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Rob Linke
Telegraph-Journal

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OTTAWA - Every week the federal government hesitates to offer aid to help the bottom lines of companies that own pulp mills, "more Canadian jobs are put at risk," says the national industry association's head.

Avrim Lazar, president and CEO of the Forest Products Association of Canada, Thursday urged Ottawa to announce measures to counter the black liquor subsidy that is giving competitors in the United States an unfair advantage.

Fraser Papers Inc. in Edmundston has cited the black liquor subsidy as a factor that threatens to make the temporary shutdown of one of its mills indefinite, which would result in the layoff of 200 workers.

And Domtar Corp. chose to reopen its Baileyville, Maine, mill where it can pocket the subsidy, while keeping another mill closed in Dryden, Ont.

One industry analyst, Kevin Mason with Equity Research Associates, told the Vancouver Sun that "at least seven mills are on the bubble of closing in Canada and unless something happens soon, we are going to see a pile of closures."

Ottawa is mulling a $1-billion fund for the pulp industry as an offset to the U.S. subsidy.The money could go to green energy projects such as cogeneration, which would not trigger retaliation or sanctions as an unfair trade practice.

One report in the Sun said the announcement is expected by the end of the month if cabinet approves it.

The federal government has not confirmed the proposal.

Steve Outhouse, acting spokesman for Natural Resources Minister Lisa Raitt, said the government is committed to helping the industry, but that it was premature to speak about specific measures.

"I hope it's true, but there's no indication at all that anything's happening," Lazar said

Lazar said it was impossible to assess the reported $1 billion before knowing whether it was all new spending and other details.

Regardless, "the government has to offset what's happening in the U.S. or we're putting tens of thousands of jobs needlessly at risk," Lazar said."I'm urging the government to do something quickly."

Mark Arsenault, president and CEO of the New Brunswick Forest Products Association, also could not confirm that the proposal exists.

"Ultimately, we agree something needs to be done sooner rather than later," said Arsenault.

If Ottawa does intend to help with energy innovation for mills, it could be helpful in New Brunswick.

The remaining mills all have some form of energy production but "there's always room for improvement or expansion," he said.

Dave Coles, president of the Communications, Energy and Paperworkers union, Canada's largest forestry sector union, said the $1 billion figure so far "appears to be no more than a public relations stunt by the Conservatives."

He said he'd been in touch with a dozen industry CEOs, none of whom were aware of any "serious government plan," he said in a news release.

J.D. Irving, Ltd. spokeswoman Mary Keith said the company would need to know the details of any approved program before commenting.

The Irving forestry company runs three of the last six pulp mill still operating in the province.

The black liquor subsidy has been called one of the most perverse examples of unintended consequences in recent public policy.

As part of its economic stimulus package, the U.S. government offered a rebate intended to encourage the auto industry to mix alternative fuels into fossil fuels.

But the loosely-drafted law belatedly became a tax credit worth an estimated US$7 billion to pulp mills once they realized they could qualify by mixing diesel into the black liquor (a chemical byproduct of the pulping process) they burn.

The Obama administration wants to end the subsidy by September but by then the Canadian pulp industry will have suffered enormous damage, Lazar said.