Federal forestry aid 'helpful'
Published Thursday June 18th, 2009
Funding But will it completely offset the U.S. black liquor subsidy? No, industry association says
A $1-billion lifeline Ottawa has extended to the forestry sector will help firms shave costs on energy but only begins to match the controversial U.S. tax credit program it is meant to address.
Federal Natural Resources Minister Lisa Raitt said Wednesday her government will pay Canadian firms 16 cents per litre for burning black liquor - a chemical pulping byproduct - as a heat and power source, to a maximum of $1 billion.
Companies can cash in on the federal dollars retroactively to Jan. 1, 2009, and until the program expires on Dec. 31, but must make equivalent energy-efficiency investments or environmental improvements at their mills over the next three years.
Raitt's government, through its new Pulp and Paper Green Transformation Program, is responding to the US$8 billion she said the nation's southern neighbour has already paid firms under a refundable tax credit, set to expire next fall.
New Brunswick industry has been a vocal critic of the U.S. scheme, with executives speaking out through media and in front of provincial and federal ministers and senators.
The spokesman for the province's forestry firms welcomed the federal money Wednesday but stopped short of calling it a solution to the issue.
"I think it's good news; $1 billion is a good sum. Sixteen cents per litre is going to be helpful," said Mark Arsenault, the president and CEO of the New Brunswick Forest Products Association.
"Will it completely offset what the Americans are doing? No."
Arsenault sees the funding as an opportunity for companies to invest in energy-efficiency - cogeneration plants, improvements to recovery boilers and machinery, for example - that will cut on power costs and help the environment in the long run.
J.D. Irving, Limited spokeswoman Mary Keith said her company's pulp and paper divisions will benefit from Ottawa's funding. "We are actively working to reduce energy consumption - especially given the escalating price of fuel," Keith said. "This program means that energy efficiency investments can happen sooner, rather than later."
The company operates three pulp and paper mills in Saint John and a corrugated medium plant near St. George.
A loophole in a U.S. transportation law enacted in 2005 and meant to reduce dependence on foreign oil allows firms to mix diesel and other fuels with black liquor - considered an alternative fuel - and reap 50 cents U.S. per gallon of the pulping byproduct burned.
Pulp mills have long burned black liquor as an energy source and critics have suggested the U.S. tax credit prompts firms to pollute to a greater extent by mixing fossil fuels with renewables.
The province's most outspoken critic of the U.S. program - Fraser Papers Inc. (TSX:FPS) president and CEO Peter Gordon - said Ottawa's move lines up with the U.S. tax credit but is effectively too little, too late.
"Our two mills that would be entitled to receive proceeds under this program in Thurso, Que., and Edmundston, New Brunswick, were both shut at the beginning of June," he said, adding his company would consider the long-term opportunities of the program.
His company has said the black liquor dispute with the United States is one of a few issues that must be addressed before the reopening of the Edmundston sulphite mill, now closed for maintenance.
The executive pointed out that the cap on funds in Canada, especially since they will be applied retroactively, will be depleted fairly rapidly.
"We are not certain as to the impact of the $1 billion cap in the fund," he said, pointing out that in the U.S., the funding taps are set to flow steadily until the credit expires.
- with files from The Canadian Press
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