Forest industry pleased with provincial package

Representatives from the forest industry were nearly unanimous in their praise last week of the Ontario government’s $220 million package to help pay for forest access roads and to reduce stumpage fees.
“Everything we’ve asked the government to do has been done,” said Fort Frances Coun. Tannis Drysdale. “We’re extraordinarily pleased.”
“The government deserves to be thanked and congratulated,” echoed Greenstone Mayor Michael Power, who also is president of the Northwestern Ontario Municipal Association.
“The measures announced today [Feb. 22] will have positive effects on not just the north, but the entire province.”
Premier Dalton McGuinty and Natural Resources minister David Ramsay announced the package at the joint conference of the Ontario Good Roads/Rural Ontario Municipal Association last Wednesday in Toronto.
The money will be distributed over three years, and includes:
•$47 million to support the construction and maintenance costs of primary and secondary access roads;
•$70 million in refunds to the industry as a result of reducing stumpage fees retroactively for 2005-06; and
•$3 million a year for the next three years by reducing stumpage fees for poplar veneer and white birch.
This is in addition to $28 million announced back in September for road maintenance, meaning 100 percent of the cost of primary roads and 50 percent of secondary ones will be covered by the province, as requested by the Minister’s Council on Forest Sector Competitiveness last year.
“Families and communities throughout Ontario rely on forestry to build a higher quality of life and create a brighter future,” Premier McGuinty said. “That’s why we’re working with the sector to help control its costs and achieve its vision of a more innovative, competitive, and sustainable future.”
“Today’s announcement is a home run by a government that has done more for the forest industry than any other government,” Jamie Lim, president of the Ontario Forest Industries Association, said last Wednesday.
“It will pay huge returns for the people of this province in terms of jobs, the generation of wealth, and tax contributions from the industry that generally exceed $1 billion,” Lim added.
Ramsay said it was his government’s goal to “help the sector meet the challenges it currently faces and become more competitive in the global marketplace.”
Last September’s announcement also had included $350 million in loan guarantees—a step largely dismissed by the forest industry as insufficient and of little help in reducing delivered wood cost.
Tembec Inc., a large forest products company with mills in Marathon, Kapuskasing, and Cochrane, Ont., estimates the funding measures announced Feb. 22, along with those announced last year, should result in a total cost reduction of about $2.90 per cubic metre.
Delivered wood cost in Ontario is about $55/cubic metre. The world average is about $35/cubic metre.
“The announcements today [Feb. 22], unfortunately, won’t save the jobs we’ve lost, but they’ll help us improve the forestry environment,” Coun. Drysdale noted.
“In Kenora, this won’t bring back the Abitibi mill, and that’s painful and horrible for that community,” she added.
“Almost all the job losses we’ve seen here come from paper mills and pulp mills,” noted Ontario NDP leader and Kenora-Rainy River MPP Howard Hampton, adding about 3,700 forestry jobs have been lost in the last 18 months only.
“This announcement is essentially aimed at sawmills. It will not do much for pulp and paper,” he charged. “It will not do a lot for the pulp and paper mill in Fort Frances.”
Sawmills, with little processing or manufacturing, have a different cost structure from pulp and paper mills, which use considerably more electricity, he explained.
“[The Feb. 22] announcement does nothing to address sky-high hydro costs that are shutting down mills, killing jobs, and hurting northern communities,” Hampton charged in a press release.
“Dalton McGuinty’s failure to tackle high energy costs is a major disappointment.”
At eight cents/kWh, it is the cost of energy in Ontario that’s causing the most problems for those mills, Hampton noted. Mills in Quebec, Manitoba, and British Columbia pay from three-3.5 cents/kWh.
“If you’re an Ontario mill, it’s pretty hard to stay in business when competing mills have such an advantage over you,” Hampton said.
The Ontario government did announce in early February that it would provide stable pricing on electricity provided by the Ontario Power Generation over the next three years through a price cap.
“All that does is continue the status quo. And the mills are saying the status quo is killing us,” Hampton argued.
“I think you’re going to see more paper mill and pulp mill layoffs in the next few months, and maybe even a closure,” he warned.
Many forestry industry reps agreed the cost of energy would have to be the next step in a provincial forestry strategy.
“Now Mr. McGuinty needs to focus on energy costs which are absolutely crippling this sector,” said Cec Makowski, Ontario region vice-president of the Communications, Energy and Paperworkers Union of Canada (CEP).
“Every single company which has closed a mill or cut back operations in Ontario in the past year has cited energy costs as the primary reason,” he added.
Makowski urged the province to consider the creation of special economic zones in northern and eastern Ontario to allow for targeted reductions in hydro rates.
“We need long-term stability so that people can plan their lives,” he argued. “Designating special economic zones, in our view, is the best way to achieve that goal.”
“The short-term goals were achieved [yesterday] and now we have to look at the long-term,” Coun. Drysdale said last Thursday. “We need to step back and look at where we’re going to be in 25 years.”