STANDING COMMITTEE ON RESOURCES
Mr. James DeWolfe
MR. CHAIRMAN: I will call this meeting of the Resources Committee to order and ask everyone to take their seats. Before we start, I will remind members and the presenters that if you are making any comments, to ensure that you talk into the microphones. Also, to the fourth member of the presenter group, perhaps if you have anything to say, please bump somebody out of their seat and move towards the microphone.
Having said that, I certainly want to welcome the members from the Nova Scotia Forest Products Association. The association, for those of you who don't know, represents some 1,000 members and also represents a diverse range of forest product producers in this province. We are certainly delighted to have you with us today and before we start with your introductions, we will go around the table, for your benefit, starting at my far left and our members will introduce themselves. Keep in mind there may be some alterations from the original list because some of our members cannot be with us today and we do have some replacements, so please take note of that.
[The committee members introduced themselves.]
MR. CHAIRMAN: Also at the table we have Darlene Henry, who has been working with your organization to make this happen today.
Without further ado, I would like to turn the table over to you, and perhaps you could introduce your members.
MR. GREGORY SHAY: Thank you, Mr. Chairman, and thank you, Mrs. Henry, for working with us to accommodate us and for getting us here, finally, before the committee. Just very quickly as an introduction, next to me is Mr. Downey Thompson who is a Vice-President with Elmsdale Lumber Company in Elmsdale, he is the first Vice-President of the Nova Scotia Forest Products Association. Second from me is Jonathan Porter, a Vice-President with Bowater Mersey in Liverpool, he is the second Vice-President of the association. Sitting behind me is our Executive Director of the association, Steven Talbot. My name is Gregory Shay and I am the President of the Nova Scotia Forest Products Association and President of Comeau Lumber Limited in Meteghan, Digby County.
This morning, I think what we would like to do, if you don't mind, Mr. Chairman, is we have a prepared text to present to you for the presentation; it is not a glamorous text, but it is designed to be to the point and relatively brief. There are three main sections to the text: we will give you a brief history of the association to familiarize you with the background of the association; there is a section that will give you a flavour of some of the things that we have done, and still do, and some of the projects that we have undertaken in the past; and then more importantly, we will go into the position section of the paper, which will outline some of the concerns that we have in industries, some of the issues that we are dealing with and our viewpoints on those.
I would encourage the members to feel free to interrupt me at any time and ask questions as they arise, rather than wait until the end and possibly lose the question. Further to that, at the end of the presentation, hopefully we could have a good, open discussion and some questions and answers back and forth on the whole paper.
I will just begin reading the introduction section. The Nova Scotia Forest Products Association is recognized as the official voice of the forest industry in Nova Scotia. The mission statement of our organization is to promote sustainable management viability of the forest industry and to act as the official voice of the forest industry. Established in 1934, the membership of the Nova Scotia Forest Products Association now consists of representatives from the sawmill industry, the pulp and paper sector, Christmas tree growers, maple products producers, silviculture and harvesting contractors, forest group ventures, forestry equipment agents, as well as woodlot owners. Our membership totals approximately 1,000 individuals and corporations, representing a broad cross-section of the forest community in the province.
Before I go on, I would just like to make it clear that with such a broad group of members in our association, in order to remain effective in our association as a voice we have had to very clearly focus. I want to make it clear that when we speak in terms of forestry issues, we are speaking on behalf of the processing sector in the industry; for example the sawmills and the pulp mills. It is important to be clear that because of the broad cross-section that also includes land owners, it is very difficult, as you are probably aware, in that group to reach consensus on some issues although we all have common interests. I want to make sure that the committee is aware of who we are representing when we speak publicly on issues.
The forest industry provides direct employment to 13,000-plus Nova Scotians and indirectly employs an additional 10,000-plus individuals. The majority of the employment is found in the rural areas of the province, areas that typically have the highest unemployment rates. The industry also contributes some $1.5 billion to the economic well-being of Nova Scotia. The spin-off tax dollars go far in supporting such provincial programs as health, education and social support. The sustainability of this industrial sector is therefore not only important to the forest industry, but to Nova Scotia as a whole.
Our mandate or our focus in the association can be outlined in some of the following activities that we undertake: the promotion and development of a healthy and diverse forest industry; the maintenance of a diverse and healthy forest resource; implementation of the Occupational Health and Safety Act and the Workers' Compensation Act resulting in a safer work environment for all forest and industry workers; development of programs to provide a trained and skilled workforce; working with the private woodlot owner sector to provide woodland access for purposes of forest management, silviculture, forest protection and enjoyment of the natural resource; working with the government and other organizations to promote sustainability, this includes cooperating in the development of management policies to ensure a healthy, stable and diverse forest resource; and developing a communications program to inform target audiences of the value of the forest industry.
The Nova Scotia Forest Products Association has a number of standing committees with volunteer representation from all sectors of the forest community, allowing committee recommendations to reflect views from all sectors of our industry. Committee activities are designed to develop programs aimed at achieving the goals and objectives of the Forest Products Association. Some of the programs of our association include the development and implementation of a code of practice, this is otherwise known as the Forest Professional, it was developed by our Safety and Training Committee to promote safer working habits for forest workers. This code is recognized by the Nova Scotia Department of Labour and it has recently been accepted as a code of practice in New Brunswick and Prince Edward Island.
The loss control manual for the wood products manufacturing and handling industry is another code of practice. This was prepared for the sawmill sector with the objective of helping the sector comply with the Occupational Health and Safety Act. The Nova Scotia Forest Products Association has established the Forestry Safety Society of Nova Scotia, whose mandate is to work with our association to provide training courses for forest industry workers and employees, promoting safe working habits and enabling compliance with the Occupational Health and Safety Act.
To promote sustainability of our forest resource and an awareness of forest stewardship, particularly at the private woodlot owner level, the Nova Scotia Forest Products Association has developed the principles of forest stewardship in Nova Scotia. Adherence to these principles is now a condition of membership in the association. An auditing program also forms an integral part of the principles.
The association administers an Access Road Assistance Program providing financial assistance to woodlot owners who are building or maintaining wood roads, enabling them to access their property. Quality control for this program is provided by two field inspectors, ensuring adherence to a predetermined construction standard. The development and implementation of training standards to meet industry needs is ongoing. Establishing these standards requires input and liaison from relevant government departments and from the private woodlot owners and forest workers. The NSFPA is currently designing and implementing a communications program to inform target audiences of the value of forest industry.
That is just a summary of our history and the types of things we have been doing as an association over the years. We do have copies of this report that Steve will hand out once the presentation is completed, and you can take it home and all read it tonight if you want to in your spare time.
The main purpose today is to bring to your attention several issues of concern of the Nova Scotia Forest Products Association. First are the sustainable forestry regulations. We applaud the government for implementing the Forests Act and we are on record as supporting this initiative. Regulations under the Act must be minimal in nature so as to encourage rather than stifle activities which will ensure the sustainability of our resource. With the amount of private land in Nova Scotia, recognition of landowner rights must play an integral part in the implementation of any regulations. We anticipate that the actions the Department of Natural Resources is presently undertaking will allow the wood supply in this province to meet industry demands into the future.
The Nova Scotia Forest Products Association looks forward to working with the Forest Advisory Board and we encourage the Department of Natural Resources to complete the development of its forest practices code for Crown lands as soon as possible. The association expects that we will be given an opportunity to have input into this code before it is finalized.
The sustainable forestry fund. The association understands that the Department of Natural Resources has limited resources to properly administer additional regulations under the Forests Act and we also realize that the provincial government is advocating further restraints within its departments. Given this situation and because of its broad membership base, the Nova Scotia Forest Products Association requests the Department of Natural Resources use the expertise within the NSFPA to manage and deliver the activities under the sustainable forestry fund. Members of the Nova Scotia Forest Products Association who contribute may wish to use a third party to maximize their use of this fund ensuring sustainability of their resource.
The NSFPA would undertake to manage the silviculture programs of its members as prescribed by the forestry fund and the Forest Products Association expects to enter into
discussions soon with other interested groups in the province in hopes of developing some type of an arrangement where all interested parties, on behalf of the department, can manage this fund. Of particular importance to this point is the fact that it is often overlooked, but the industry is the largest paying member in the group when it comes to forestry practices and activities. We think, therefore, that it is quite important, in fact imperative, that if we are going to be paying money into the fund that the industry has a very strong influential voice on how it is spent on the ground, and we certainly believe that all of it should be spent on the ground.
The private silviculture programs. The Nova Scotia Forest Products Association reaffirms its support for implementation of private silviculture agreements between operators or buyers, private landowners and in many cases the Department of Natural Resources. Some NSFPA member companies have implemented such programs with major participation by the private woodlot owner sector and DNR. The provincial government, through the Department of Natural Resources, is a major player in these programs. We encourage the Government of Nova Scotia to not only maintain, but to increase their financial support for these programs as their part in ensuring the sustainability of our resource.
The Gas Tax Access Road Program. This program is aimed primarily at the private woodland owner sector and provides access to woodlands that otherwise might remain unchanged. These roads allow for acquisition of fibre and increased availability of woodland for silviculture treatment. Access for fire protection and treatment of insect infestations is also enhanced. Woodland road construction and maintenance under this program results in approximately $5 million being invested annually in private woodlands. The Department of Natural Resource's portion of this investment, which is actually a rebate on road taxes paid on fuel, is about 14 per cent with the remainder being invested by the private woodlot owners.
The association recommends that the government increase its portion of the resource investment to 20 per cent which was of previous levels a few years ago which we feel is the much more appropriate budgetary number in order to adequately carry out the program that continues to grow every year and receives a lot of support. It is a very active program for all private woodland owners in the province.
Native issues. The association is greatly concerned with unsettled land claims and Natives' rights issues. It is difficult to implement long-term management plans when the future of the resource is uncertain. We urge the provincial government to settle these issues as soon as possible.
Economic impact, the forest industry provides 13,000 plus or minus direct jobs and 10,000 indirect jobs in this province, mainly in the rural areas where few employment opportunities exist. Forestry also contributes approximately $1.5 billion to the economic well-being of the province. We are presently commissioning a study by a professional group in the Halifax area to do intensive research on our industry so that we can finally come up with
some hard and fast facts and figures about our industry and the importance of it to the economy of the province because we feel it is a study that has long been overdue and it will help us and send our message to the rest of the general public about the importance of this industry to the province.
MR. KENNETH MACASKILL: Greg, are you sponsoring that?
MR. SHAY: Yes, we are. The Nova Scotia Forest Products Association is sponsoring that study. To maintain social programs such as health and education it is essential to ensure the sustainability of our natural resources from which much of the tax revenue is realized. Government support of the forest industry is vital to keeping these benefits in place for the public of Nova Scotia and, again, the point is that one of the reasons for this study is to bring some of these facts and figures and some of the effects of our industry to light because a lot of people just simply do not realize, or take for granted, the benefits that are derived from the industry in terms of tax revenues and economic activity that will go back into paying for the social programs that we can enjoy and that we expect to have in the province as the general public.
Tax credits and management incentives. To stimulate investment in silviculture activity in the private sector we ask that the government consider implementation of a tax credit for forest management expenditures. Without an adequate provincial silviculture program in place throughout the province the future of the resource is in question, particularly at the privately-owned woodlot level; 75 per cent of the resource is privately owned in this province. Thus the future of the industry depends to a large extent on maintaining the silviculture program.
MR. CHAIRMAN: The honourable member for Dartmouth North.
MR. JERRY PYE: Excuse me for interjecting, Mr. Chairman, through you, about the silviculture program, can you tell me briefly how does Nova Scotia rate with respect to other provinces and/or other countries with respect to its contribution to the silviculture program from the tax purse?
MR. SHAY: From the tax purse, it is a bit unique in this instance because of Nova Scotia's land tenor wherein a lot of the forest land in the rest of the country, for example, is Crown-owned land and I am sure that they have more resources to spend on managing their investment in timber whereas in Nova Scotia it is largely a privately-held resource and I think that certainly at the federal level silviculture funding has been pulled out and completely depleted in the last few years in terms of support for silviculture. It has been put more in the hands of the users and owners of the resource. I think that we are a little behind in that area. I think the industry has certainly come to terms with the requirement to make a heavier investment in the area.
I don't think the feds are at all interested in supporting us any longer in this area despite the large amount of taxes that go there every year from the industry, but I think you are going to see in the very near future some inroads in silviculture investment certainly from the industrial sector and, hopefully, from the landowner sector and we expect, hopefully, from the provincial government as well.
The next point was capital gains exemptions. Elimination of the tax exemption has caused undue hardship for many forest industry operators and woodlot owners. Landowners are reluctant to sell stumpage or property to the industry due to the amount of capital gains tax they are required to pay. Landowners traditionally view their woodlot as an investment for future generations. They are unable to realize a return on that investment resulting in many cases in overmature stands susceptible to fire and insect damage. The resulting damage benefits neither the landowner industry nor the government. We realize that the capital gains tax issue is a federal concern, but we are asking that the provincial government support the industry and the private sector in its continued efforts to try to have tax reform in that area.
The final issue, it is not the only issue of concern, but the final one that we have short-listed for today is a fire protection program. The Department of Natural Resources over the past number of years has developed an excellent forest fire protection program. The province's ability to keep forest fire size to a minimum has played a large role in maintaining the sustainability of our resource. Without the forests, everyone loses: the forest industry, the tourism sector, recreationists, and the environment. The Department of Natural Resources Fire Protection Program must be maintained through the government's present financial review process.
Mr. Chairman, that concludes the written presentation. In summary, before we go into hopefully a question and answer period, if there are two or three key points that I would like to leave with you it is regarding the forest sustainability fund, which we think is vital and important to encourage and stimulate investment in silviculture activities, and we certainly think the Forest Products Association has a key role to play there in managing that fund, where it has the infrastructure and resources now to carry out the activities and it certainly represents the largest paying portion of the industry.
I will ask my colleagues to add to anything they see as important that I have left out, but the other item is certainly the Gas Tax Access Road Program which has been a very successful and important program for the association and its members over the years, which is in effect, as I mentioned, a rebate of taxes paid for fuel used on privately built and maintained off-highway roads. That is an essential program to everyone, and we are certainly interested in maintaining and hopefully expanding that program at the association. We would like to have support to continue with that program and, rather than see it shrink, to be able to help continue to see it grow.
MR. CHAIRMAN: Mr. Shay, thank you for that presentation. You certainly covered some key points, and each one is worthy of a lengthy discussion. I was wondering if any of your companions would care to add anything to what you have had to say. Does anyone have anything additional they would like to bring up to the committee before we go into the question period?
MR. DOWNEY THOMPSON: The gas tax road program is very important to the woodlot owners and farmers, and most of the farmers are woodlot owners. It is very important to them, it is an incentive for them to manage their forest. If they have a road in there, if there is a fire or an outbreak of bugs they can do some harvesting. I think it is very important to the small private woodlot owner. It is spread evenly across the province among the woodlot owners. Ownership of the timber lands in the province is spread fairly equally over the province except for two or three areas that may be Crown lands. This is a very important program to these people, and for the little benefit they get - they put a lot of money in it, probably 85 per cent on their own - we would ask that this program be continued for their sake.
MR. CHAIRMAN: That is a good point you make, Mr. Thompson. Thank you for that. Any of the other members? Mr. Porter, do you have anything to add?
MR. JOHN PORTER: To reinforce what Greg talked about, we have seen a lot of changes in the approach to forest management over the years in Nova Scotia, going from a federal-provincial era to a more provincial industry-landowner system. I think the current Forests Act and the regulations coming out under that Act are unique - anywhere I have seen in Canada or the world - maybe it is that we have a unique situation in Nova Scotia that often needs a unique solution.
You hear a lot of doom and gloom about forestry; I don't feel that way about it. I think it is very different from other resources, and I think there is a lot we need to do Obviously the focusing is always on how much wood is being cut, and the key component in deciding how much wood you can cut is how well you manage the land beforehand; the cutting is just the end result of the managing.
As Greg mentioned, it is very important in this province we get on with the management programs and the fund - if people want the fund - and get the issues sorted out
and get the work done on the ground, because Nova Scotia doesn't need to be ashamed of where it is in forest management, nor does Canada, which is not what you hear in the press, but the Canadian forestry is as good as any in the world and Nova Scotia's forestry has the potential of being right up there too. We just have to get all of these issues sorted out and get on with it.
[9:30 a.m.]
MR. CHAIRMAN: Thank you, you are a good ambassador for the forest industry.
Mr. Talbot, in the back there, I don't want to leave you out. Is there anything you would like to add?
MR. STEVE TALBOT: Just to comment on the industry in general, in terms of what it sees as a priority in terms of its relationship with not only government but with the public. We have undertaken not only an economic impact study but are looking into a communications program whereby we are going to try to get our story out there to target audiences we feel really don't understand or realize the value of the industry to the province. This is very important when to comes to making decisions about the resource, decisions about the industry. We feel that if the public is properly informed, then the decisions that they are making are going to be informed as well, and that is the direction we are taking with that particular program.
MR. CHAIRMAN: Thank you. I guess at this time we will open the floor up and I am sure each of you will have an opportunity to answer some questions.
Mr. Pye.
MR. PYE: First, Mr. Chairman, it is a pleasure to have the gentlemen here today on behalf of the Nova Scotia Forest Products Association and, secondly, I don't profess to be an expert - as a matter of fact I am a novice - but I am interested in knowing as much about the forest industry as possible.
My first question to you is with respect to the silviculture program. I believe that this is a private contribution as well as a public contribution to that program and I do recall, although I can't specifically indicate the number, I do know that the number was in the last budget for the provincial government's contribution to this silviculture program. My question is, what is the contribution to the silviculture program by private industry, private woodlot owners and/or industry itself?
Secondly, I know that you are here speaking on behalf of the processing industry. Do you believe, when you are speaking on behalf of the processing industry, that we have been able to produce as much of a value-added product as possible from the forestry that we have in Nova Scotia and, if not, where are we going in the future with respect to that?
MR. SHAY: No one else has stepped up, so I guess I will stick my neck out first. First of all, on the funding arrangements for silviculture, it is in an evolutionary process right now, the whole arrangement. There are some existing programs in the province now, partnership arrangements between an industrial operation, like my own for example, and the Department
of Natural Resources and the private woodlot owner group. I am not sure if there is consistency in all of the arrangements that exist, but in our case for example it is a three-way split. I think that is the more common . . .
MR. PORTER: It is consistent that the government contribution is a third in each case.
MR. SHAY: Is it? Okay. That is certainly the case in ours, it is a three-way even split among those three partners, and then the funds are expended through a process onto the ground. I would hope that that formula would permeate into the sustainable forestry fund as well when it gets developed and matures as the legislation and regulations are put in place.
I guess the main three stakeholders certainly are: the private landowner who owns the resources and receives a return on that resource, and should have some responsibility to manage and reinvest in that resource; certainly the industrial user like myself wants to make a contribution because it is using the resource and wants to see it become available in the future; and certainly the government has a stake in looking out for the greater social good of the whole resource in the province and also realizes a certain amount of tax revenues from the activity that is stimulated by that sector and that resource.
The question on value-added. I don't know if you can be very specific in answering that except to say that there are some value-added operations now in the province. I think there is a long way to go and I think you are going to see a lot more there in the future as we come to realize the maturing process of our industry and as we try to move away from a commodities-producing industry or just a raw materials producing industry and getting some more value-added products. Like I said, there is some going on now. Certainly in the sawmill sector, there has been a lot of investment in recent years in sawmills to upgrade their technology and their processes, and this does indeed add value and makes a better product at the end of the road which in a sense is a value-added process. I certainly think that you are going to see some big changes there in the next few years as people look down that road to try to create more value for the product they are producing.
MR. PORTER: I don't think you can ever have enough value-added. You are always driving for more value-added. It is easy to look at certain areas of the resource and say why aren't they being made into this product or that product? It has to be a combination of having markets for the product, which sometimes are there and sometimes they aren't; having the raw material which you can add the value to; and then getting the investment to put it all together which is often the big issue. You look at some of the value-added businesses today, they are very, very capital intensive, not all of them, but some of them are, and you have to have all that put together. When those combinations come together, I think you get the investment and you get the value-added.
I think the industry will continue to develop so you have a combination. You are going to have some of the commodity products like pulp and paper and softwood lumber and that has been the backbone for many years and I don't see any issue with that continuing to be a backbone. I think that will also continue to develop the value-added product because we are starting to see it in some of the hardwood, in the businesses we are in from Bowater's point of view, as well as making products, we sell a lot of products from the land we manage and for a lot of them there is no market in Nova Scotia to sell that product to and you are forced to sell it outside.
So whenever you see wood going outside for higher-value products, you always wonder if there is not an opportunity some day inside which will be better for the economy. Some of those markets take a long time to develop. I have seen a lot of progress in the last few years, particularly in hardwood. You have more hardwood sawmills, you have some small hardwood finishing operations starting to come up. It is not as advanced as in other parts of the northeast.
MR. CHAIRMAN: Mr. Porter, I am very impressed with a hardwood mill that is in my constituency, owned and operated by Murray MacDonald. There is little or no waste from that mill. He even has a market for six-inch stock, it goes for parquet flooring. It is just amazing what little waste there is from that operation. Talk about value added.
MR. PORTER: There are some good examples in the western end of the province with value-added being done on pine. It is easy to think of the products it is possible to make from a piece of wood. It can take a huge investment to get from point A to point B and that is the struggle.
MR. THOMPSON: Mr. Chairman, on the value-added, I think there is a lot of room. Various sawmills are now working together. They are utilizing all species. I am speaking on, maybe, behalf of Elmsdale Lumber, our own company. We utilize all the species. You mentioned the hardwood, last week we sent a load of hardwood logs over to Pictou County that we couldn't use and there is a trade back between the mills. I am not familiar with this operation in your constituency.
MR. CHAIRMAN : Yes, it is in Pictou County.
MR. THOMPSON: Yes, and I guess he is looking for fibre. We do have fibre and we expect to send fibre to him. We are into pine and hemlock added value. Hemlock is not a very acceptable species by some sawmills, but it is a good product if you find the right end use for it. I think great headway will be made on the value-added. It takes large investments to do it, but the raw material is there and it will come in place, as you have mentioned.
This mill that you were speaking about, it is just outside New Glasgow somewhere, is it?
MR. CHAIRMAN: Yes, it is.
MR. THOMPSON: It is a new operation?
MR. CHAIRMAN: Yes, it is relatively new, within the last couple of years.
MR. THOMPSON: Yes, and I was talking to one of our supervisors and we did send a load of wood over there. I think we are going to continue to do that. He can use it and we get a little better return on it.
MR. CHAIRMAN: That is very important too, under these organizations such as yours, that you are working together.
MR. THOMPSON: Yes, that is right. We are working with various sawmills. Sawmills that have a raw material that they can't use, they send it over to our mill. We are into all species, all sizes, and we are trying to do our part. Not everyone has to be in the value added, but I think there is room for some more.
MR. PYE: Mr. Chairman, just one more on this topic and then I will wrap up so that others can speak. I just want to say that it is pleasing to hear the association say that there is lots of room for value-added in the industry in Nova Scotia, because when I made a trip down to the Eastern Shore recently - not that I knew I would be sitting on this committee today - I looked at some private woodlot owners who are developing woodchips, where a ship comes in, I believe to the Town of Sheet Harbour - I know the capital cost that you are talking about - it transports it across the ocean and brings it back as a manufactured good to sell to Nova Scotians.
I think there is something wrong with that picture. If at all possible, since we have the natural resource, we certainly should make sure that we get the added value out of that natural resource as well. Thank you.
MR. CHAIRMAN: I think we had some good dialogue on that topic. We will turn now to Mr. Chipman.
MR. FRANK CHIPMAN: You are talking about value-added, it brings back a thought. I was on the board of the Western Valley Development Authority. I am not sure of the figures, but I think it was 133 trailer loads left on the Digby-Saint John ferry in the month of October 1998, and that represents a considerable volume of wood and that is only one crossing point; you also have the Truro area, into Amherst and across to Moncton.
I guess my concern, and this is just one question I have to ask, what can we do to address this? The governments don't have any more money; at least the provincial government here doesn't have any money, the federal government seems to have lots. It is
hard to go to the provincial government and say, look, we need money, but if other provinces can buy that wood and transport it across the border in raw form, and we all know it is much cheaper to transport the finished product, how do you develop a market? How do you keep that product here? They are paying higher prices in these other provinces, so why can't we finish the product here?
MR. SHAY: That is a very timely question because we have certainly been grappling with that for the past year or two. I am not sure if we have the answers yet, although we are working on that. We have been in intense discussions with the Department of Natural Resources in the province over the past few months or couple of years about the amount of wood leaving our province. Realizing that we are in a capitalist-type of a system, which we all love and enjoy by the way, we accept that it is very difficult to stop the free flow of goods moving back and forth across the border, whether we like it or not.
Unfortunately there seem to be some production advantages right now in other provinces in the country that afford them the opportunity to pay more for that wood than they are in their home province. By using the law of averages and other pricing schemes available to them, for the short term they seem to have been able to come down here, pay what appears to be more for the wood in this area, and take it out. In the short term, we have been trying to grapple with that by competing with them head-on in pricing, to some extent, and we have been successful to some extent but not largely.
In the long term I think it is going to require, for one thing, greater cooperation amongst the Maritime industry as a whole, at the industry level and at the government level, to make sure that we are all competing on the same field, in the same industrial area, under the same rules, because right now that is not happening although we are selling in the same market place. So it is a difficult question to answer. Like I said, we are investigating that to actually determine what the differences are and the competitive features of our industry versus New Brunswick's.
MR. CHIPMAN: Do you have a rough idea what the volume is and the number of jobs that are lost?
MR. SHAY: The department's numbers I think right now are 15 per cent or 16 per cent of the total roundwood harvest for the year, which was over five million cubic metres in 1999.
MR. PORTER: It has been in that 10 per cent to 15 per cent of the softwood harvest in particular that has gone out of the province.
MR. CHIPMAN: Cubic metres though, what are we? There is a conversion there and out of 1,000 board feet, what is it?
MR. SHAY: Do you know the conversion, John? I have used 1,000 of board feet, too. I am sorry, but that is the number we are given, it is cubic metres.
MR. CHIPMAN: A cubic metre is roughly two-thirds of a cord. Anyway, I know when you look at the 133, or if it was 233 trail loads, that is one million feet or two million, it could be one million to two million feet.
MR. SHAY: Yes.
MR. CHIPMAN: Do you run Comeau's box factory?
MR. SHAY: The box factory is a division of our company, yes.
MR. CHIPMAN: How many board feet, I think there was mention that there was enough going over there in a month to keep your mill going for a year?
MR. SHAY: We calculated it at one time. Yes, there was roughly enough there for one year in our mill.
MR. CHIPMAN: I think a fine example of value-added is the Shaw wood plant, the IKEA Furniture in Cornwallis Park. The only thing is when government lends money to get the thing started and there are certain colleagues here in this room who may oppose that sort of thing, but if you don't have the money on your own, where does it come from? If you cannot raise the venture capital to go out there and take that risk, like I am saying the government doesn't have the money and there would be opponents to that who say you should not give money out to business, but there is a prime example of government being prohibited from doing that, so it is up to private industry to create those jobs?
MR. SHAY: Yes, it is a good point. The raising of capital certainly is an issue.
MR. PORTER: That is why value-added is not as easy as it first appears, because the capital to put together a plant such as this Shaw wood plant is significant.
MR. CHIPMAN: Right, because I think they are using about six million or seven million feet of pine from Queens County, some from Bowater and, is it Freeman's?
MR. PORTER: It is from all over western Nova Scotia; certainly some would come from Bowater.
MR. CHIPMAN: Right.
MR. PORTER: One of the things that has really changed in the last few years is the wood flows in the Maritimes. It used to be that you could drive on a highway and you could
see a truck and you knew what mill it was going to. Now there is wood moving all over, both inside the province and outside the province and, certainly, more is going out of the province and coming in, although some does come in, but it is partly a result of our unique landownership structure. You have a lot of private-woodlot owners who are deciding on their own where they want to sell that wood and, if they want to sell it to someone in Maine, they sell it to someone in Maine, or Quebec, or New Brunswick, or wherever.
As Greg says, it is quite possible if you have a mill whose primary source of supply is from Crown land in another province, when they average the cost of a load or two of private wood in with hundreds of those from Crown, the average price absorbs it very readily. You can certainly see the cases where the price of wood being purchased is higher than the value of the lumber being produced in that load which, on the surface, makes no sense but it happens because it is all averaged in.
MR. CHIPMAN: I read an article the other day that the smaller logs are now in demand because of the I-beams used for floor trusses, and the demand for the larger logs is going to deteriorate. How do you feel that is going to affect the industry? I guess what I am saying is we are going to start using smaller wood that has not had a chance to reach its optimum growth.
MR. PORTER: I think the I-beam market has certainly come a long way in the last few years and the main market for softwood lumber is in the smaller dimensions; it is in the two-by-fours and two-by-sixes and two-by-threes. I think there are still premiums in the market - and Downey might want to comment - for large dimensions too, it is just it is a much smaller market. If you get engineers, for example, specifying I-beams in a house rather than two-by-tens, then that is what the market starts demanding.
MR. CHIPMAN: There is a mill near my community, Kingston Lumber, and they are converting the mill over to a stud mill so there is not going to be a demand for logs there, but I have always felt this way because I have a woodlot, I cut logs, or I used to, but I always felt that I would take my logs there and I get a certain price, we will say $200, I don't know, it stayed at a low volume, $150 a thousand quite a few years now. It is up to $350 and even higher and now it is going by the ton so it is hard to determine, but I always felt that the inferior quality lumber was kept on the local market and sold at a lower price and the premium wood was exported at a higher price and it really didn't reflect on a fair return to the producer because I would go and buy a board of a piece of pine and it was nowhere near the quality of the logs that I had sold, but I would pay, you know, $350 a thousand for it and then, of course, they would say we cannot pay any more for it because that is what we are selling it for. They are not saying we sold this and exported it for $1,000 a thousand, the premium, the top quality, whether it is number one pine or number one spruce, two-by- eights, two-by-tens, that are 20 feet long.
MR. SHAY: I wouldn't even begin to comment on the market pricing system for pine, but for spruce it certainly is a commodity market. It is set by the market place and buyers and traders every day. There is very little, in fact virtually no influence that a sawmill like mine has on the price we get for our lumber. It is true that there is a growing demand for smaller dimension lumber as more and more, speaking of value-added, and more and more engineered wood products are developed that use smaller dimension lumber and I think the sawmills are responding to that by retooling their mills to be able to process that more efficiently.
In terms of letting the trees reach their actual maturity or full potential, I don't know, I guess you could debate that for quite a while as to what full potential is when the marketing conditions change the requirement of the raw material.
MR. PORTER: The way the markets are going I think a landowner is going to have a lot of opportunities if he wants for his own objectives to grow trees of a much longer time period and sell large logs, I believe there will be a market for that and if he wants to manage his over a shorter time period, grow smaller logs, there will be a market for that. From a forestry point of view, both of those in my view are sound forest management. There is not one solution to how to manage forests in Nova Scotia. You can go out and cut a large log, the key is when you harvest an area, that you make sure it comes back. That is the most important thing.
MR. CHIPMAN: I guess my concern is there is going to be shorter rotation with the smaller logs. I can remember back in the late 1940s, early 1950s, it was actually illegal to cut a log of a certain size, you know, red or black spruce, because it was too immature and it was being cut and exported for pulpwood. I am just going to ask a couple more questions here if I can. I will be brief.
There is no Canada-Nova Scotia Forestry Agreement. Do you see anything on the horizon for that?
MR. SHAY: Do you mean in terms of funding silviculture or . . .
MR. CHIPMAN: Federal-provincial agreements, there is nothing and it has lapsed.
MR. SHAY: Nothing that we are aware of.
MR. PORTER: What we understand is that is not an area the federal government feels they want to put money in.
MR. CHIPMAN: Right, unfortunately, and the fishery too. The Annual Allowable Cut, how close do you feel we are? Have we exceeded the Annual Allowable Cut or are we below it?
MR. PORTER: As I am sure the folk in the Department of Natural Resources would say, with the ownership in this province, it is a hard number to calculate, but we have looked at the work they have done. Obviously, the company I work for is a large landowner. We do our own work on our own lands, but the province tries to put together the numbers for the entire province and all landowners. With the silviculture program that is being proposed as part of the new regulations, they show that the level is sustainable and I have full confidence in that. The issue tends to be in certain areas and the area of biggest concern at the moment is certainly on the private landowners where the silviculture being proposed is right on the limit. With Crown land and with industrial land, based on their projections, there is room for significant increases in harvest level.
MR. CHIPMAN: Just one last question on the reforestation. I know we have had nurseries in the past, there was one in my area, in Annapolis County, in Lawrencetown, that was shut down. I am not sure, I think the one in Strathmore, is that still operating?
MR. PORTER: Yes.
MR. CHIPMAN: Are you with Bowater?
MR. PORTER: Yes.
MR. CHIPMAN: That is where I have seen you before. It has been mentioned before, that there is a lot of concern about reforestation, we should be replanting, but I have talked to people on your staff, like Stanley Kempton and Kevin Gillis, and they say that we have the best natural regeneration of any place in North America here in Nova Scotia. Would you agree with that?
MR. PORTER: Particularly in western Nova Scotia. There is a big variety across the province, but particularly in western Nova Scotia, you have abundant natural regeneration. If you look back over the years, there is a lot of areas that were planted which should not have been planted and where the planted trees were totally wasted. In central and eastern Nova Scotia, you tend to have to plant more. The reason, for example, at Bowater the nursery shut down a few years ago because it did not make sense to run a nursery. There was plenty of either provincial or private trees available to buy, so when we need trees we can buy them. I think that is common throughout the western end of the province.
MR. CHIPMAN: Which area of the province would require reforestation?
MR. PORTER: Planting tends to be required more in the central and eastern parts of the province. That is just the type of forest that grows there, but in some places, you still get good natural regeneration.
MR. THOMPSON: In some sites, probably if you took a line from Halifax to Windsor, west of that, that is regeneration and it is probably better than any part of Canada.
MR. PORTER: It is as good as I have ever seen.
MR. THOMPSON: It just comes back in a green mat and needs to be managed. Some of the other areas need some management and some planting. In our area, there have been areas planted where the natural regeneration has come up among the planted stock and taken over and killed out - it was planted when it should not have been, I guess. I would like to answer your question on pine.
We are a pine dealer. We are small, we have a pine division. We sell about 3.5 million board feet of pine a year. I have been involved in pine all my life. The clear is there. We draw our logs from Guysborough, Pictou, Cumberland, Annapolis, Lunenburg, Kings and bring it in to Elmsdale. The clears from our 3.5 million are 1 per cent of the production, which isn't very much. You get those knotty tops, you know what they are like. I guess nobody likes pine pulpwood. There is a very limited market for this.
We process the whole thing, and last year and this year and the year before, our entire cut was sold within Nova Scotia to reman mills. We are a wholesale manufacturer and we don't retail anything. Now the clears will go to somebody, but basically it goes to somebody who is going reman it. Our sales are kept within Nova Scotia. I think we had a chance the other day to send some outside to New Brunswick, maybe for $100, 1,000 more, but we didn't accept the offer. I feel strongly that Nova Scotians have supported me and I should support them.
MR. CHIPMAN: Just one question, when you are talking about reforestation - we have good reforestation - it is predominantly balsam fir, isn't it, that will come back first?
MR. PORTER: In western Nova Scotia, and obviously there are a lot of different areas and counties in western Nova Scotia, but the predominant regeneration we find is red spruce; balsam fir is probably next, and some white pine and hemlock mixed in. Certainly on the lands I am more familiar with in the western end, red spruce would be the main species we get back, far more so than balsam fir.
MR. CHIPMAN: If you were going to reforest, would your preference be Japanese larch or Norway spruce?
MR. PORTER: Again, in most of the land that I have been more familiar with, neither. Red spruce, for a lot of sites in this part of the province is an excellent tree and it comes back without any work. On some sites Norway spruce or Japanese larch would grow very well but it won't regenerate naturally. So it depends, it comes back to the landowner; if a particular
landowner wants to grow trees as quickly as possible on a piece of land then Japanese larch or Norway spruce will grow faster than red spruce, but the porcupine also loves to eat them.
[10:00 a.m.]
MR. SHAY: I know you want to move on, Mr. Chairman. Just a small point on Norway spruce. Right now it is not accepted as a species in the NLGA grade rule book so we wouldn't be able as a sawmill to buy it, process it and sell it on the market as grade stamped construction lumber.
MR. CHAIRMAN: Thank you. I believe we should move along. Mr. MacAskill is next.
MR. MACASKILL: Thank you, Mr. Chairman. Good morning panel. It is good to be with you again. Your presentation today began with your mission statement, that your mission is to promote sustainable management and the viability of the forest industry and to act as the official voice of the forest industry. Indeed in my experience as minister, I believe you do that very well and I want to congratulate you on that.
I have a couple of questions for you today. I want to take you back in time - I believe it was called the Provincial-Federal Forest Stewardship Agreement - it was federally funded. I think it was discontinued in 1995. There were a lot of federal dollars put in the forestry at that time. From your point of view, was that wisely spent? If it was, why are we almost at a crossroads today, between a crisis and sustainability?
MR. SHAY: From my own point of view, and I may be out of line, but as far as I am concerned and based on the experiences I have seen in my end of the province, the money was not wisely spent. I think the arrangements that were set up to manage and disburse the funds were not held accountable enough for the way it was spent and I think it is fairly common knowledge that only about 45 per cent of all those federal funds ever landed on the ground in actual work. I think that is probably part of the reason why the feds don't want to be involved now. I don't know but I certainly think that it is not the right way to approach silviculture funding and management in this province. That is why I think too that industry being much more directly involved in the application of the funds would certainly see a much more efficient process undertaken.
MR. MACASKILL: How involved would your group have been at that time? Were you the voice of the forestry at that point in time?
MR. SHAY: Fortunately that was before my time so I would like to defer to Jonathan or Steven, if you were around then.
MR. PORTER: I guess the association has probably claimed to be the voice of industry back before any of our times. We started representing industrial concerns since then. Greg makes a good point. It was an ongoing concern with some of the previous agreements about how much of it was actually getting on the ground and doing the appropriate work. I can't speak for why the federal government decided to change that. They changed a lot of things in the last few years but if we look ahead from where we are today, having the province, the provincial industry and provincial landowners involved, there is no reason why we can't do a good job of putting the money on the ground in the appropriate treatment. I know the people I have to report to in my job, I have to show that I am making wise use of money. I don't have any concerns that we would do that. It may be that it was time for a change and a new type of arrangement.
MR. MACASKILL: So while it might have been a lost opportunity, it was an experience?
MR. PORTER: I don't think it was lost. There was a lot of good work done. The question was, was it the most cost-efficient way to spend the money or could more work have been done for the same amount of money? Certainly there has been a lot of good silviculture and good forest management work done in this province. There are a lot of people, especially landowners today, who understand forest management better than they did 20 years ago. So that is progress. Maybe we just didn't get as far as we should.
MR. MACASKILL: The road building tax credit, that is provincial, is it? All provincial? It is not from Canada Excise?
MR. SHAY: No, it is from the provincial portion.
MR. MACASKILL: Relative to the transboundary issue that Mr. Chipman talked about, if there are no boundaries relative to movement of products within the Maritimes, is it, and I guess I am making reference to the Maritime Lumber Bureau, what is their mandate? Is it much like what you do, is promote the industry and seek out markets that are best suited . . .
MR. SHAY: Yes, the bureau's mandate - actually their lead mandate - is the authorized lumber grading agency for North America for this region, and they do promote marketing efforts to some extent. They have been quite involved, in fact instrumental, in our recent softwood lumber agreement with Canada and the United States.
MR. MACASKILL: What would their views be on transboundary shipments?
MR. SHAY: They really don't have any views because they represent all of the Maritimes; the sawmill industry comes together under the MLB, so I don't think it would be in their interests to have a view one way or the other very much except to hope that the
industry, again, where we are competing in the same market place and competing against the same competitors hopefully we have similar rules of engagement amongst us as we are operating day-to-day.
MR. MACASKILL: There is no doubt that you have a member on Voluntary Planning. Was this member involved in the dialogue where that committee was sent around the province to look at ways to promote industry or to find ways to save government tax dollars?
MR. SHAY: Can you help me out there, Steve? I think David Barrett is on Voluntary Planning?
MR. TALBOT: Yes, we have two or three members of the association who are on Voluntary Planning and they act not only on their own behalf, but on behalf of the association as well. I have attended a number of Voluntary Planning meetings and the association has had fairly extensive input in terms of forestry decisions that come out of Voluntary Planning. The latest one, of course, has been the National Forest Strategy, and this strategy as well as the previous one, which was I believe back in 1992, we had extensive input into both of those strategic developments. The recent panel that went around the province, we also had input into their planning sessions as well.
MR. MACASKILL: In our budget of last June, which was defeated, we had an additional $1 million in silviculture. I know when the budget was defeated and the new government brought in a budget, that $1 million was not in there. I guess my question would be: this money is one-third industry, one-third province, or one-third buyer and one-third producer and one-third government, is that correct? If the government fails to come up with their one-third, does the industry pick up the additional costs? There must be a target that we have to reach in terms of silviculture if we are going to be sustainable.
MR. SHAY: That would be my fear, that the funding would be short and then that would reduce the amount of work that would be able to be done. Certainly all three parties have their limits as far as funding availability goes. I mean the private sector certainly has responsibilities too in terms of running this business and maintaining profitability and keeping employment, and they can only absorb so much as well in terms of costs and expenditures into these things. I am afraid that if the government were to fall short of their share of the commitment, then the repercussions would probably be - I might be wrong - reduced silviculture activities on the ground at the end of the day, less than what would be required in order to maintain our sustainability curve that has been calculated by the department.
MR. MACASKILL: So it is driven by funding rather than the need to have sustainable forestry? I mean what do you do at that point in time, do you tell the operators to cut back on production?
MR. SHAY: In our case, we have a limited budget available for that and we have so many dollars and it costs so much for the prescribed different treatments and once the dollars are gone on that, to put it very simply, if you want to do 1,000 acres under a certain budget and if you only have 80 per cent of that budget, maybe you are only going to get 800 acres of work done.
MR. MACASKILL: We put $1 million in there because we saw the need that if we are going to remain sustainable then we have to put more money into silviculture.
MR. SHAY: If one of the three parties doesn't accept their share of responsibility then obviously, I think, the whole program will suffer in the long term.
MR. PORTER: I think the way the regulations are set up, if those are followed through then the required amount of silviculture should get done. The regulations requiring a certain contribution needed through a company's own program, such as what Greg has mentioned or to pay directly into the fund, which the province then has responsibility to administer, is a choice that a buyer has whether they want to spend the time and money on their own program or just pay for their commitment, in effect.
One of the things, this should I think open up a lot of opportunities on the silviculture contracting front and we are starting to see that already and we know that silviculture contracting seems like any other business, the more efficient contractors will do very well out of this and they will have, I think, a thriving business and there is going to be a lot of competition for work and a lot of competition for rates. Ever since it has been based on putting a certain amount of money aside, I think there are opportunities that even more work would get done for that amount of money as we see more competitive and efficient contractors doing the work. Some landowners do their own work but most of the silviculture work is done by contractors and I don't expect that that will change. That's their business.
MR. MACASKILL: The point I am trying to make, I guess, is that there must be a line somewhere we must reach in terms of silviculture if we are going to be sustainable. If we can't get funding or if funding is not available from the government then, of course, it falls onto the other two levels. What do we do when we can't reach that line? Do we tell the producers not to?
MR. SHAY: I guess the long and short of it would be that the industry would begin to shrink and we would see reduced economic activity and employment in the industry because, obviously, if it wasn't sustainable the industry would start to fall off the table as it couldn't get supply and the most aggressive, the largest and most efficient and successful operations would surface and remain somehow, but I think that would have a negative effect certainly on employment numbers because we already can see that the larger operations don't necessarily employ more people than the smaller ones.
MR. PORTER: As I said, there are incentives. There are three groups of people involved that you talked about. There are incentives for all of them to make this work. There is the landowner who wants his land managed well and in most cases appreciates assistance in doing that. There is incentive on the government to make it work because, as Greg has mentioned, there is a huge benefit from this industry and there is incentive on the industry because they want to continue operating. I am optimistic that with each group having an important interest there a solution is going to be found to the problem.
MR. MACASKILL: You say it is $0.5 billion industry. It is a big industry.
MR. SHAY: It is a big industry.
MR. MACASKILL: For an investment of $1 million, you would think the return to government would be substantial to make an investment in the industry.
MR. THOMPSON: I think, and this is my personal idea, that the amount that is going to be spent on silviculture will be tied to the annual production. If the production is high there has to be more silviculture. In a year where the industry got into a slump and the production came down, well then there wouldn't be as much silviculture. I think the silviculture should be tied to the annual production, if you cut a lot of wood, you should replace it; if you don't cut as much you don't need to replace it. Greg or Jonathan, that's the way it is set up, isn't it?
MR. SHAY: Yes.
MR. THOMPSON: Now to answer your question about the money, I couldn't answer that.
MR. MACASKILL: Just one more question, if I may, Mr. Chairman. How did the Christmas tree industry do this winter? Was it up or down and did they have a problem with the balsam saw fly?
MR. PORTER : I am not one to say.
MR. TALBOT: My understanding is that they had a good year, but I don't know the particulars about it.
MR. PORTER: I guess none of us here is involved with that business at all.
MR. THOMPSON: Just in talking to the Christmas tree people, I think they had a reasonably good year. I think there are some producers around this room who probably would know more about it than I would. But talking to them, I think they had a reasonably good return this year.
MR. MACASKILL: Thank you.
MR. CHAIRMAN: I think at this time I will introduce John MacDonell. He joined us late in the game and didn't have an opportunity to introduce himself. He represents Hants East. Mr. MacDonell has a few questions for you.
MR. JOHN MACDONELL: Sorry for being a Johnny-come-lately; I appreciate your
presentation. I may be one of the doom and gloomers that Mr. Porter mentioned, but it is not because I don't have something better to do with my time. I may be one of those in a group that I think is wrongly classed, that doesn't like to have money go into private enterprise. We certainly would like to see some type of value-for-dollar audit when money goes in there; it is taxpayers' money. We certainly would believe in the case of Michelin, if they decided they wanted to pay some of the money back, you should take it, too.
I do have some concerns about the industry. Part of that is something in my gut that tells me that things are not as great as they possibly could be. That's not really enough to go on, so I do spend as much time as I can trying to get numbers. I was in the Department of Natural Resources last week and spoke to two gentlemen there. I live in Enfield and if I drew a radius from Enfield, 40 miles at the outside - 30 miles may do it - and draw a circle with that radius, I would touch on MacTara, Taylor Lumber, Barrett Lumber, Hefler, Elmsdale Lumber, White Lumber, Sproule, and Julimar. Is there anybody else?
MR. THOMPSON : Ledwidge.
MR. JOHN MACDONELL: Ledwidge, I guess I would certainly hit them. As far as a concentration of mills, I don't know if there is a greater concentration anywhere in the province than in that area. We are not talking pulp mills.
In my discussion with Mr. MacAulay at the Department of Natural Resources, they are working on a code of practice and mentioned the sustainable forestry fund. Could you gentlemen tell me what your understanding of the sustainable forestry fund is in relation to the present stewardship agreements? Is that, to your understanding, the same type of thing, a third by everybody, or is that something different? I know $3.00 a cubic metre is supposed to go back into silviculture and that would be about $6.00 a cord, if I am right. So what is your understanding of how that sustainable forestry fund is supposed to work?
MR. PORTER: We will all have a shot at that question. My understanding of the way it has been set up so far - and obviously a lot of the details have yet to come out - is that a buyer has the option of either having a program or paying into the sustainable forestry fund. There is nothing that I have seen in the draft regulations to date which commits government to put money into the fund. The requirement is on the buyer to put money into the fund.
If you have a program, then it is up to you to decide if you want that program to be entirely self-funded or to enter into arrangements with the province as, as far as I know, all the funds are done. The variation on the funds tends to be in the two-thirds that is non-government, how much is industry and how much is landowner. I think they range from a one-third/one-third split to 100 per cent industry none landowner, so you have a range there. I am not aware of anything in the fund.
MR. CHAIRMAN: I don't know if you gentlemen have any . . .
MR. SHAY: That is the way I understand it.
MR. THOMPSON: John, it amounts to about $15 per 1,000 lumber; 5 times 3 is 15, so about $15 would be the amount going into silviculture per 1,000 lumber that is produced at a sawmill. The company can have a program of its own, as John said, or they can pay directly in at the end of a period of time: if you sawed so many board feet, you would pay $15 per 1,000 and then the province is supposed to - actually we are supposed to look after that, and have it spent.
MR. PORTER: Remember too, if you are running a program there is a lot of in kind that is part of administering that program. I think that is why the idea of an option means you have a business decision, whether you are a big operator or a small operator - do I want to administer my own program, and maybe some of the money is cost shared, but I would probably spend as much on administering it because the programs don't take costs out for administration. You have the choice. If you are paying into the fund, you may put more cash in, the way it is set up today, but you don't have the administration issues.
MR. THOMPSON: The way I understand, every 1,000 that is harvested in the province, there will be money taken to put into silviculture and that will be up and down with the production. Is that right?
MR. PORTER: Unless the person has their own program.
MR. THOMPSON: Yes, unless they have their own program.
MR. JOHN MACDONELL: Just in rough figures, and I am trying to get some idea, the department has basically isolated as much of Nova Scotia as Crown land that they could cut a tree on. They have set aside riparian zones, parks, swamps, you name it. If they are not going to be cutting trees there, they have tried to identify how much of their Crown land was going to be available as part of the forest that could be cut. It is their view that Crown lands and industrial private lands, large private lands, are sustainable but the small private woodlots are not sustainable. They think that this sustainable forestry fund will address that. But that is at the current level that we are cutting.
There is absolutely nothing in anything that they are doing that says we can't cut more than that. It is my understanding, right now I think MacTara is doing about 180 million board feet a year. I just took a rough figure - and I don't have my conversions - of 20 cord to the acre in Nova Scotia, it would take approximately 18,000 acres a year to get that 180 million board feet. Ledwidge cuts 55 million; Sproule is 35 million with a plan, I heard, to double that to 70 million. You guys may be able to say we have never heard tell of such a thing or that is in the works.
My fear is, because the province's number is 15 per cent to 20 per cent raw round logs leaving the province, I am wondering how many other mills are thinking of expanding? That means that the numbers at our current level, they don't mean anything, their present cutting. This money that we are going to put into this sustainable forestry fund isn't going to work. It is not going to give us a sustainable supply, and there doesn't seem to be any incentive or there doesn't seem to be any gut for trying to stop it. In other words, say, look you can't go above this present level.
Mr. Shay, you had mentioned it is a capitalist system, and I agree with you, I think what is going to happen is the industry is going to eat its young. Those who are most aggressive and have enough dollars to work with are going to eat up the smaller mills and at the Nova Forest Alliance meeting a couple of weeks ago, Laurie Ledwidge from Ledwidge Lumber stood up and said that he bid $2,000 an acre on a piece of timber and didn't get it.
That either means that we have all kinds of wood but people with private lands don't want to sell it because of tax reasons or whatever; but it also may mean that for whatever reason wood is becoming very scarce in this province. I am willing to believe in the capitalist system, but there have been things that have been done, like when we discussed free trade, we didn't involve the auto pact, we set that industry aside and didn't include it in the negotiations. In a true capitalist system, they should have been allowed to fall and burn the same as anybody else but we put some protection in there for them. We have marketing boards for selling milk and chickens and whatever else to try to protect the farmers in that industry.
It is not a true capitalist system in the sense that the government does have a responsibility to look at an industry and set regulations that will sustain that industry. I think they should. If there roughly 24,000 direct and indirect jobs in the forest sector, then it would seem to me that it would be appropriate to come up with some mechanism that ensures that those jobs are sustainable, at least that the industry is sustainable no matter what technological shifts adjust the people who are working on the ground, but certainly even talking $1 million for silviculture on a $1.5 billion industry is a joke. It would seem to me that if you wanted to create jobs in Nova Scotia, certainly there is an opportunity on the silviculture side of this to create a lot of jobs in the forest sector.
That is part of the reason that I have real concerns about where this industry is going and how sustainable it is, because if there is nothing to secure the level, if this silviculture program or this forestry fund will sustain small private woodlots and maintain sustainability at the present level, that is a great thing to say, but if you are not going to maintain the present level then that is not worth anything at all.
Do you have any comments about what I have said? Am I way off the beam? I know Downey Thompson's experience in this business, and so Downey, I would appreciate anything you have to contribute as well as the others.
MR. SHAY: I understand what your concern is. Certainly when you talk about the future sustainability and the future of the industry, the first thing that comes to mind is the 15 per cent of the wood that is leaving the province. Why can't we use it in our mills? I guess the irony is coming back to the land tenure of this province. It is a unique situation we are in, the small private landowner owns the majority of the resource. We have a responsibility as businesses to run our businesses. There is a supply and demand function that is going on. If we don't buy the wood, it will go somewhere else. That is one of the short answers.
But I think the other part of the equation and the more important part of the equation is that there needs to be a huge undertaking on behalf of the small private landowner to educate him on the importance of managing what is his resource. One of the problems that we have is in our tax regime. Right now there is no incentive for him to manage his resource in a means that will match the life cycle or the best use of that resource. Right now our tax system is set up with the incentive so that they liquidate and run as fast as they can.
I am not placing the blame anywhere but I think that is part of the problem of our fundamental structure that we have. There is no long-term vision on behalf of the holder of that resource to be a good steward. There needs to be some incentive, and one way would be in fiscal ways to help him manage that.
As far as capitalism goes, we are not going to get away from that. That is one of the reasons, in fact, I think we have a truer capitalistic system maybe than some parts of the rest of the country and in other areas. That is one of the reasons we have been successful in having unrestricted free trade with the largest-buying public sector in the world right now, which is the United States of America, because our system of buying raw material very closely monitors their existing system and they are happy with that because we are in an open bidding process. Jonathan, you may want to add to that.
[10:30 a.m.]
MR. THOMPSON: John, I appreciate your concerns about the future of the forest industry. The industry is working toward sustainable forests and I think it will come, but I know you are concerned and I know a lot of other people are concerned, and the industry is
concerned I think. I know at our company we are concerned about the future, but I have a feeling that we will get on with it and get the job done. How? I don't know, but people seem to have a way of surviving. I do appreciate your concern, John. It is something that should be taken seriously.
MR. JOHN MACDONELL: I appreciate some of Mr. Shay's comments, and certainly about the difficulties in the 15 per cent to 20 per cent leaving and the fact that the accessibility to Crown land is basically buffering the price for people to come down here and pay a higher price and then, when it goes into the mix, it kind of evens out, which is an advantage because of the large private-woodlot owner numbers here - percentage - that buyers here are not able to have the same advantage. But I think the bottom line to me is the notion that Nova Scotia is only so big. There are only so many trees growing here and I would assume that somebody can figure out - now I haven't been able to do it, but I sure have been trying - that there are a certain number that you can cut that you could cut forever, and there is a point beyond that, that once you go beyond it, you start to lose ground.
I guess what I would like you guys to give me your impression of is, for what we are cutting, can we keep cutting it? I was not thinking about these mills in my small area. They are not getting that wood from that area; that 80 diameter circle is not where they are getting their wood. If they were, they would be closing up shop pretty quick. So the question is, can we keep cutting what we are cutting to the end of time?
MR. PORTER: The area that you talk about is the highest concentration in the province, but some of the mills in that area are drawing wood from the entire province . . .
MR. JOHN MACDONELL: Yes.
MR. PORTER: . . . and that is part of the nature of the business. They are the ones who happened to expand in that area. I have full faith in the province's numbers, which show that at the current level of harvest and the proposed level of forest management, not only can we continue cutting what we are cutting but, in the future, we can cut more. When you start looking at forest management and the assumptions that are in there on how much an acre of land in Nova Scotia will grow compared to a lot of other places in the world, we are being very conservative, but we are starting fairly low down the scale. So the numbers in Natural Resources' projections for Crown land and industrial land shows some significant increases in sustainable production possible in the future, but certainly the current level is sustainable.
When you mentioned earlier the amount of wood and trying to convert it back and forth, the amount of wood leaving the province is about equivalent to the amount of wood consumed at the Bowater mill, very roughly; that gives you an idea of the size. I don't think there is any company in Nova Scotia that, when they are thinking of changes to their process, does not spend as much time - probably more time - on fibre issues than the equipment issues and all the technical issues because it is a key thing, the cost of fibre and the availability.
The regulations are proposing a certain level of expenditure. If that level proves not to be enough, then it is going to take more. I mean I think there has to be the commitment that we are going to sustain fibre because that is what the whole industry is based on. I believe that the numbers we have, we can sustain it at that level. If that proves not to be the case, it is going to take more money to sustain it.
MR. JOHN MACDONELL: I don't know if I can get three in this one question or not - if that level was as high as 20 per cent, and that was what Bowater basically would be requiring, that means that the province could stand about five Bowaters. You know, if it is 20 per cent of what the cut is, 100 per cent would be five Bowater Merseys and I am thinking of Stora and Kimberly-Clark, our two other pulp mills in the province. Is Bowater as large as those or smaller than those?
MR. PORTER: In wood consumption Bowater would be the smallest.
MR. JOHN MACDONELL: The smallest of the three?
MR. PORTER: Yes.
MR. JOHN MACDONELL: Then not to mention all the sawmills, it would seem to me we are cutting over 100 per cent if that was the case?
MR. PORTER: One of the positive things is the new registry of buyers that was brought in so that we have - the province has been collecting data for many years on how much wood is being cut in the province, but didn't have jurisdiction over all the export woods. This past couple of years is the first time we had got good numbers and certainly the provincial projections are based on what has been harvested, wherever it has gone, because when it comes down to forest management, the issues of where the wood goes is what comes off the ground and what you put back into the ground.
MR. JOHN MACDONELL: Right.
MR. PORTER: That is what I say, we spend a lot of time looking at provincial projections. The association has had presentations on them and I think we feel we are comfortable with the modelling that has been done.
MR. SHAY: I think the other bit of an evolutionary process has taken place, and again, I think it is going to have a positive effect on the volume of wood that is used, that the pulp mills, if I am correct, Jonathan, are moving more toward purchasing the by-product of the sawmills in chip form as opposed to roundwood. So I think the total, like in the cubic metre volume, the problem has mitigated a bit to the extent that a lot of their supply is coming from wood that we are harvesting as opposed to two different groups going in there.
MR. PORTER: The primary destination of wood in the Maritimes and in Nova Scotia today is the sawmill sector, not the pulp and paper sector.
MR. THOMPSON: I guess the sawmill sector is providing more and more fibre to the pulp mills and that is reducing their harvest or purchase of roundwood. Probably that will continue, if we can maintain the quality that suits these plants, and so I guess maybe the logs that come into Elmsdale, or Ledwidge, get processed locally and then the chips go to these pulp mills and as long as they get these chips they will not have to be harvesting trees. I think if anybody is around in the year 2065, there will be all kinds of timber here. At the moment we have an over-mature forest and people don't put their timber up for sale until it is over-mature, half rotten, because they are going to lose money in tax, but eventually there comes a time when they have to sell it and they are probably not getting quite as much for it with it deteriorating, but eventually the over-mature forests in this province will get cut and there will be a new forest. By 2065 you should be able to harvest more than we are now, under proper silviculture forest management. I think it will happen, John.
MR. JOHN MACDONELL: Thank you.
MR. MACASKILL: On this, what we call old growth forests that you just talked about, or people who have land and timber on it, do you feel that this is partially due to the fact environmentalists have been brainwashed into believing that they should not cut these trees down? Do you think there is anything in that, that people hang on to these old forests for that reason?
MR. SHAY: I think we would agree that it is important to keep a certain amount or percentage or volume of that wood in the province for research, for enjoyment, for whatever purposes. I don't think that anybody in the industry would be anxious to go out there and cut everything down and flatten it with a chainsaw just to make some lumber. I think there is a place and a certain amount of room for that type of fibre for our own education and those types of things. What the right amount is, certainly I wouldn't know, but I think there is a place for that and industry certainly accepts that.
MR. PORTER: If we had 40,000 woodlot owners in this province, they would have 40,000 reasons for how they like to manage their land, it is pretty difficult to predict.
MR. CHAIRMAN: We have approximately 20 minutes left. We will turn the floor over to Mrs. Baillie, then Mr. Boudreau and Mr. Carey. I would ask you to try to divide your time evenly, if possible.
MRS. MURIEL BAILLIE: I will be brief. Just a little background. I am very interested in forestry. My husband and I had a small lumber company in the Village of River John, which we started from scratch, that grew too large for us so we had to stop. But my husband owned some woodlots very dear to his heart; he treated them with tender loving
care. I am wondering, if we sell the wood by stumpage just to a local contractor, are there any laws or incentives to make sure that that land is replanted? This is in northern Nova Scotia. I don't know if the reforestation is good or not. Are there any incentives or laws?
MR. SHAY: I think that is what the impending legislation will accomplish, a requirement to have that land replenished.
MRS. BAILLIE: There is nothing in now?
MR. PORTER: There are really no laws today; there are a lot of guidelines today and there are a lot of industry programs today that would do that. The forest wildlife guidelines, parts of them will become regulations and that will regulate what a contract can do, leaving green belts along rivers, that kind of thing. Those aren't laws today but they will become laws from what we understand. In terms of replanting the land, that is going to be covered by this new silviculture program, but depending on who you sell to today, a number of companies have that program today and they will commit to doing it.
MRS. BAILLIE: Are you talking about bigger companies?
MR. PORTER: I am talking about some of the sawmills and some of the pulp and paper mills. Individual contractors don't, but depending on where the wood goes, they may be able to access some of the programs today. Once this is all in place, anyone who buys wood in Nova Scotia for use in Nova Scotia or for export will have to commit; they will have to either be paying money into a fund that you can access or they will have to offer you a program.
MRS. BAILLIE: Just a couple of comments. First of all, I was very glad to hear Steve talk about communication. I think that is excellent, I think it is necessary. I also liked hearing about the sawmills sending their chips and so on to the pulp mills because when we were in business, I used to hear my husband say it was difficult to get good logs these days because so many of them were going to the pulp mill companies. I am pleased to hear that.
MR. THOMPSON: I think it has turned itself around. I think the better logs are going to the sawmills and the chips from those logs are going in return, and pulp mills are selling logs to sawmills off their private holdings and getting chips back. They can use this by-product but we in the lumber business can't use the by-product, we have to have the standard. I think the thing has turned around. There is great cooperation now between landowners, sawmills and pulp mills. You hear stories that there isn't, but I think people began to pull together for the best interests of everybody.
MRS. BAILLIE: It is very encouraging. Thank you.
MR. BOUDREAU: Mr. Chairman, I will try to be brief too. First of all I want to thank the committee for the opportunity. I really don't know that much about this industry, I admit that. I do have some sawmills in my area, and I know that they contribute a great deal to the economy in Cape Breton, that is for sure, not only through job creation but the aftermath jobs like you indicated.
I also want to congratulate them, since 1934 you have had over 1,000 members, you have 13,000 employees, 10,000 aftermath jobs, $1.5 billion to the economic well-being of Nova Scotia. I think that says enough right there for the industry that this is a very vital industry to the communities in which these industries are located. I think it is important that we are all educated. It was indicated that you were going to educate the community and I think that is vital.
One other thing is just a comment. I could scream sometimes when I hear, in particular, government members indicate that there is no money. Any government, in my opinion, has a certain amount of money for operating and I think it is the responsibility of that government to recognize and give that priority to industries in this province which are important to the well-being of the province. It is obvious that this industry has contributed a great deal to the success of Nova Scotia over the years and I am hopeful that government members of this committee will take that message back to their caucuses and their ministers and recognize the importance of this industry.
One of the things I am interested in is you indicated you don't feel the federal government contributed enough to the forest industry in this province. What I would like to know is just exactly where do you think there is room for improvement? What role would you like the federal government to play?
MR. PORTER: One of the clear roles Greg mentioned is in the whole area of taxes, which is a federal responsibility, because there are a lot of incentives in other businesses. It seems that only in woodland, although it is very important in the Maritimes, but when you look at Canada as a whole, it doesn't even hit the sheet because the Maritimes are different. The tax rules, the capital gains, and tax credits could play a very important role in encouraging people to invest in their own land. I think that is one of the biggest areas we would see and it has been an issue that has been pushed by woodlot owner associations and industry for decades. I think we are seeing some progress but it is a very slow process because it is a small part of Canada.
MR. BOUDREAU: Mr. Chairman, I would just like to recognize that from my understanding, at least, this industry, like several industries within our province, is certainly going through difficult times economically and with different things. I think several industries are in that category in the province. I think it is important for us to recognize exactly what I said before, the contribution to the economic situation that this industry is providing in the province. Although it has some difficulties, it does have a bright future possibly if it is
managed properly. From what I am hearing I believe that the Department of Natural Resources, at least, is making some success in that. I heard the word volunteers before and volunteers are the backbone of this province and to have as many members as this organization has, I think it is important for you people to have a direct input into the direction that this industry is going.
When you are ready, Mr. Chairman, I am prepared to make a motion to write a letter to the federal government, indicating we recognize the importance of this industry and requesting that they play a much bigger role here in this province.
MR. CHIPMAN: I second that motion.
MR. CHAIRMAN: The motion has been made and seconded. Is there any discussion on the motion?
MR. KERRY MORASH: I was just wondering if we could put in some of the specifics with regard to capital gains and tax structures and things like that so that we could give some direction as to exactly what we are requesting or what we look forward to.
MR. PYE: Mr. Chairman, I think we recognize that this is simply a request.
MR. CHAIRMAN: Yes, and might I suggest that perhaps the two of you stay or anyone who wants to stay after the meeting just to give some direction to Darlene with regard to that topic. I will stay as well.
MR. JOHN MACDONELL: I don't think the motion was made. I think Mr. Chipman said he would second it when it was made.
MR. CHAIRMAN: Okay. Well, we will go through that formality at this time then. Would you care to make the motion, Mr. Boudreau?
MR. BOUDREAU: Thank you, Mr. Chairman. I will make the motion that we write the minister responsible for forestry in Ottawa, that the importance of this industry and the impact it has on the provincial economy be acknowledged and that we would support federal initiatives in the areas of tax incentives, perhaps capital gains. Is there anything else you would like to see in there?
MR. SHAY: Capital gains reform and tax incentives for silviculture are the two big key items that need reform.
MR. BOUDREAU: We request the federal government look seriously at implementing a policy in the forest industry in this province.
MR. CHAIRMAN: You have heard the motion. Are you ready for the question? Mr. Pye.
MR. PYE: Just one more point, Mr. Chairman, with respect to the motion that is going forward. Before the letter is sent off to the minister responsible, is it possible that the respective members can have a copy of that letter to peruse it to see that all the intent is in the letter that has been suggested?
MR. CHAIRMAN: Yes, that would be no problem.
MR. PYE: Thank you.
MR. CHAIRMAN: Are you ready for the question?
MR. CHIPMAN: Just before I second the motion, maybe you could put a little addition in there, rather than go through the motion to amend, consider signing an agreement with the province for more money.
MR. CHAIRMAN: Yes.
MR. PORTER: Could I make one comment? With the capital gains and the silviculture incentive, the key issue is rather than being for the industry it is for the landowner. It is at the landowner level that those are critical.
MR. CHAIRMAN: Absolutely. Are you ready for the question? Would all those in favour of the motion please say Aye. Contrary minded, Nay.
The motion is carried.
As I said earlier, those who would like to give some direction to Darlene could stay following the meeting and do so.
Moving right along, we have Mr. Carey.
MR. JON CAREY: Mr. Chairman, my questions are quite brief. One of the things that I wanted to ask was, do you feel that there is adequate fire protection provided by Natural Resources?
MR. PORTER: I think today fire protection in Nova Scotia is second to none in Canada. It is excellent. It is a combination of Natural Resources and particularly volunteer fire departments. It is an exceptional job. When I talk to counterparts of mine in Ontario and they talk of 1,000 acre fires and we talk of a big fire being one-quarter to one-half an acre, they
cannot understand how you can do that. So I think the key thing is we have to maintain what we have and it is a critical part of everybody's livelihood, but it is exceptional.
MR. THOMPSON: It is maybe one of the most important things in forest management to maintain the present level of fire protection because if that level drops, there will be big fires, more fires and I guess I would like to say that the local communities that have a volunteer fire department, many times they are on the site of a fire before DNR is because they are there locally. It is volunteers and I sure appreciate what they are doing.
MR. CAREY: That is particularly interesting to me. I have been chief of a fire department, a volunteer for 21 years, and I was just wondering. I notice that because of the dry weather over the last three years that there was a significant increase in the number of calls, but yet the losses were kept minimal. Another question was, how significant is the U.S. exchange rate to your business?
MR. SHAY: Quite significant.
MR. CAREY: I guess, again, the federal government has more to do with that than certainly we do, but I am just wondering, is a 75 cent dollar better than what we have now for your business?
MR. SHAY: Certainly not from a point of view of exporting.
MR. CAREY: No, but would it have any bearing on what we are shipping to Maine and so on at this particular time?
MR. SHAY: Certainly it would cause us to be a little less competitive and it may influence the buying decisions of some of the buyers in Maine and the rest of the United States. It may also have an influence on whether they decide to use wood or some other non-wood product. So it certainly is a significant factor in our everyday business decisions. So the stronger the dollar, I guess it is not a good or an evil thing, there are ups and downs and pros and cons to wherever the dollar is on either side, whether you are an importer or an exporter. I guess the downside for us is when we are buying capital equipment or other items from outside the country, then it is obviously more expensive for us there.
MR. CAREY: I guess my final question would be, with the exception of money which we have already discussed, the provincial government, what would be the one thing that you would request of them in your priorities, what would be the main thing they could do for your organization?
MR. SHAY: Just one main thing? I have two main things. I guess in terms of the organization itself, certainly the longest standing and most successful program that the association has carried out over the years has been the road access program. It probably
reaches the widest membership of our group and we really would be grieved to see that lessened or reduced any further than it is, and I think it would do a disservice to all of the individuals and outfits that have used it over the years. It is also a very efficient use of those funds. We get good value for our dollar in that program and it would be a shame to see it gone.
MR. THOMPSON: It is spread evenly across the province. Every county gets it and it is going to the people who actually need it.
MR. PORTER: To me the key thing is cooperation with the industry and we can-particularly as we move away from some federal-provincial systems to more home-grown systems, industry can be very efficient in the delivery of services and I think the silviculture program is going to be a very good example of that. You can get a lot of good work done on private land for relatively little money.
MR. CAREY: I did say that was last, but I do have one more quick one. The $15 per 1,000, is that a reasonable fee and is it something that the industry can handle or is it going to erode their profitability?
MR. SHAY: I don't know if the term reasonable is appropriate, but it seems to be the value that has been arrived at by the department's calculations that is required as a reinvestment to maintain the industrial level.
MR. CAREY: Can companies afford to pay that and still stay viable?
MR. SHAY: I think that remains to be seen. I think it is going to be quite onerous on some smaller companies, but they are also creative and they have their own programs. I think there are ways that companies will find to meet that commitment and grow into the future.
MR. CAREY: Thank you.
MR. CHAIRMAN: Because some of our members have other commitments I think we will have to end our debate at this time. I certainly want to thank you, Mr. Talbot, Mr. Porter, Mr. Thompson and Mr. Shay, for your presentation and your dialogue. I also want to thank the committee members for a most interesting meeting that we had here today on a very important subject. I fully believe that all in this room recognize the importance of the forest industry and certainly the contribution it makes to Nova Scotia and to our economy. It is the number one resource-based industry in my constituency of Pictou East and we have numerous mills and contractors in that area.
I must say that I don't have a doom and gloom outlook with regard to the future sustainability of our forests and our industry because I fully believe that the landowners, the mills, the government and the various forestry organizations will work together to resolve any
problems we have and ensure the viability of our industry into the future. I again thank you very much. I know some of our members would like to ask more questions, but I think it is only fair to . . .
MR. BOUDREAU: Mr. Chairman, just on a point of order, it is not a question, I would like to request that Senator Bernard Boudreau and, of course, our minister, the Honourable Ernest Fage, get a copy of the letter that we are writing to the federal government, please.
MR. CHAIRMAN: I would have no problem with that and I don't think anyone at the table would have any real problem with that.
MR. PYE: As a matter of fact we welcome it.
MR. CHAIRMAN: Again, gentlemen, thank you so much. As you can see we could continue for another two hours, I am sure. Thank you again.
The meeting is adjourned.
[The committee adjourned at 11:01 a.m.]