Hydro costs blamed for mill closure in Kenora

Last week it was Kenora.
But if Queen’s Park does not move to ensure the long-term health of the province’s sagging forestry sector, other pulp and paper mills in the region could be next to shut their doors, warned Kenora-Rainy River MPP and NDP leader Howard Hampton.
“Frankly, it’s not the only paper mill that is being pushed over the edge by sky-high electricity rates,” Hampton charged. “Unless the McGuinty government changes its [policies], Kenora will be the first of many.
“I think other forestry communities, like Dryden, Thunder Bay, and Fort Frances, understand that.”
Abitibi-Consolidated announced last Wednesday that it would be shutting down one machine at its Kenora mill and idling the second one indefinitely in October.
On the same day, the Montreal-based newsprint company also announced a second-quarter loss of $43 million, or nine cents per share. Last year, it reported a second-quarter loss of $79 million.
Hampton said all pulp and paper companies, not just Abitibi, are struggling to cope with the province’s soaring electricity rates.
While mills in Ontario pay about seven cents per kilowatt hour of energy, their counterparts in a number of other provinces and U.S. states are charged only half that amount.
“You can’t afford to operate a paper mill for long when you’re paying double what your competitors are paying,” Hampton argued, pointing out about 30 percent of a paper mill’s cost structure is devoted to electricity bills.
Lorne Gorber, Abitibi’s director of Investor Relations and Financial Communications, said his company is committed to restructuring the Kenora mill to a one-machine operation—as long as a new energy deal can be struck with the provincial government.
Nothing has been agreed to yet, but he said there has been some positive progress.
“I think there’s some optimism and encouragement around the recent discussions we’ve had with the Ontario government,” Gorber said Friday. “What we’re asking of the Ontario government is give us your commitment to work together and we’ve got that.
“We’ve had constructive conversations.”
Still, any agreement would come too late to save Kenora’s smaller machine, which has a production capacity of about 90,000 tonnes annually.
Hampton said he, and others approached Premier Dalton McGuinty about addressing the crisis in the forestry sector numerous times before Abitibi’s announcement, but didn’t make any progress.
“Forestry companies have been telling the McGuinty government for over a year that their policy of driving up hydro-electric rates was going to kill jobs in the forestry sector,” Hampton said. “And the McGuinty government just ignored them.
“You could see the Kenora decision coming down the road.”
Hampton noted the province has invested about $500 million in the automotive industry, another $125 million annually in the television and movie industry, and recently pledged about $400 million to help boost the lagging casino industry.
Now is the time for McGuinty’s Liberals to make the same commitment to the forestry sector, he stressed.
“The pulp and paper mills are not asking for a hand-out, they’re simply asking to be treated by the same rules that apply to the automotive sector or the television and movie industry sector,” Hampton said.
“The question now is are they going to apply the same commitment, the same regulations, to forest industry towns or are they going to turn their backs?
“This is where the rubber meets the road,” he remarked. “It will be a test—does the McGuinty have any concern, does the McGuinty government have any plan for the forestry industry in Northern Ontario?”
Michael Power, president of the Northwestern Ontario Municipal Association (NOMA), said the key now is showing the politicians in Toronto that the closure of a paper mill in the north will have ramifications province-wide.
“Not every community is directly impacted but the ripple effect is going to hurt every one of us,” Power warned. “It certainly will have a devastating effect on the economy in Northwest Ontario, and in all of Ontario.”
More than 200 municipalities across Ontario have a “significant” stake in the forestry industry, including a number of cities in southern Ontario, but not many people realize that, Power said.
“What we have to do is get the message out to all MPPs that it will affect them,” he added. “An impact in a place like Kenora spins off to impact in other areas.”
Abitibi’s decision to close the doors at their mill in Kenora will result in nearly 400 lost jobs.