Five days after announcing more temporary layoffs at Howe Sound Pulp and Paper (HSPP), a new funding program from the federal government has renewed some optimism at the Coast's largest employer.
On Wednesday, June 17, the federal government announced a $1 billion plan to support environmental improvements for the pulp and paper industry.
According to Natural Resources Minister Lisa Raitt, the Green Transformation program intends to provide funding of $0.16 per litre of black liquor, up to a maximum program total of $1 billion. Black liquor is a liquid by-product of the chemical pulping process used to generate renewable heat and power. Eligible companies participating in the program will be required to invest these funds over the next three years in capital expenditures that make improvements to energy efficiency or environmental performance on any pulp and paper mill in Canada, including mechanical mills.
Projects such as improvements to the energy efficiency of recovery boilers, more energy-efficient pulp and paper machinery and machinery to produce ethanol from forest biomass are examples of capital expenditures that may qualify under this new program.
Al Strang, manager, environment and external relations at HSPP, said the announcement is a good one for HSPP.
"We do burn some black liquor and we have identified some projects that will help us increase the amount of green energy that we can produce and make us more self-sufficient," said Strang. "We're pleased with the announcement and it will be beneficial to us."
Strang said HSPP is hoping to continue to consult with the federal government on the exact programs this funding could target.
West Vancouver-Sunshine Coast-Sea to Sky Country member of Parliament (MP) John Weston said the workers at HSPP and their ongoing struggles in the industry are top priority.
"I've met with union leaders both here in Ottawa and in Port Mellon. They've made some great presentations, and I've made sure Minister Raitt is very much aware of what is going on at HSPP and in Powell River," Weston said. "This is an intelligent announcement, one that improves not only energy efficiency, but sustainability. It just makes sense. This is what the industry needs. I hope for the Sunshine Coast that this will mean a shot in the arm for what I know is a beleaguered pulp mill."
Wednesday's announcement could not have come at a better time for HSPP. On June 12, HSPP said that due to continued poor newsprint demand and low pricing levels, the mill would indefinitely curtail one-third of its newsprint production.
Strang said it means that the newsprint operation will be shut down an average of 10 days a month, putting 100 to 120 people temporarily out of a job. He said the production curtailments will be accomplished through a combination of paper machine shut downs and reduced operating rates.
Strang said it is still too early to say whether Wednesday's funding announcement will allow the mill to forego plans to curtail newsprint operations.
"We want to position the mill to be stable for the foreseeable years ahead. Hopefully this funding will allow us to do that," he said.
The major issue that is causing the curtailment at HSPP is an even higher black liquor tax rebate in place in the U.S.
The U.S. tax credit is providing some chemical pulp producers with significant financial benefits - up to 60 per cent of the total cost of production. Some of these U.S. companies have discovered that by adding at least 0.1 per cent of diesel to black liquor, they may qualify for a $0.50 per gallon tax credit because the resultant mixture qualifies as a bio-fuel. Black liquor goes into a recovery boiler, where combustion results in chemicals that are recovered and re-used in the pulping process.
Diesel was never part of the mixture until companies discovered this loophole in recent months. In effect, they are actually burning additional fossil fuels just to qualify for the tax credit, which is completely contrary to the tax credit's intent to reduce the use of fossil fuels.
Strang said this tax credit is having disastrous implications for HSPP and pulp and paper makers worldwide because the tax credit distorts normal competitive conditions in favour of a few U.S. producers in an already oversupplied market.
Weston said the government is aware of the competitive imbalance between the Canadian and U.S. pulp and paper sectors caused by the black liquor loophole in the U.S. alternative fuel tax credit. He said through this new Green Transformation program, the government is working to correct this issue.
"The U.S. black liquor subsidy may be terminated by December, 2009 or even earlier, say October, according to my discussions with the U.S. consul general," Weston said. "We're going to continue to pressure the U.S. government and will continue to work with HSPP on this issue."
Strang said while the funding announcement is good, the government still has to continue to work on more solutions to enable the Canadian pulp and paper market to remain a viable entity.
"This funding will help level the playing field, but it doesn't go all the way," Strang said. "The money we're potentially getting is restricted on what we can do. I'm not complaining, but that's the reality."
