Monday, November 02, 2009

Eurocan's Federally subsized, permanent shutdown?

While Kitimat comes to terms with the shock of pending unemployment for its 500 plus pulp mill workers, there is growing frustration and perhaps a little anger that West Fraser Timber, the owners of the Eurocan mill are about to realize a windfall of revenue under the Federal Government's Green Transformation Program, this country's answer to the American "Black Liquor subsidy" program.

The program is designed to help Canada's struggling pulp and paper sector compete with industry's economic troubles of the day, many of which are the result of American protectionist policies which see American mill subsidized by a rather loose interpretation of page 802 of a piece of American legislation known as the Safe Accountable Flexible Efficient Transportation Equity Act .

The Federal Government, is set to return over a billion dollars to pulp producers, designed to help make their operations more fiscally balanced and able to weather the current economic storms.

West Fraser is set to receive some 88 million dollars in assistance from the Feds, a rather handy bit of cash in troubled times which the company can apparently reinvest in whatever operation it wishes to designate the cash towards.

Prince George's Opinion 250 outlined the possibilities in an editorial by Ben Meisner today, which basically asks aloud the question is West Fraser using Eurocan as it's cost cutting target, while it reinvests money into its Alberta operations, which operates in a non union environment.

Add onto that bit of conspiracy theory, the recent tax battles between West Fraser and the Kitimat council over tax payments and the tax rate and the conclusion that Kitimat was considered expendable to the bigger picture seems to grow more plausible.

All of West Fraser's talk last week of tough financial decisions and struggles with their corporate plan for Kitimat start to pale in the new reality of corporate ethics, especially when considered as part of the larger issues of their redistribution of the pending government money and the acrimonious battle over taxation.

They very well may have had a good case for closing the 40 year old mill, West Fraser today announced a third quarter loss of 198 million dollars (though they still reported earnings before interest, taxes, depreciation and amortization of $42 million) based on financials. But there are still a number of questions that remain.
Questions of timing on the announcement so short after that tax debate and before a judicial ruling is even made. Questions of notice, the decision to close seems to have come out of the blue and caught many in Kitimat unaware of their fate. And now questions of accepting Federal money while at the same time sending long time workers off to the unemployment lines.

Nathan Cullen, the NDP MP for Skeena- Bulkley Valley is also putting forward his concerns over the prospect that West Fraser is about to utilize those Federal programs for industry to in effect shut down one of the North West's larger employers, a condition one would hope was not in the prospectus when the reinvestment projects were first considered.

While Cullen continues to try and put some pressure on West Fraser and the Federal Government over the hand off of cash to a departing industry, he also is hoping to secure some funding for the workers about to lose their jobs.
A helpful goal and one which we are sure will see any number of federal and provincial funding programs arrive in the short term. But still, it's a project that won't provide much comfort, nor offer up much long term reassurance for those hundreds Eurocan employees (and who knows how many others in spin off industries) who won't have a job to go to at the end of January.

Kitimat has been quick to ask the provincial government to fast track other infrastructure possibilities such as the LNG terminal and the Encana Gateway pipeline to name a few, and BC's Forests Minister Pat Bell offered the prospect of perhaps a second thought on the Eurocan closure issue.
Expressing his disappointment at the mill closure announcement, he wants to talk to West Fraser's head man, Hank Ketcham about the decision. The forests minister seems to be reading from some notes that Prince Rupert residents already may have heard from in the recent years.
Among his thoughts on the issue are his opinion that there is growing interest from China in northern B.C.’s crumbling pulp industry, and he wants to make sure all options, including a sale to Chinese interests, have been considered.

Talking points that provide some glimmer of hope for Kitimat residents, but as Prince Rupert's past history has shown, what is discussed and floated as possibilities when an industry announces a closure, can take years to reach the follow through phase... If it ever does.

Bell isn't the only one who wants to discuss the future of pulp and paper, the CEP, the union that represents the majority of pulp mill workers in British Columbia is calling for an emergency summit to address the "crisis" in the industry.

All of which is kind of like asking to close the barn door after the horses have taken off, but if it can perhaps put the brakes on the closure of Eurocan, what would Kitimat have to lose from it all.

For the here and the now however, Mr. Cullen is correct in his observation that it isn't right that a company is allowed to collect a subsidy, at the same time that they are preparing to put the locks on the gates.
If the message that the Federal Government is sending out is that industry can accept this Federal money and still remove key industrial components from struggling parts of the country, while adding more Canadians to the unemployment lines, then it is that subsidy and the message that is going out with it that needs to be reassessed.

No comments: