From:

The Working Forest

Fall # 2, 2006

Energy relief announcement expected

Province says by year-end

By Ron Grech

  After consulting with industries, the Ontario government may finally be ready to announce a cost-relief measure for the forest sector and other industries that are heavy users of electricity.

  A spokesperson for Ontario Natural Resources Minister David Ramsay told The Working Forest the forthcoming announcement is expected sometime before the end of the year.

  The details of what that announcement will entail are unknown.

  However, in the Ontario Legislature on October 23, Michael Gravelle, the Liberal MPP for Thunder Bay-Superior North urged his government to push forward with a regional energy pricing plan.

  “I was speaking as one of the provincial members whose constituents have been most impacted by high energy costs with mill closures and indefinite shutdowns,” Gravelle explained. “The government has been taking a look at regional energy pricing and we’ve been anxiously awaiting the results. It’s become more apparent where the help is most needed and that’s in the forestry sector and pulp and paper industries.

  “I wanted to express concerns that time is running out and unless there is further assistance from the government, we’re going to see more closures and more job losses.”

  He said the idea of a regional energy pricing plan makes sense in northwestern Ontario where there is a surplus of energy and no ability to export it.

  “The mills in the northwest are the ones that seem to be having the greatest problems with electricity rates and they deserve a break when you consider their actual cost is less than in the rest of the province.”

  Thunder Bay Mayor Lynn Peterson, a member of the Ontario Forestry Coalition, said if the province is coming forth with a solution, its vital the government “gets it right” and offers relief providing real benefits to the forest industry.

  “What I want to hear from the industry is that what is being offered at the end of the day will actually do the job,” she said.

  Since the summer, the forest industry has been told an announcement addressing high energy costs would be made soon.

  For Peterson and others, patience is wearing thin.

  “Since August we’ve been told the government would address the energy issue and that we’d be hearing something from them soon. I think we’ve waited long enough. I want to hear something now.”

  Bob Fleet, vice president of woodlands and environment for Grant Forest Products in Englehart, agreed that the government needs to respond with a greater sense of urgency.

  “Mills are closing and mills will continue to close in Ontario if we cannot get a competitive price for electricity,” he said

  Fleet suggested the government should come in with a two-pronged approach that has both short-term and long-term benefits for the forest industry.

  “What the government needs to do is take immediate steps that will stop mills from closing. They have to give us immediate rate relief but that’s not a long-term cure. We need a long-term cure but we can’t afford to wait three or four years while they work on it. The long-term fix is for Ontario to produce electricity where it can charge a rate of $45 per megawatt hour (MWH),” said Fleet. “That’s a number that collectively, the forest industry in Ontario sees as leveling the playing field with surrounding jurisdictions.”

  Fleet believes a long-term solution should incorporate the use of the several million cubic meters of wood waste produced each year.

  “We need to do something with the idea of looking at that raw material resource as energy whether it’s used to generate to electricity or converted to liquid or bio-diesel.”

  Jamie Lim, president/CEO of the Ontario Forest Industries Association, said the province has recently hinted that it’s considering solutions that would incorporate the use of wood waste or the surplus electricity produced in the north.

  “In August, mayors attending the Association of Municipalities of Ontario meeting in Ottawa were told the government would be making an announcement that would use electricity as an economic development tool for northern Ontario,” said Lim, who heads an organization that is a member of the Ontario Forestry Coalition (OFC)

  The OFC has been promoting the idea of a $15 per MWH rebate to the forestry sector retroactive to Jan. 1, 2006. The $200 million proposal would provide interim relief and give the government time to achieve a goal of all-in delivered electricity at $45 per MWH. The current rate on average is between $63 and $70 per MWH.

  Lim said Ontario is pricing itself out of the competitive market because of its high energy rates.

  “Businesses seek out low-cost jurisdictions to operate in and it’s critical to be a low-cost jurisdiction in today’s market,” said Lim. “Many provinces are paying less than $35 per MWH. If the Ontario rate dropped to $45 per MWH, it certainly wouldn’t make us the best team but it would at least put us back in the ball park. Right now we’re paying on average $70 per MWH and you can’t even compete in Canada at that rate, never mind in North America or globally.”

  Lim pointed out electricity rates in Ontario have gone up by 60 per cent since 2001.

  “Since then, northern Ontario has been shedding jobs,” she said. “Ontario’s manufacturing sector has been under mounting pressure for the past three years because of rising energy costs, a strong Canadian dollar and intense global competition. Certainly members of the Ontario Forestry Coalition don’t expect the provincial government to affect the Canadian dollar or help with declining U.S. housing market. But they can make decision about rising electricity costs in the province. We need competitive electricity costs because we can’t afford to see the carnage in the forest industry continue.”