The year 2016 proved to be a tumultuous time in the forest industry in Merritt. The Tolko Industries mill was shut down in December, a decision which left more than 200 people scrambling to find employment in a matter of months. The mill’s closure — coupled with a major fire at the Diacarbon wood pellet plant in November and labour disputes that delayed the Merritt Green Energy Project — meant that many industries in Merritt related to the forest sector felt the squeeze.
But was the year 2016 an aberration, or a sign of things to come for this sector?
I had a conversation with the Derek Nighbor, the CEO of the Forest Products Association of Canada (FPAC). FPAC is a trade association which advocates on behalf of companies in the Canadian forestry industry — a position which means Nighbor gets a chance to interact with mills across Canada. He gave me a sense of how the forestry industry is addressing the softwood deal, the increased threat of automation to good paying jobs in mills across the country, and how the future of the forest industry might rely on manipulating the very genes of a tree.
The conversation has been lightly edited for length and clarity.
CW: One of the reasons for the Tolko shutdown in December was the reduction in the Annual Allowable Cut this year, after the AAC was increased for a number of years due to the pine beetle infestation. Are we only now realizing the real impact of the pine beetle infestation?
DN: I can speak broadly to B.C. and Alberta — there was a movement at the time to try and save the trees they could, and then starting to harvest more by special direction from the B.C. government, because you wanted to salvage the stuff. I think everybody did expect that it would catch up to you after a few years, unfortunately I think that’s where we’re at now.
It’s unfortunate timing with the uncertainty around softwood lumber, and all that stuff going on right now. The one thing we’ve seen in the industry across the country is a lot more investment in terms of modernizing the mills, getting into new innovative products. I was just at a mill in Thurso, Quebec probably about 50 kilometres from Ottawa. They’ve invested in a new birch harvesting project, it’s kind of leading edge — it’s going to help that mill survive. Just today, I was at a mill in Renfrew, Ontario at the Ensyn facility. They’re converting sawdust into biofuels and selling those fuels in the U.S.
We have a lot of small communities throughout rural eastern Ontario that depend now on selling that sawdust to Ensyn to support their business. That’s the interesting thing about this industry, and I’m sure with the Merritt closure, that’s going to provide downstream impacts to people who were either selling to that mill or who were buying residues or whatnot from that mill. It’s a really interconnected, interdependent ecosystem. It was really striking — I’ve been doing a tour back in my home area — and I’m just reminded how important it is for these smaller mills to have a place to sell their wood chips and sawdust to. We now have a fibre board mill just outside of Pembroke, Ontario and then we have the Ensyn bio plant in Renfrew — so that’s now provided a huge amount of relief to the mills in this community, because they now have other businesses to sell their residues to.
It becomes important to approach these things from a regional perspective, to look at the entire eco-system. That’s why I’ve been encouraging local governments in eastern Ontario to be looking at the broader picture here to say “Okay, if there can be regional support to develop some kind of a facility over here, that’s going to provide a market to a lot of the mills in the area. The mills rely on the pulp guys to do business with, it’s a really interconnected economy, if you will.
CW: With the rhetoric in the States focused on protectionism, are you hopeful that a new softwood deal will be struck between Canada and the U.S.?
DN: This is the thing on softwood. The U.S. can only satisfy 75 per cent of their demand for softwood lumber — so they need us. If they want to slap additional duties on Canadian lumber coming south, they are only hurting their own consumers. And I think this is the issue — whether or not there is going to be a political rising up of people to win the day on that in the U.S., I don’t know — this is going to add thousands of dollars onto the average construction cost of a new home in the U.S. That’s what it boils down to.
And that’s unfortunate. Susan Yurkovich, who runs COFI [the Council of Forest Industries], she has a mandate to work on behalf of the B.C. lumber industry. So I let Susan do that work — but overall I will say that it is very frustrating. It is like Groundhog Day — we won this [battle] every other time before, it’s the same movie again, and it’s really frustrating we have to go through it again.
I think the opportunity in B.C., which is less of an opportunity in eastern Canada, is how close you guys are to the Asian market. What we’re saying to people in Ottawa is that we have to get [the softwood deal] fixed and figured out — but in the meantime, we can’t become paralyzed by it. We have to continue to find ways to grow exports to Asia. We have to find ways to build more at home here with wood. So — what about through municipal government procurement? What about through provincial and federal government procurements? We know that wood products are less fossil fuel intensive to produce, and they store carbon. With a federal government that’s poised to spend over $10 billion on infrastructure, I hope they are looking to wood.
I think the [federal government] has to do more to support exports to other markets, so we can diversify. They have to do more to support building with wood domestically — that’s absolutely critical. And getting back to this bio/innovation piece. I had a call with a couple of officials at Natural Resources Canada last week, [where I said] ‘I’m all for innovation and investing in R & D, we gotta do that for the long term. We also have to provide support to our mills that is going to help us right now. How can we turn some of these science projects into really meaningful things that are going to deliver value and jobs in the forestry sector and the mills’
CW: Does the move to more automated practices at mills present a bit of a paradox, where a mill might be able to reduce its costs and remain operational due to tech advancements which ultimately replace jobs?
DN: Definitely that’s always a challenge. And that’s a challenge for the politicians as well. We’re competing on a global scale now. If you don’t have an efficiently run, productive mill, it’s going to be tough to compete in the export market and the domestic market. So the opportunity is: there are a lot of downstream jobs. We’re seeing it on the bio side of things, we’re seeing it the spin off jobs in the local communities. I know when we talk to government, where possible it’s about creating new job opportunities. But increasingly, it’s about how can we keep what we’ve got? How can we build some of these adjacent industries, like the bio industry — that’s gotta be a focus. I think there is still a way to support current jobs and evolve here — but it’s definitely a challenge. That’s why it’s important that the government thinks about not just science projects that are going to turn into pretty cool things twenty years from now, but what stuff can they invest in — in partnership with the business community — to bring about innovation in the mills and in the forests over the next two or three years.
It’s not all about automation. This plant I was at in Thurso, it’s a new way of harvesting birch from the forest. It can just be a more efficient way of getting trees out of the bush, it can be a streamlined production process or it could be really testing a new product innovation before being ready to really scale it up. Innovation is a word that’s used far too much as far as I’m concerned, and it means different things to different people. But in the forest sector, it’s no different — there is a lot of opportunity. This is a bit of a longer play, but even in terms of ‘How can we support research in the forest to ensure the trees of twenty or thirty years from now are going to be resistant to pests? It’s not only at the mill, but also through the sustainable way we manage our forests, to improve the genomics of trees and species.’
CW: Will the lumber industry be affected by the probable death of the Trans Pacific Partnership (TPP)?
DN: Because of the growing trade we have with Asia, and the existing trade with the U.S., we’re supporters of free trade. Especially in the forest sector, we have a lot of great stuff to bring the world. So we’re big supporters of TPP. That going away, at the end of the day, is just going to lead to more bilateral conversations with other countries.
We’re seeing a lot of opportunity in places like Malaysia, and Indonesia. More can be done in China and Japan. I just recently went with Steve Thompson and a delegation from the B.C. government over to China and Japan a few months ago. It was fascinating. It blew my mind, just the scale there, and the opportunity. You go to Shanghai and its 25 million people there, and it’s just mind blowing.
So I think at the end of the day TPP would have created opportunities for us. Its gone by the wayside, we can’t do anything about that. What we can do is continue bilateral conversation with some of the other markets and try to do more trade. I know the B.C. government is very focused on that, and we support that.