Vaughn Palmer: Forestry firms continue to send their investment dollars elsewhere

December 6, 2021

By: The Working Forest Staff

VICTORIA, VANCOUVER SUN —  — Forests Minister Katrine Conroy tried this week to put the best face on news of the closure of B.C.’s oldest paper mill.

“I understand the company has cited the ongoing contraction of global paper markets and paper prices in Asia as the primary factors for the curtailment,” said Conroy on Wednesday following the announcement regarding the Catalyst Paper mill in Powell River.

Granted, Paper Excellence, the owner, did say the mill is “simply not viable under the reality of today’s market conditions.”

But B.C. is also regarded as a high-cost producer of forest products. And when markets contract and prices falter, the highest-cost producers are the first in line to be driven to the wall.

Conroy also took consolation in the adjustment prospects for some 200 workers currently employed at the mill. The company is committed to the layoff terms of its collective agreement, she noted, and “our government is committed to supporting impacted workers through skills training, short-term employment opportunities, and employment assistance.”

Those options, though welcome, tend to be of the type associated with sunset industries: relocation, retraining, early retirement.

“Separately,” the forests minister continued, “my colleagues and I will continue to meet with industry leaders to discuss future economic development opportunities at the site.”

Take that as a sign that the closure, though officially characterized as indefinite, is almost certainly permanent.

Powell River Mayor Dave Formosa confided to CHEK-TV news this week that the president of the company “told me that we wouldn’t see paper coming off this site again.”

Unless that verdict proves to be mistaken, it will be the end of the road for a mainstay of the coastal forest industry. The Powell River mill has been making paper since 1912. At its peak, it was supplying newsprint to one in every 25 newspapers printed worldwide, Tom Fletcher of Black Press reported this week.

Still, Conroy professed optimism about the future of the industry in B.C.

“Our government will continue to support the forest sector through our vision to prioritize innovation and made-in-B.C. manufacturing, including a healthy pulp-and-paper sector,” she declared. “We recognize the boom-and-bust cycle of the past is not working for people. We are committed to working with our local partners to build a more sustainable forestry sector, and more resilient and diverse economies so communities can thrive for generations to come.”

The vision includes a reduction in harvesting of old-growth and a sweeping makeover of tenure, the process whereby the government awards cutting rights in Crown forests. The New Democrats have also rewritten the rules for compensating companies when government claws back cutting rights, increasing the cabinet’s leeway to pay less than the market value of the timber. The enabling legislation for the changes was pushed through the fall session of the legislature under government-imposed time allocation.

As a result, many of the changes were adopted without explanation. Other provisions were left to the cabinet to specify at a later date.

When Conroy was challenged about the likely impact of the changes on employment, production and the investment climate, she accused the Opposition of “fearmongering.”

But in the same week, as she and her colleagues were ramrodding the bills through with minimal debate, B.C.-based Interfor announced it was spending $490 million to acquire seven sawmills and a remanufacturing plant.

Not here in B.C., mind you. The company’s newest acquisitions are in Ontario and in Quebec.

With the latest purchase, Interfor will have 62 percent of its production in the U.S., 20 percent in Eastern Canada, and only 18 percent at their home base in B.C.

Conroy brushed off the significance.

“I have talked to Interfor,” she told the House. “They have been working on this transition for some years now. It did not just happen. It did not just happen because of our forest policies. They made that very clear.”

Still, it remains an open question whether the NDP-authored changes in forestry policy and legislation will reverse or accelerate the exodus of investment dollars to other jurisdictions.

This week came another sign of B.C. companies going elsewhere to invest. West Fraser announced Wednesday that it had completed a $300 million purchase of Angelina Forest Products, operator of a state-of-the-art sawmill in Lufkin, Tex. The purchase is one of two announced by West Fraser this fall. The company also spent $280 million to acquire an oriented strand board mill in Allendale, S.C.

Those moves by West Fraser are only the latest in a trend that has seen B.C. companies acquiring U.S.-based production facilities. They do it as a way to get south of the perennial tariff wall at the Canada-U.S. border, which the Americans doubled last week.

West Fraser’s purchases, combined with Interfor’s foray into Eastern Canada, means B.C.-based firms have invested more than $1 billion outside the province in a couple of months. The outflow of dollars has provoked occasional expressions of anger from Premier John Horgan, who argues companies should reinvest their profits in value-added production in B.C.

Perversely, he and his NDP colleagues also say that there is too much concentration of ownership in B.C.

So does he want the major B.C. companies investing here? Or do they already own too much?

It would appear the companies have gotten the second of the premier’s messages because they’re continuing to send their investment dollars elsewhere.

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