[Recorded by Electronic Apparatus]
Wednesday, June 5, 1996
.1533 
[English]
The Chairman: I'd like to bring this meeting to order. Pursuant to Standing Order 108 we are going to continue our study on rural development and the natural resource sector.
We have a number of witnesses today, all of whom I'd like to welcome. First of all, from Keep Mining in Canada are Eileen Wykes and Colin Seeley, who is from Placer Dome. Eileen has been here on a number of occasions. Welcome back. From the Canadian Pulp and Paper Association is Lise Lachapelle. From the Canadian Federation of Woodlot Owners is Peter de Marsh. Welcome.
The way we've been proceeding with this is that we'll ask each of you to make a brief intervention, no longer than 10 minutes, and then we will open it up for questions from our members and go as a panel. Would anybody like to go first?
Eileen.
Ms Eileen Wykes (Project Manager, Keep Mining in Canada): Mr. Chairman, committee members, ladies and gentlemen, on behalf of both the Mining Association of Canada and Keep Mining in Canada, I'd like to thank you for inviting me to be part of your investigation into the contribution of the natural resources sector to rural development.
.1535
As Mr. Mitchell said, Colin Seeley from Placer Dome Canada has joined me today. He brings his vast experience in working in rural mining towns. He's currently involved with the Musselwhite project in northwestern Ontario, where he works closely with nearby communities on employment and aboriginal issues and business and economic development opportunities. He has been mine manager at Placer Dome's Endako mine in Fraser Lake, British Columbia, and the mayor of Fraser Lake.
As you know, mining plays a vital role in rural Canada. This is especially true in the provinces of Ontario, Quebec, and British Columbia, which account for two-thirds of all mining activity in Canada, and in Saskatchewan and Manitoba, where mining is the province's second-largest industry.
Of Canada's 150 mining communities, 100 are classified as rural, so it can be said that by definition mining is a rural industry. Indeed, many mining towns and villages are located in northern and remote areas where economic and industrial development would otherwise be unlikely. For this very reason, the contribution of mining is essentially invisible to urban Canadians and to policy makers.
We commend this committee for shining a spotlight on rural Canada. We intend to support the premise that mining's continued health and prosperity must be integral to any federal government initiative to foster the interests of rural Canada.
When one looks at mining's $23 billion contribution to the Canadian economy, it's essential to keep in mind that this economic development takes place largely in rural Canada, out of sight and out of mind of most Canadians. Yet of the 341,000 jobs in Canada's metals and minerals sector, more than 150,000 are in rural Canada. More importantly, they are high-quality, high-paying jobs in all aspects of mining, from exploration to mining to metal fabricating.
Unlike many jobs in remote areas, mining involves workers in the technological revolution taking place in the workplace. In fact, 85% of people in the industry now use advanced technologies to carry out their work. Mining activities also account for thousands of spin-off jobs in transportation, services, and equipment supply.
As impressive as these numbers are, they mask the quality of jobs in rural Canada. Mining pays a higher average wage than any other industrial sector in Canada, and those are not seasonal jobs but year-round jobs. It brings advanced technologies to rural Canada. It brings environmentally sustainable growth. It brings an enviable quality of life. I'll elaborate briefly on these three points.
First, let me point out that it's because of mining that many rural communities will not be left out of today's technological revolution. Through constant innovation in the use of advanced technologies, mining will continue to be one of Canada's leading knowledge-based industries well into the next century. Keep Mining in Canada's new faces of mining provide ample illustration of the technological value-added of mining investments.
Let me give you a couple of examples from our new faces search. At Fording Coal's Greenhills operation in Elkford, B.C., Robin Sheremeta is marrying advanced satellite technology, previously available only to the U.S. military, with mining operations, such as truck dispatch, mine surveys, shovel positioning, and so forth. Meanwhile, on the other side of the country, in Bathurst, New Brunswick, Brad Simser, another new face, has successfully installed Canada's first integrated seismic system, a computer-based technology used to track and monitor how rock formations are adjusting to mining activities. This improves safety and allows for deeper mining.
Both Robin and Brad demonstrate how mining works to ensure that rural and remote communities are staying on the cutting edge of technological advancement.
.1540
Second, mining brings environmentally sustainable development to rural communities. Again from our new faces, in Fort McMurray, Alberta, hydrological engineer Marie Keys and her team of specialists are ensuring that Syncrude's oil sands operations are environmentally sustainable from the planning stages right through to the mine's expected closure in the year 2030. Similarly, scientists like Barry Given of Homestake Canada and Liang Xue Liu of Lakefield Research are investigating innovative techniques to deal with mine tailings in an environmentally responsible way.
In fact, our industry is on the international forefront of sustainable development activities and technologies, and that bodes very well for both existing and future mining communities.
Finally, we know that development must mean more than economic growth. It must also include social and community development.
One thing people who live and work in mining communities never fail to mention is how mining forms a key pillar of the social and cultural life of their town. Mining companies have a well-earned reputation for contributing to all aspects of community life, from schools to theatres, from hockey rinks to community centres, from roads to hospitals. Clearly, the well-paying jobs and the numerous facilities and events supported by mining companies allow many rural communities to boast a high standard of both economic and social life.
In this regard, I hope this committee is paying special attention to the important role aboriginal communities play in the development of natural resources in rural areas. By making a concerted effort to ensure the integration of first nations communities into all aspects of mining, our industry knows the value aboriginal Canadians can bring to rural development.
Turning to the future, we must take into account Canada's enormous undeveloped mineral wealth. I'd like to highlight briefly two very significant examples: the potential of the BHP Diamonds project in the Northwest Territories and the Voisey Bay project in Labrador.
In the north, BHP has spent $50 million so far. Of that, $20 million has gone to aboriginal co-owned or owned companies. In a territory where the unemployment rate is the highest in the country, BHP's diamond project is expected to generate 1,000 jobs in its construction phase and an average of 830 during operations, thereby reducing the Northwest Territories' overall unemployment rate by three whole percentage points. In aboriginal communities, where the unemployment rate can be as high as 40%, the reduction could be as much as 10% from this one project.
This project alone is expected to be one of the largest purchasers of goods and services in the north. It will contribute $2.5 billion to the gross domestic product of the Northwest Territories and $6.2 billion to the economy of the country as a whole, and the project's lifespan will be 25 years.
In Voisey Bay, on the east coast, is one of the largest, most accessible nickel deposits ever discovered. It likely will change Newfoundland from a have-not to a have province. In 1995 former Premier Clyde Wells estimated that if the Labrador mine reached its full potential, the federal tax transfers to Newfoundland would be lessened by about $700 million. Preliminary Inco estimates put capital expenditures for construction at about $1.1 billion through to the year 2000.
These are the kinds of development we must promote in order to ensure the future of mining in Canada.
Now to our recommendations. Given that the federal government made a commitment in the throne speech to promoting rural development, and given that promoting mining development must be a central part of any rural development strategy, what can Ottawa do to promote the health of mining communities? We have four recommendations.
One, in terms of existing mines, the federal government should look at measures to extend the mine's life by encouraging exploration at deeper levels and at nearby sites.
.1545
Secondly, in terms of mines near closure, mining companies will be looking to work cooperatively with government to minimize the consequences of mine closures on workers and communities by fully integrating plans for the life cycle of the mine into the economic development plans for the whole community. In this regard, I believe the mining industry and the government have had an excellent record in recent years.
The third recommendation is that it is essential that land claims be settled expeditiously, efficiently and fairly, that simple and effective regulatory regimes governing land use be established in claim settlements, and that interim business or participation agreements be developed until land claims are settled. As you know, these are basic tenets of the Whitehorse Mining Initiative leadership accord.
The fourth recommendation is that probably the most important action this committee can take is to work to eliminate government red tape, which discourages investors from undertaking uncertain exploration activities. No investor wants to face two sets of conflicting regulations. No investor has unlimited amounts of time to wait for a government decision.
On the safe assumption that there are other diamond deposits and other Voisey Bays out there, it is vital that Ottawa streamline federal-provincial environmental regulations to allow Canada to compete more effectively for the investment spending necessary to find such deposits.
We recognize that the issue of regulatory reform is not new to members of this committee. Indeed, it has been central to your last two reports. It is highlighted in the 1993 Liberal red book, in the Whitehorse Mining Initiative leadership accord, and in Building a More Innovative Economy. We know the minister is supportive, but progress remains frustratingly slow.
In order to make progress on this issue, the work of this committee and the minister must not be left to stand alone. Instead, other key ministers and departments such as Environment, Fisheries and Industry must also make the commitment for needed reforms.
I understand there was an announcement on the weekend from the Canadian Council of Ministers of the Environment indicating their support for this issue. We are most encouraged by this commitment and we'll be looking for action within a specific timeframe. It is very encouraging.
For our part, we'll continue to work to make all members of Parliament and ministers aware of the need to speedily address this pressing issue. In particular, we will be approaching many of your urban colleagues, who are often unaware of mining contributions. We will involve them in a dialogue. They don't know it yet, but many urban MPs will be adopted by mining communities. These companies will be providing them with regular updates on national and local mining issues. In addition, we're arranging mine tours for some urban MPs.
I'm hopeful these efforts, combined with your work, will lead to significant progress on commitments to facilitate mining investment in Canada in the short term. For mining communities that already exist or are yet to be established, the future of Canada's mining communities depends on actions taken today to improve the climate for exploration and development tomorrow.
At the end of my friend's presentation, Colin and I will welcome your questions.
Thank you, Mr. Chairman.
The Chairman: Thank you very much. Ms Lachapelle.
Ms Lise Lachapelle (President, Canadian Pulp and Paper Association): Thank you,Mr. Chairman.
First I would like to thank this committee for the opportunity to present our views to you here today. We have contributed and I guess will continue to contribute heavily to rural economic development in Canada.
I would like to say a few words about our industry and the importance of it in rural development. Then I have a number of recommendations for you.
One thing I will say at the outset is harmonization, as Eileen has just spoken about, is one of our recommendations. But we never know any more whether to include it or not, because either it is an item everybody has talked about too much or an item everybody has done too little about. It is still on our list, but somehow or other we're putting some other recommendations ahead of it because we figure people should know now they have to do something about it. If they don't know, maybe it's too late for them to understand that it's still very much a required item.
.1550
That being said, the forest products industry in Canada is by any measure the largest net contributor to the balance of trade in Canada. To put it in perspective, Canada's balance of trade last year was $28 billion and the forest industry's balance of trade was $34 billion. In other words, if we were not there, we would have a balance of trade deficit of $6 billion.
The industry directly employs about a quarter of a million people, indirectly three-quarters of a million people, across Canada. We do employ one out of ten or eleven Canadians, depending on the region.
To come down to the actual rural impact of our industry, 337 rural communities depend on forestry for more than 50% of their economic base. There are another 1,200 or 1,300 that also rely partly on the industry. That's 1,500 communities across Canada.
We also have to realize that through the pulp and paper end of it we are also very present in urban areas, or often also act as linkages between rural and urban areas, as many of our businesses include not only the logging but also transportation, the business, the marketing, and the exports. We export to over one hundred countries around the world.
The good news is that global demand for paper and other forest products is on the rise. It continues to be a cyclical industry, but there are cycles that are on the upturn and not on the downturn. We are expecting growth in all of our major markets, those being the U.S., Europe, and Asia, which for the first time has come to be our second-largest export market, as of last year.
What we have in this industry is very intensive application of technologies that even five or ten years ago were not available in Canada. We're also talking about satellite remote sensing, computer processing technologies. We use all these new technologies.
In some of our mills the clients are able actually to check the quality of the paper or the pulp they're buying directly on real time in Japan or in Colombia. They are related directly to the quality controls and can then decide whether this is the type of pulp or paper or coated paper or paperboard they actually want to buy.
On the other hand, and despite all those very positive growth prospects, I don't think we should take the future of this industry for granted. Just one word of caution. In the last few years there has been more growth in the pulp and paper industry in a number of countries around the world, including in the U.S., which, by the way, is the most important pulp and paper manufacturer in the world, Japan being second, than there has been in Canada. I think we have to pay attention to that. Some problems are directly related to the Canadian situation. So I would like to come to some of those and offer some recommendations right away.
[Translation]
My first recommendation deals with the cyclical aspect of our industry, about which some claim we can't do anything. It is true that prices go up and down, but it is not true that other things could not be dome.
I would like to mention by way of example a series of taxes that are currently applied by levels of government. We call them non-income-sensitive taxes.
Many problems are caused by these taxes that do not evolve with the cycle itself, but which often help to push the cycle up or down. One of the first recommendations we would like to make to the committee is to replace these harmful taxes that accentuate the cyclical nature of the industry with taxes bases on profits or income, rather than on fixed costs, such as salaries. When we use fixed costs as a basis, the costs stay the same, whether or not there are any profits, and this aggravates the cyclical problem.
.1555
Our second recommendation has to deal with the costs of capital. Here again, the Canadian industry is generally at a disadvantage as compared to the American industry, for example, which, until very recently, enjoyed up to a 2-point interest rate advantage. That does nothing to promote our investments.
[English]
On that particular one, though, the progress that has been made recently to cut the federal deficit and to bring it down to better proportions has really helped, in the sense that the actual control we are starting to have on the deficit and the unrelenting battle that the Bank of Canada has waged on inflation... If you combine those two factors and you look at the cost of capital - especially at the differential cost of capital, because that's where it really counts for us - it's really gone down, and that's really helped.
So on that one, our recommendation is to keep it going. Please don't let go of that deficit-cutting situation. This is really what we need.
Obviously, one of the costs that affects our industry is capital costs. I would also like to make a recommendation in terms of all the other input costs: we have to ensure that those other input costs are competitive. They are not necessarily competitive at this point. I'll mention a few examples: transportation, energy, and fibre supply.
In this industry, we are the largest users of transportation in Canada. Yet in many cases we have to pay a higher proportion of our costs than our competitors do in the U.S., and that really affects us.
It's the same on the energy side. There are costs in terms of input that are really a drag on our bottom line. There's no other way to call it.
[Translation]
I would like to come back to this idea, because it is very important. We need to reduce not only the costs of capital, but also that of all other input costs. We must remember that in Canada there has been a virtual monopoly or duopoly in a number of transportation sectors, including air transportation and trucking, which is still quite expensive here in Canada as compared to the United States.
Our fourth recommendation is to continue reducing all international trade barriers. Whether we look at the urban or rural industry, the problem is the same. The industry will not manage to survive and develop unless markets are open to us.
At the moment, the industry is trying to move increasingly toward value-added products. It is specifically in these areas that our competitors throughout the world are continuing to erect tariffs and non-tariff barriers. Let me give you the example of a basic product such as pulp or newsprint. There is no tariff on pulp for those who want to manufacture their own paper using Canadian pulp. However, when the same people manufacture, often using our pulp, fine paper or coated paper, boxes or paper board, they impose some rather exorbitant tariffs on these products, because they don't want our products to compete with theirs. It is not unusual to see tariffs of 40, 50 or 60 per cent on some fine paper or specialty paper.
This happens in countries such as Indonesia and Brazil, to which Canada has given the most-favoured-nation tariff. Unfortunately, Canada does not enjoy a similar status in those countries.
.1600
[English]
This whole recommendation has to do with reducing obstacles to trade. We are obviously working very closely with the Department of Industry, the Department of International Trade and the Department of Finance on all of those issues.
I wanted to bring it up here to make sure that the pressure is being kept on. This is just not about... People sometimes just see numbers, like reducing tariffs to zero by the years 2004 and 2008. We're asking what's wrong with 1998 - or what's wrong with now? What's wrong with next year? Every time we have a chance we push for an accelerated reduction in tariffs and also for keeping our eyes on all the other non-tariff barriers that prevent us from selling our products abroad.
My last recommendation has to do with equity. Let me tell you what I mean by equity. While on the one hand we are fully cognizant of the fact that the federal government has to recover the costs of many of the services we provide, we find ourselves in some business cases that are very hard to comprehend after the fact.
I'll give one example. It's our ice-breaking services, our coast guard services. When you have - and we have these in remote areas - a mill that was built on the basis of these types of services being provided... I'll go back to ice-breaking very specifically. Of course you go and see your bankers and you make your investment on the basis of such-and-such a cost. Now this is really changing. The government is indeed trying to cost-recover, and one side of us says yes, that's the right thing to do in terms of fighting the deficit. On the other hand, if those costs are being borne by just one community or one mill - it could be one mining town in one particular area - we find that it's a very harsh dumping, if you'll pardon the expression, of costs on one operating unit. In the end, it could make that operating unit very unprofitable. It could end up closing that operating unit.
I'll finish with this. I think the other side of the cost recovery is the side that has to do with some of those services being monopolies now and being offered as such. That places the industry in a position of having no choice, of having to actually use those services. In many cases we don't think those are the best services being offered. We think that monopoly situations have served in certain cases to inflate costs, and those are costs directly to us. We would like the government not only to cost-recover these, but to slim them down first. Put them on a diet, as it were, before you cost-recover them. That would be very useful, especially if they are going to actually privatize them and leave them as the sole source of service available to our industry in certain areas.
These are four or five of recommendations we had, and basically we do have both rural and urban development at heart. This is where we make our business. This is where the bulk of our operations are located.
Again, thank you for having us here today. I'll be glad to answer questions afterwards.
The Chairman: Thank you very much.
Mr. de Marsh.
Mr. Peter de Marsh (President, Canadian Federation of Woodlot Owners): Thank you, Mr. Chairman. First of all, I apologize on behalf of my colleague, Donald Brunette, who is unable to be with me today.
I have two goals in addressing this committee. First of all, I want to share a bit of additional awareness with you about the woodlot sector across the country, about the place it plays within the rural economy and the national economy. Secondly, I want to identify some of the policy barriers that we feel are a hindrance to realizing the full contribution of woodlots to the Canadian economy.
.1605
The brief that has been distributed has a number of background statistics. I will certainly not read them, but I will draw attention to a few of the key ones.
Across the country there are 450,000 woodlot-owning families. They are preponderantly in Ontario, Quebec, and the Maritimes, but they are increasingly important in the prairie provinces and in British Columbia, even though to show up in British Columbia you have to be extremely large. In some of the regions in B.C. the wood supply from woodlots is becoming increasingly crucial.
I'm going to refer frequently to our contribution to industrial wood supply, but it's important to recognize that our contribution goes beyond economics. In many rural communities woodlots are a key component not just of the economic but the social health of the community and they contribute enormously to a healthy environment.
I talked about wood supply. I indicated for some provinces the proportion of industrial wood supply coming from woodlots. Nova Scotia and Prince Edward Island would be the highest, but New Brunswick at 25% and Quebec at 20% are extremely important. As I've already mentioned, in all provinces this role is increasing.
Last year we sold from woodlots approximately $1.25 billion worth of raw material to industry. We've translated that production into jobs on woodlots, at about 25,000 equivalent to full-time jobs, though much of that employment is part-time and we believe probably is even more important to the rural economy because it is a supplementary source of income for many families. For instance, in the case of family farms, in a bad year for farm commodities, it makes the difference between survival and failure of a business. So strategically in the rural economy we think woodlots are even more important than the 25,000 full-time equivalent jobs would suggest.
The production then contributes to employment within the processing sector, as Ms Lachapelle has discussed. Approximately 10% of the processing jobs are based on raw material originating on woodlots. Beyond that are the spin-off jobs in the service sector.
When I did these figures yesterday, I wanted to shock and surprise you. I surprised even myself. I almost succumbed to the temptation to reduce them a bit to make them appear more credible. But I checked the data. That is the truth. I perhaps share some surprise with you at the actual number of jobs that are directly or indirectly based on the 6% of the Canadian forests we collectively own.
I draw attention also to other types of economic activity based on woodlots: Christmas trees, recreation, and so on. With increasingly popular policies and notions of things such as agroforestry it's really important to recognize the potential and the fact that it's growing and the fact that it can benefit from more appropriate policy encouragement.
In the brief there's been a long section on the history of the nine provincial associations across the country and the role of the national group in contributing to such initiatives as the national forest sector strategy, the Canada forest accord, and so on.
I draw attention also to our participation with industry and other interest groups in the Canadian Standards Association effort to develop a certification standard for sustainable forest management in Canada. We entered that process with a great deal of concern that woodlots would be left out of the equation; that is, the certification procedures would be appropriate for large-scale forestry on crown land and small-scale forestry would not fit very well. Well, we've been surprised. We've appreciated the support from colleagues in industry. The current CSA standard, which will be completed in the next few months, has been field-tested on woodlots in southern New Brunswick, and that test has been very successful. We are now confident that we can work with the CSA standard.
.1610
I'm speaking at this point as a New Brunswicker. Our colleagues in Saguenay - Lac-Saint-Jean in Quebec are probably the most advanced group in developing a regional approach to management of their resources. Along with other groups in Quebec, New Brunswick and across the country, we are beginning to actively prepare ourselves for this major task.
On the potential of the sector, I've given you employment figures, output figures, dollar value and so on. A conservative goal would be a doubling of that output over a period of five to ten years. Foresters commonly suggested that on the best forest sites, which on average tend to be woodlots, at a higher level than crown land... And it's no virtue on our part; it's simply the fact that woodlots tend to be an area settled for agricultural development, and therefore soils are somewhat better on average than further back, which is where we normally find the crown lands.
In any case, the foresters say the output figure on average across the country can easily be tripled on the best forest sites. It's in that sense that I say a doubling of the output, the employment figures and the dollar value would be a reasonable, conservative, cautious goal.
I want to draw to your attention to three policy issues that we believe are significant barriers to full development of this potential.
One of them is the treatment by the income tax system of part-time woodlot owners who wish to gain some credit against non-woodlot income for investments in their woodlot. Basically you can't do it as things stand now. You're treated as a hobby farmer or someone primarily seeking a tax shelter.
We've had significant dialogue with people in the Department of Finance and the Department of Revenue, and we have a great deal of respect for their concerns. As taxpayers, we think that's the job we want them to do, and they're doing a very good job at it. The problem is that in this particular sector it's a handicap that needs to be overcome.
A second aspect of the tax system that's of increasing concern is the extent to which present policy favours what we call liquidation of woodlots; that is, a contractor purchases the standing timber and with modern equipment can clean the entire woodlot in a period of as little as six weeks to two months. I'm speaking of a hundred-acre woodlot, a forty-hectare woodlot.
This is something that even two or three years ago would not have happened. It has become increasingly evident in parts of the Maritimes, Quebec and across the prairies as well, especially Alberta, with the boom in lumber markets over a period of time in British Columbia.
This has led to a tremendous amount of public concern and outcry at overcutting, clear-cutting and so on. I would add a lot of concern from our own members, who don't like what they're seeing and who recognize that if it continues, all of us are going to suffer, not only due to imposed regulation that will reduce our eliminate our property rights, but also due to decline in the long-term sustainability of the local sawmills, the local wildlife populations and other parts of our way of life.
So the pressure is coming not just from without but from our own membership as well. Something has to be done to reduce very quickly and eliminate these liquidation harvests. Right now the tax system favours them. The details of the argument are in the brief.
This makes no sense. I was going to say at the very least the tax system should be neutral between the liquidater and the owner who is managing his or her woodlot on a sustainable, long-term basis. I'd like to retract that. It should not be neutral. It should favour the sustainable manager.
Our general concern about the need for changes in income tax provisions has been recognized by two previous standing committees: what was previously forests and fisheries, in 1990, and natural resources, in 1994. So some attention has been given to this issue.
.1615
Until recently, no progress can be reported, partly for reasons I alluded to earlier. However, officials at Revenue Canada have been taking a serious look at our concerns in recent months, and I'm very pleased to tell you that we think that finally things are starting to move.
We urge you to support this process and to encourage substantive, meaningful change as quickly as it can be brought about. I think that reasonable treatment under the income tax system would provide a very powerful tool to people who want to see the full potential of the woodlot sector developed on a sustainable basis.
I will deal with two other policy areas.
As I'm sure all of you know, woodlot owners across the country, especially from Quebec east, have taken part in federal-provincial forestry agreements for as much as 20 years and have made very substantial use of public money for investment in silviculture. Approximately two years ago that era came to an end. We did not necessarily fail to recognize the reasons for the withdrawal of the federal government from financing silviculture, but we seriously objected, and continue to object, to the abrupt fashion in which it took place. Many woodlot groups across the country accepted, and continue to accept, the need for a planned, rational phasing out of this money, but the effect of the ``cold turkey'' approach has been very damaging.
A number of provinces have succeeded in patching together alternative financing methods. Patching together is certainly inappropriate in recognizing, for instance, the very workable system that's been put in place in Quebec, where industry, the provincial government, and woodlot owners share the cost of silviculture in proportion to their benefits from the added production from woodlots. P.E.I. and New Brunswick have also put in place reasonably good programs, but even in these provinces we continue to feel very sorely the absence of the federal participant, which, through income tax and other tax revenue, is the greatest beneficiary of these programs. Certainly in provinces such as Nova Scotia, where local interest groups have not yet succeeded in putting together an alternative, the absence of the federal government is felt even more seriously.
There are rumours that Mr. Doug Young is considering the possibility of jobs fund money as a supplement to existing provincially funded or cost-shared programs. All I would say to you is that I urge you to give him every possible encouragement in moving in that direction.
Finally, on training and technology transfer, the federal-provincial agreements did a lot more than just share in the costs of silviculture. Significant portions of those agreements dealt with education, training of woodlot owners and the workforce that we employ, and the withdrawal of the federal government from funding of those programs has created a vacuum that in some ways is even more serious than in silviculture funding. Few, if any, of the provincial governments are going to be able to fill that vacuum.
One example where we acutely need a major effort in the area of training right now is in forest products certification, which I've already mentioned. We have to produce a very substantial number of individual property management plans over the next two to three years, perhaps in the order of 40,000 to 50,000 across the country, which is more than presently exist. That has to be done very quickly. We have to, through our organizations, learn to use new mapping technology. We have to do a substantial amount of specialized training of owners and contractors in improved harvesting methods in order to help them move away from clearcutting. In all of these areas we very much need the federal government as an active partner.
Those are my three recommendations.
The Chairman: I've just been informed that Ms Lachapelle needs to drive to Montreal. Is that true?
Ms Lachapelle: I need to go back there.
The Chairman: You have to go back to Montreal.
.1620
So I would ask the cooperation of the members. I ask those members who have a question specifically for her to ask their questions first. Mr. Canuel.
[Translation]
Mr. Canuel (Matapédia-Matane): Matane has seen some huge fluctuations in pulp and paper. A pulp plant was built three or four years ago at most, and six months later, it was closed. I found out today that it will remain closed for another month. Can an ultra modern plant not recover its costs just on the basis of pulp prices? Are there other factors that come into play besides the price on the international market?
Ms. Lachapelle: Are you referring to the Donohue plant in Matane?
Mr. Canuel: Yes.
Ms. Lachapelle: Two factors are coming into play in the closing of plants. Our American clients have never had such large stocks as they have at the moment. Thus, current production is going into our own stocks only, because our clients are not buying. The price of pulp doubled last year, and this year dropped by half. So the prices are all over the map. What would you do if your own budget depended on an income that went from $50,000 to $100,000, backed down to $50,000 and then to $25,000, over the years?
Mr. Canuel: Budgets often depend on income.
Ms. Lachapelle: Exactly. So that's part of the answer. Plants stop working, whether or not they are efficient, because there is no place to sell the pulp. There is no point in continuing to produce a product you cannot sell. So we stop production for a while to try to lower the stocks.
Mr. Canuel: Thank you.
[English]
The Chairman: Mr. Bélair.
[Translation]
Mr. Bélair (Cochrane-Supérieur): My question is also to Ms. Lachapelle and concerns the forestry development agreements referred to by Mr. de Marsh. I don't remember the Canadian Pulp and Paper Association objecting, at least not with members of Parliament - it may have done so to the Ministers of Finance and Natural Resources - to the rather drastic cuts in the budget of these agreements. Are we to assume that paper mills will assume full management responsibility for their timber concessions, whether in the area of sylviculture, road construction or wildlife protection, without any federal participation and probably with a major reduction in provincial funding as well?
Ms. Lachapelle: The short answer would be no. In a more detailed answer, I would say that when we were told about these cuts, we put on our Canadian corporate citizen hat, and made deficit reduction a priority. It must be understood that there are grants, but we cannot always ask the government to reduce other peoples grants, and not our own. So we were wearing our corporate hat at the time.
In a number of the cases, our industry is already involved in sylviculture. The Canadian pulp and paper industry owns between 65 and 70 per cent of the commercially usable forests. In general terms, the amounts invested in these lands average about $5 to one, if we compare industrial development to private development. Some efforts have already been made in the area of sylviculture. Some companies are assuming responsibility, although not completely. We are not road builders; that is not our job. Our job is to make paper. When roads are there, we use them; when they were not there, we often got help in the past. We will have to decide what we will do in the future.
Mr. Bélair: My question is about the recent agreement of some $60 million entered into between Canada and Ontario. I am giving the example of Ontario, because I know it the best.
.1625
You say, Ms. Lachapelle, that the industry is prepared to absorb almost all these costs.
Ms. Lachapelle: No, that is not what I said. I said "no" the first time, and I am still saying "no".
Mr. Bélair: We're talking about forest management, sylviculture, wildlife protection and recreation. There is more involved than just cutting down trees and making paper.
Ms. Lachapelle: I should start by saying that we do not represent the forestry industry as such, but rather the Pulp and Paper Association, which is huge, as you mentioned. I would like to come back to the figures that I mentioned earlier. We own approximately 70 per cent of the harvestable land. Recreation and tourism are not our responsibility. We assume many costs, but I cannot speak for other players involved in these sectors.
I'm sorry. I see you are not satisfied with the answer. There really isn't anything else...
Mr. Bélair: Sixty million dollars were earmarked for that over the last five years, at the rate of $6 million a year. That $6 million no longer exist. Who is going to pick up the slack?
Ms. Lachapelle: You have to look at this in two ways. The industry was already participating significantly, and we are continuing to participate and to do a great deal of research. There are also sylviculture methods beyond those we have at the moment. In addition, we have a certification program that Mr. de Marsh mentioned. As a result of all these initiatives, we are introducing more advanced sylviculture and sustainable development methods.
That's what we can do to make up for this shortfall. If you ask me wether we are prepared to take over everything that was done by the government before, the answer is no. We will assume responsibility for a large part of it, but not for the whole thing. We cannot do that.
[English]
The Chairman: A last forestry question to Mr. Reed.
Mr. Reed (Halton - Peel): Forty years ago I worked in the fine paper industry. What happened to it?
Ms Lachapelle: You obviously had a very good impact on it - or a very bad impact.
Mr. Reed: Did we just abandon it because it was such a small percentage of revenue?
Ms Lachapelle: Not at all.
I did bring our annual report. I don't know if it was distributed to the members. If you look at some of the numbers in the CPPA annual report you will see that apart from pulp and newsprint, what we call our specialty papers, which accounted for less than 10% even ten years ago, now account for over 18% of our production. So that is what has happened since you've left the industry. It has doubled.
Mr. Reed: You mean it's getting better, not worse.
Ms Lachapelle: Of course it is.
Mr. Reed: Well, you mentioned we're importing, or the door was opened for importing, fine paper.
Ms Lachapelle: Not necessarily fine paper.
Mr. Reed: All right. So it's a thriving industry and it's growing.
Ms Lachapelle: It certainly is, and that's why I made the point about our making sure trade liberalization happens, because we need those doors to be open and those tariffs to be lowered to make sure we sell to all those countries.
Mr. Reed: And I take it we are competitive in the world.
Ms Lachapelle: We certainly are. We are the largest exporter of pulp and paper products in the world, bar none. But in those one hundred countries, as we move up the value-added ladder -
Mr. Reed: Yes, that's what I was -
Ms Lachapelle: - we need those other tariff items, we need that door still to be open to us, not only at the pulp or newsprint level but at the value-added levels. That's what we're fighting for.
The Chairman: Mr. Canuel.
[Translation]
Mr. Canuel: I'm sorry that the president of the Fédération des producteurs de bois du Québec cannot be here. However, you made up for his absence. You referred to Quebec, and I'm very pleased about that.
I will come back to a matter I was saving for you.
.1630
When the grants to Quebec and other provinces - you also mentioned New Brunswick, were cut, I think the provinces, at least Quebec, were not prepared to take over. Thousands of woodlot owners suffered at that time. You are familiar with the Eastern Quebec Development Plan, which was wonderful and very cost effective for the federal government, because of the tax advantage and income tax that was generated, as you pointed out.
I know you have done some lobbying; so have I. What more could we have done? What concrete action could we take together? I hope my colleagues on the other side are listening carefully and that our committee will take this matter up again. I'm still thinking about the Eastern Quebec Development Plan. There could have been provision for a transition period of at least four or five years, rather than barely one year. I've often asked the Minister this question. She replied that Quebec would take over. That is all very well, but when a plan of this type is introduced, there has to be some continuity, some funding and some expertise. Funding is not the only thing required, technical know how is as well, but it was already there. What can we do?
I have some other questions for the owners about a five-year agreement between Canada and the United States which is about to be signed, if it has not already been signed. You may say that this is no concern of yours, but it is, because you trade in wood. Many people in the industry in Quebec that I have met - and this is probably the case in the other provinces as well - are worried that the industry will have to beg for more, even though it has to pay $50 or $100 if it exceeds the quota. How will that work? I don't know whether you can give me any clarification.
I would also like to ask for your advice, because you are closer to certain groups of people than I am. I am from a rural community, and I have noticed that in the last 15 or 20 years, this community is on the verge of disappearing despite people's good will and tremendous energy. Do you think there would be a promising future for tree farms if we were to require, for example, that people had to live in the village or close to it in order to get authorization to live off the forest? We might also consider selling or renting the land; these are other possibilities. Is there a future for rural communities, and could it be built indirectly by tree farms?
Mr. de Marsh: I live in a small village, and I am very worried about the future of our young people. I have a 14-year-old son. Will he stay at home or close to home? Or will he move to Toronto or Vancouver? I just don't know. This is not a new concern, but conditions are changing so quickly at the moment that the situation is becoming increasingly difficult. Forests cannot exist without people to look after them. And woodlot owners are the best able to do this. Theoretically, there is a great future for tree farms, on a full or part-time basis. I have 300 acres,125 hectares of good land. It is enough to generate 40% of a reasonable income. This is ideal for a person with other sources of income.
Mr. Canuel: It would be impossible to make a living on the land alone.
Mr. de Marsh: I could not have a full-time job in the city at the same time. Yes, there is a great future, if, to come back to the recommendations I made earlier to your committee, we managed to change certain federal policies that are harmful to us at the moment.
As far as grants go, I can only repeat what I have already said: it is unfortunate that the industry sustained a 100% cut all at once. However, it is not too late to find ways to make the transition.
.1635
Most of us don't like subsidies, because we are very independent-minded and we prefer to live off our own resources with the income we get from the market. However, we are not there yet. We think a progressive, well planned, orderly transition period would be very desirable. And it is not too late.
It is too bad that Ms. Lachapelle has left; she would have been better able to answer your question about exporting lumber wood to the United States. I am not an expert in the field. All I know is that some industry analysts think that the effects will not be that significant because apparently the agreement allows for considerable flexibility as to its implementation depending on the demand in the United States. But it would be better if you were to direct your question to the expert.
[English]
Mr. Thalheimer (Timmins - Chapleau): When we are talking about rural economic development and the natural resources, basically mining, forestry, agriculture, and fishing, what role do you foresee government playing in that? I suppose that whenever you have a... We go out and find our mines and harvest our forests and do our agriculture. Obviously we need people and we need services for that industry. Some of the services can be brought in at a cost.
Whether it be mining, forestry, fishing, or agriculture, what role do you foresee the government playing in assisting the industries to develop and extract those natural resources when they're from rural areas - of course keeping in mind that you need people?
The tendency today is to put up just lodging, a house, or families in more urban areas, where you have your school, hospitals and so on, so you get away from the bussing. You've done the same in Detour Lake. Is that the way we should be thinking, to get rid of all these small areas?
At one time, of course, when a mine was developed the whole community was developed around it. This is the problem: when the mining is finished, the community disappears.
What role do you foresee government playing there to assist the industry in getting the people and the services it needs into those remote locations?
Mr. Colin Seeley (Placer Dome Canada Limited): There are probably a number of initiatives.
Certainly the infrastructure aspect of those areas is key. If you want to look at the Musselwhite as an example, the company today is bearing the total cost of constructing a 200-kilometre power line to that site. That project failed a feasibility study several years ago because of the infrastructure costs, and it's only because of this most recent effort by Placer that we've been able to get the economics such that we can afford to install a 43-kilometre road, the cost of which, in the order of$7 million, was born by the company. Plus, the power line is a $15-million expenditure. That's just to bring two key infrastructure services to the area, let alone build the site itself and carry out the mining. So infrastructure has to be looked at.
If you look at one of the local non-native communities, Pickle Lake, one of the reasons we didn't choose to locate there in any significant way for our people was the lack of educational facilities in that community. It goes to a grade nine level and beyond that the children have to go outside the community for education. If you're trying to attract people into that area, it's a serious drawback when they're faced with sending their children away.
.1640
Medical facilities in the area could probably be enhanced as well, which would make it more attractive for industries to locate there. Pickle Lake is unique in that could service that whole northwestern region in terms of the aboriginal communities that flourish to the north of them. Right now Sioux Lookout is more or less the centre there.
In terms of the native communities, we're more central to native communities than we are to non-native communities. We would like to and we will be sourcing a large component of our labour force from those communities. I think we're well aware that the unemployment rate in those communities is very high, upwards of 90% in most cases.
A project like Musselwhite could have a very positive impact on the welfare of those communities, but to get those community members to a level of education that a mine site like Musselwhite requires inasmuch as it's going to utilize very modern technology, there has to be a very serious effort put into educational upgrading.
Mr. Thalheimer: What I see happening in rural Canada... You're talking about a very remote area, and I appreciate that, but there are less remote areas. Look at Timmins, for example. They're bussing children in from Gogama to high schools and all that sort of thing, and of course that's where they come for their medical care. Some of those kids get up at 4 a.m., you know, and they come home at 8 p.m.
What role can government play? It seems to me that if government would give the people financial incentives, such as higher wages, less tax, and so on, they would put up with the lack of services they have in rural Canada. You can't build a hospital or a high school or a university in every little community. I suppose if they give people an incentive through the tax system or the hourly wages they pay, they wouldn't mind sending their children off to a high school in Toronto or Barrie or Sudbury or wherever they go.
What I'm trying to say is that we're overtaxed in rural Canada, and that is a tremendous drawback. You need people out there. You need people if you're going to develop an economy out in rural Canada because you're going to develop your plants and your mines and so on. You need people, and it seems to me that the biggest factor in cost is to get the actual, physical people out in the field.
Mr. Seeley: I would agree that an alternative to providing the infrastructure or the plan to provide education would be to provide an incentive through a tax credit system or some kind of a tax reduction scheme that recognizes the higher costs and the difficulties in those areas that are less accessible.
Mr. Thalheimer: In more urban areas you see people who move from the country into the city because, damn it, they're paying as much tax on their house sitting out in the country, where they get absolutely no service for anything. Let's say they're 50 or 100 miles from an urban area. They're paying as much municipal tax as people in downtown Ottawa, so they say what the hell, let's move to Ottawa. The farming is 60 or 100 miles from there and their children have no schools out there.
That's the problem as I see it if we're going to have economic development in the rural areas. We have agriculture, which is normally closer to urban areas in the southern parts, and then we have mining and forestry and so on. We have to get those people out there and satisfy them somehow to accept fewer services from government in return for something. For what? How do we approach that problem? What role could government play in that? That's a real problem, as I understand it.
Mr. Seeley: Well, it is. I guess we're caught between realizing that we want all these things that our tax dollar provides, yet we don't want to provide the tax dollars. So we're in a loop here.
.1645
I think you have to look at the situation overall and decide if it is better to have those jobs and have those people working and paying taxes to some degree than to have them not working and not paying taxes, in fact taking out of the system through welfare or unemployment insurance types of schemes.
In those remote areas there's a lot of opportunity to create jobs. You're absolutely correct that the way in which you can do that quite effectively is to recognize the hardships and the difficulties companies have in accessing those remote sites and to provide some kind of a tax credit, if indeed you're not prepared to provide the infrastructure itself.
We will build the power line, but surely there could be a formula that would realize that investment back or give us some assurance that we're going to get some return on that investment for the jobs we create. We don't see that happening today.
A project like Musselwhite is an example. I can assure you that it was an act faith on Placer's part to go ahead with that project, because the economics are extremely fine. We all trust and hope that it will work out, but it's a very high-risk investment. But there's the better part of 300 jobs there directly, and you can multiply that by two and a half times for indirect jobs - not to mention that it's going to be a catalyst for that whole region in further development up there. So the spin-off is going to be quite pronounced.
You want to induce companies to look at those properties up there and be comfortable that they can go ahead and develop them. So whether it's through providing the infrastructure or taking a serious look at how a tax credit scheme could be effective there, the economics are not too difficult.
I'll give you an example. The Endako mine out in British Columbia shut down in 1983 because of a downturn in the price of molybdenum. We reopened in 1986. We opened up in a market that was worse than the one we shut down in. What we did was lobby the government to give us a rebate on power. They were spilling water over the dam because they couldn't sell the power through the generators. We said ``Sell us that power at a reduced cost - not at below your cost, but at what it costs you to produce it plus some kind of a profit margin, if you want. Give us power at below the rate schedule in effect. We will give you 200 jobs. We will employ 200 people directly.''
It's a simple math exercise to figure out what it costs to have those 200 people on welfare versus 200 people producing molybdenum and paying taxes into the system. It's not a difficult comparison.
Mr. Thalheimer: I have one more question, if I may.
The Chairman: Then I will ask you, Mr. Thalheimer, to take the chair and ask your question from the chair. I have to go down to the House and give a speech, so you'll have to excuse me.
The Vice-Chairman (Mr. Thalheimer): Some witnesses talk about value added to our forest products, our mining and so on. But, again, we come back to the problem of people. If we're going to have value-added property to mining and forestry and so on, then we're going to need more people in the rural areas. It comes back to that basic problem: how do we cope with the people there? A lot of jobs could be there, and I think people will go there. They'll put up with a lot, I think, but not everything they're being asked to put up with right now. To drive your kid 60 miles to school, or to bus it, is a hell of a price to have to pay.
Ms Wykes: Could I use some information that Colin shared with me earlier to augment what he said?
.1650
You mentioned that the people who work at the mine site don't always live there. In fact Colin has just explained why. Just to add to this point, even though the Musselwhite workers may not be living there, the people in Pickle Lake benefit tremendously. They benefit from the increased traffic, from all the spin-off industries, from the businesses generated in the communities around. Many of these, or some of them at least, are owned and operated through joint agreements with the aboriginal groups. So even though not all the people will live immediately adjacent to the mine, there are still very local benefits from the venture.
The Vice-Chairman (Mr. Thalheimer): At one time you built a mine, you built the housing and everything around it. Now in areas like Pickle Lake, Kapuskasing, Timmins and all sorts of larger urban areas, they say they do not have Internet and they have terrible telephone service. Should government be providing this service to those communities so people can do business in today's world? Today you can't do business without telephone lines.
Mr. Seeley: That is correct. If you want those areas to be attractive to people, then certainly those things have to be available. Government can play a role in setting up part of the infrastructure.
The Vice-Chairman (Mr. Thalheimer): Industry can't do all this. If you were to provide and absorb all this, your project would not be viable. So this must be the role of government if we're going to have an economy in rural Canada.
Mr. Seeley: I think we agree on this. Either it is done through government initiatives based on a tax structure from the industry or it's done through a tax credit scheme where if a company goes into a community such as Round Lake and builds a community medical facility this expenditure could be offset in the tax system through a tax credit scheme.
The Vice-Chairman (Mr. Thalheimer): I hope I'm not abusing my position as chairman, so I'll let you ask -
Mr. Reed: Thank you, Mr. Chairman, but you've abused it nicely, because we have been able to segue into a couple of comments I would like to make on mining.
Ms Wykes, one of the comments you made jumped out at me and I think it is very important. You said the mining industry was going to adopt some urban members. I can't think of a single thing that would heighten awareness in the body politic more quickly than doing this.
One of the things you have to observe in this business over the years is that as a nation we have gravitated from an agrarian society and a society in the north of hunters and gatherers and so on to where over 90% of us live in highly urbanized areas. We are now three generations away from this rural milieu, in some places longer. What happens is while voting power and numbers stay with the urban area, people in urban areas very often develop opinions and policies based on mythology of the past or sometimes on mythology generated by various interest groups.
My wife taught primary school until very recently in a highly urbanized area about a concession and a half from dairy farming, yet her pupils all believed milk comes in rectangular cardboard containers.
.1655
This is a phenomenon that applies in the area of adults. We talk about things like forestry and we think of the Temagami ``wilderness''. When I have tried to explain one of the reasons why the Temagami forest is so vital is because it's been cut through twice and it's overdue for its third cut, suddenly you see these terrible flashes. It's not dissimilar in mining, where the vision of mining is trash on top of the ground, a big hole there, acid leaching into streams and all this sort of thing.
Yet the truth is if you took all of the surface areas of mines in Canada and put them into one place, they would all fit into metropolitan Toronto. There is a great deal of misconception to overcome.
I commend you for this. I strongly suggest you carry on with this and do it, because I think it's going to be very important in the formation of policy and the area of where political pressure lies. I don't think anybody, for instance, in northern Ontario wants to imagine they're continually governed by people who live south of Highway 401. But this is what seems to happen.
I would like to make a brief comment on the private woodlot situation, Mr. de Marsh. The comment you made is that the revenue from woodlots could easily double. I couldn't agree with you more. I think you're erring on the conservative side.
I live in southern Ontario and of course it's a highly developed agricultural area. For many, many years and in many instances farm woodlots there have been ignored. I'm not sure why, whether it was a perception there was a lack of revenue or whatever. I know farm woodlot properly managed can vastly increase its productivity over the years. But there aren't a lot of farm woodlots being exploited properly or being managed on a sustainable basis. Generally what happens is they're not managed at all. They're just left there. I could walk you through many of them within a couple of miles of my farm and you'd see instantly this should have been harvested and that should have been harvested. You would ask why that is growing there and so on.
I know one of the difficulties farm woodlot owners have is they have not paid attention to the woodlot for quite a few years and they do not have a wealth of knowledge on how to locate markets for what in many cases is potentially very high return hardwood and so on.
Does your organization provide any service in locating markets? How do we translate all this into agriculture? How can we be able to say to farmers who own farm woodlots - there are lots and lots of them - here is how you can exploit this woodlot and add to your income?
Mr. de Marsh: This kind of service is being provided in varying degrees across the country. In Ontario, the association affiliated with the national group is the Ontario Woodlot and Sawmill Operators Association. While they are just a couple of years old, they are very interested in pursuing this and other types of service. I'd be glad to provide you with contact names if you'd be interested.
Mr. Reed: Here is one of the areas, Mr. Chairman, where when we're talking about rural development it is a crossover into agriculture and potentially has great value in terms of rural development. But it is an area in southern Ontario that to a great extent has been ignored in recent years. I appreciate this and I'll look forward to getting that from you.
The Vice-Chairman (Mr. Thalheimer): I suppose if you quit politics, Julian, perhaps politics will disappear too.
.1700
Mr. Reed: Are you suggesting I've abused my office here, Mr. Chairman?
The Vice-Chairman (Mr. Thalheimer): I want to thank all the witnesses for attending. It has been very informative.
Ms Wykes: Thank you.
The Vice-Chairman (Mr. Thalheimer): Because it is five o'clock, we'll adjourn.