Utopia mill welcomes rebate extension
Published Wednesday September 23rd, 2009
Industry Money being invested in projects promoting energy efficiency
ST. STEPHEN - The Lake Utopia Paper mill in the St. George area won't complain if the provincial government keeps extending a tax rebate to offset high energy costs.
The mill, which turns recycled paper and hardwood chips into cardboard boxes, provides 132 well-paying jobs in Charlotte County, a region where jobs can be scarce.
The region depends on this income, said Michael Rouse, executive director of Enterprise Charlotte. The mill, run by J.D. Irving, Limited survives despite the state of the economy.
"It's extremely important - it's one of the key employers in eastern Charlotte County," Rouse said. "It competed certainly on the North American market if not further afield. They are quite competitive."
But when NB Power announced several years ago it would increase electricity rates markedly in an effort to recoup costs, industry that depends on a lot of electricity cried foul. The province responded by introducing the High Energy Use Tax Rebate for two years, ending on March 31, 2009. Companies could apply for the rebates based on the amount they paid on their NB Power bills.
Under the tax rebate program, the Lake Utopia mill received just under $700,000 - $316,686 in the first year, $365,167 in the second year.
Industry heaved another sigh of relief when on March 17, Finance Minister Victor Boudreau announced the government would extend the rebate for another year.
The province rebated just over $10.3 million to six pulp and paper mills in the first year, and just over $7 million in the second year of the program. The province expects the program to cost $5 million in 2009-10.
Three Irving pulp and paper operations - Lake Utopia Paper, along with Irving Pulp and Paper, Limited and Irving Paper, Limited in Saint John, received rebates totalling $11.1 million over two years.
J.D. Irving spokeswoman Mary Keith said the company invested all of it in energy-efficiency projects employing hundreds of local tradespeople.
Over the two years the company invested more than $22 million in energy efficiency at its pulp and paper mills, she said.
In the last year alone the company cut its annual output of greenhouse gases by 37,000 metric tonnes, Keith said.
Irving Paper reduced the amount of heavy oil that it burns by 71,000 barrels per year by upgrading its boiler, providing more than 100,000 person hours of work to local tradespeople, she added.
The three J. D. Irving mills that benefited from the rebate directly employ more than 800 people. The annual payroll comes to more than $80 million. The mills spend almost $200 million per year in purchases from New Brunswick suppliers.
In the St. George area, the Lake Utopia mill is important to the local economy, which has had its ups and downs. The population of St. George dropped by more than 13 per cent from 2001 to 2006, Keith noted, citing Statistics Canada census reports. An independent study showed that the Lake Utopia Mill employees would have spent $8 million locally in 2008, she said.
Despite the tax rebate, New Brunswick pulp and paper mills still pay more for electricity than they did in 2007.
The rebate applies to the increase in power rates effective in 2007, but not to the increases of three per cent each in 2008 and 2009, which the pulp and paper companies pay, Keith said.
They also pay the increase of eight per cent in 2006. When the rebate program expires, they will pay the increase that went into effect in 2007.
In New Brunswick pulp and paper companies pay among the highest electricity rates in North America, Keith said. In Quebec, with its hydro electric resources, the mills pay 40 per cent less than they would here, she added.
Electricity accounts for a huge part of the cost of running a pulp and paper mill. It is the single biggest cost, more than wages or buying wood, for J. D. Irving, Keith said, but it works out differently for each operation.
Mark Arsenault, president of New Brunswick Forest Products Association in Fredericton, estimates electricity accounts for 25 to 30 per cent of costs at most of these operations.
"It's very important. There is a competitive disadvantage to New Brunswick with respect to energy rates," Arsenault said.
The rebate did not come in time to save the UPM Miramichi pulp and paper operation that shut down in 2007, or the Abitibi-Bowater mill that closed in January 2008, Keith said. The Smurfit-Stone Container pulp mill closed in Bathurst in August 2005.
"Sadly, what is perhaps most noteworthy about the government's High Energy Use Tax Rebate Program is the number of companies that are not on the list, and the associated jobs, because these companies have closed," Keith said in an email.
Lake Utopia Paper did not produce from Dec. 15 to Jan. 14 to clear inventory but the company says it is committed to the mill.
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