Pulp, paper producers herald end of B.C. strike - National Post, October 17, 2007
Nathan Vanderklipp
VANCOUVER - The news of a possible end to the three-month-long British Columbia forestry strike could not have been better for the pulp and paper producers who in desperation had resorted to hauling wood chips from outside B.C. to keep running.

"Best news I got in a long time," said Don McKendrick, the vice-president of operations at Catalyst Paper Corp.'s Crofton operation, which is shutting down for an extra week beginning this Friday, and had contemplated another shutdown in a month.

Although the strike's end will come too late to avoid the Friday closure, Crofton's shutdown plans were effectively cancelled yesterday when the United Steelworkers and industry bargaining group Forest Industrial Relations reached a tentative agreement aimed at putting about 6,000 of the B.C. coast's loggers, sawmillers and lumber manufacturing workers back on the job.

That news drove up shares in Vancouver-based Catalyst, which closed up 7¢, or nearly 5%, yesterday, although the agreement has yet to be ratified by either the workers or the 31 companies represented by FIR.

If it is, workers could be back on the job Monday. That should spell the end of a pinched supply for pulp mills, whose workers did not strike but who depend on the chips and pulp logs produced by Steelworkers sawmills and logging operations.

The dearth of those raw materials also forced Catalyst to shut down its Elk Falls division, Howe Sound Pulp and Paper to turn off a paper mill for five weeks and Pope & Talbot Inc. to close down one line at its Harmac pulp mill. Both Catalyst and Howe Sound said they plan to reopen their shuttered operations as soon as smooth material supply resumes, a process that could take two to three weeks after sawmills resume work. A spokesman for Pope & Talbot, which is facing a severe liquidity crunch, said it was unclear what impact the strike's conclusion will have.

For the others, however, it will mark the end of extraordinary, and costly, survival measures. Howe Sound took to importing logs and chips from outside the province and from far deeper in the B.C. interior than usual. Catalyst increased its imports from the U.S. Northwest and the province's interior, but faced increased costs as demand drove up prices.

Pulp mills were also forced to spend more money to chip whole logs, instead of using cheaper sawmill byproducts, as that material stream dried up. What production remained was also hampered by the poor quality of some products from new suppliers.

What is perhaps more surprising, however, is that more production was not affected by the strike, which was expected to paralyze the coast's pulp and paper mills. A remarkable 45% of forest harvesting activity continued during the strike, and the unexpected prevalence of non-union forest workers meant that at least one pulp mill, Neucel Specialty Cellulose, worked with no disruption throughout the entire strike.

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Coleman warns towns about industry taxes - Vancouver Sun, April 07, 2006
Gordon Hamilton
KELOWNA -- Forests Minister Rich Coleman accused British Columbia resource towns of "dining out" on taxes they levy against industry, and he warned them to lower their rates if they want to keep industrial jobs.

Coleman made the comments at the annual Council of Forest Industries convention taking place in this southern Interior city. Municipal taxes are affecting the ability of industries to compete globally, he said. The provincial government intends to engage municipalities over their tax rates later this year.

"A whole lot of people have to do some waking up when it comes to the wood products and manufacturing sector in British Columbia," Coleman said. "There are communities in British Columbia that have dined out on the industrial complex of taxes for too long. And by dining out on them they have actually made their companies and their communties non-competitive."

Coleman said one pulp town in the province levies municipal taxes equal to $26 per tonne of pulp produced. By comparison, a competing Quebec producer pays only $4 a tonne in municipal taxes, Coleman said.

In a later interview, Coleman said some of the communities he is referring to have fat recreational programs that are paid for through high industrial taxes.

"Some of the communities that do this might not, for instance, charge for ice time [at the local arena]. There will be a number of things that are free that other communities, like Kelowna, would charge for in their recreation departments.

"They are going to have to look at their operations, what their costs are, what their overheads are, and try to balance that off with what industry can afford," Coleman said.

Kamloops Mayor Terry Lake challenged Coleman to come up with another suggestion for resource communties to collect revenues.

"Many cities are rapidly growing, and we face infrastructure costs with sewer, water and roads which of course are used by heavy industry. And yet we are not seeing a lot of other options in terms of where we get our money to support our cities," Lake said. "Where do you see us replacing that income?"

Coleman said there is no single solution, but Community Services Minister Ida Chong intends to engage communities "in how we do taxation across the province." Coleman said diversified cities like Kelowna and Kamloops do not face the same tough decisions in weening themselves from industry. But he said in towns like single-industry-dependent Port Alberni, local councils are facing significant pressures over their tax rates.

Port Alberni, Campbell River and North Cowichan were identified in a 2004 report on the issue commissioned by Catalyst Paper, which has mills in all three towns. The study showed one-quarter of the muncipalities in B.C. live off their major industries. One of the highest industrial tax rates is charged by the Municipality of North Cowichan, which in 2004 charged industry at an annual rate of 6.4 per cent, while residential ratepayers paid 0.2 per cent.

The median industry-to-residential ratio in B.C., according to the study, is four-to-one. By comparison, Ontario has rates four to seven times lower.

"If you want industries in your community and you want them to stay and be vibrant and employ people, then you'd better start becoming partners on your tax structure if you want those jobs in your community," Coleman said.

Coleman said the province is doing its part to attract new investment in the forest industry by examining options for forest companies to use flow-through shares, a structure used in the mining and oil and gas industries. Typically, companies that use flow-through shares enter into agreements with limited partners and then flow tax deductions generated by capital expenditures through to the limited partner. Typically they are 100-per-cent tax deductible and require tax approval by Ottawa.

"Everything is on the table as far as I am concerned to find sustainable solutions to the economic viability of the forest sector in B.C.," Coleman said. "We are the ones who would take less revenue through flow-through shares."

Coleman's comments on the dire straits facing the industry -- the mountain pine beetle is eating its way through Interior forests and the coastal industry is largely uneconomical -- were prompted by a draft report on the wood products and pulp sectors prepared by Premier Gordon Campbell's Competition Council.

Council co-chairman Dan Miller delivered a talk on the council's findings to convention delegates. "I would argue that the condition of the forestry and pulp sectors on the coast is so severe that we really need to pose the question: Does the population of B.C. actually want an active forest industry on the coast?"

Miller, a former premier, forest minister and pulp mill worker, said British Columbians have taken the industry for granted and have been indifferent about its economic health.

Unless that changes, sectors such as pulp and the coastal forest industry could disappear.

He cited reports that show the dominant engines of the B.C. economy are natural resource industries, providing two-thirds of export income.

"A decline in B.C.'s forest sector would reverberate throughout the province. Every citizen would pay a price," he said.

He said the industry cannot make the required return to attract new capital, yet the municipal tax rate is more than two times higher than competing jurisdictions.