OTTAWA - The federal government has extended a $1-billion lifeline to Canada's struggling pulp and paper industry in an effort to match billions of dollars in subsidies available to U.S. rivals.
Natural Resources Minister Lisa Raitt said Wednesday the money will be available on a one-time basis for up to three years to Canadian mills that make capital investments for the production of alternative fuels, so-called "black liquor."
Raitt said the money was needed because U.S. mills had already received about US$8 billion in subsidies for producing so-called black liquor, a liquid byproduct of the chemical pulping process used as an alternative fuel.
"The credit in the U.S. is a significant incentive for producers to overproduce pulp and make investments in their pulp mills, which coming out of a recession, place them in a much more competitive position vis-a-vis the Canadian (mills)," Raitt said.
The Canadian program will pay 16 cents a litre to mills that produce black liquor and spend the money on capital improvements to increase energy efficiency and the production of alternative fuels.
The minister said aid will help the industry become more green and preserve jobs in a sector that has been battered by falling demand in the U.S.
About 250,000 jobs are directly and indirectly tied to the pulp and paper industry in about 85 communities across the country, particularly in New Brunswick, Quebec, Ontario, Alberta and British Columbia.
Canada's forest industry already claims that 60 per cent of its energy use comes from renewable fuels.
The new funds will help it achieve the goal of reaching 100 per cent renewable energy, said Avrim Lazar, president of the Forest Products Association of Canada.
"This program is double-green," he explained. "You only get access to the money as a reward for having used renewable fuels and it's green because you can only use the money for further improving the environmental performance of the mills."
Only about 27 of Canada's 71 mills produce black liquor, but Lazar said the grants will benefit most companies in Canada since they will have at least one plant that does.
Some mills will get no benefit from the grant, however.
Lazar said the program had to be modelled the way it was because the U.S. subsidy also only goes to black-liquor producing mills.
Giving the litigious nature of the U.S. lumber lobby, Ottawa and the industry have been working on a program for months that would not violate the Canada-U.S. Softwood Lumber Agreement.
Raitt said everything within the program is within both the spirit and the language of the softwood lumber agreement, adding she had spoken to all her provincial counterparts and the U.S. deputy Secretary of Commerce.
Lazar explained the subsidy is not available to any lumber facilities covered by the agreement and is usable only for environmental improvements.
Still, neither Raitt nor Lazar would guarantee the program would not become the subject of a new trade challenge.
