Black liquor equals cash for mill

Stronger currency means Canadian products pricier to Americans

Robert Barron, Daily News
Published: Thursday, June 18, 2009

Nanaimo's Harmac pulp mill is one of just 27 out of 71 across Canada that will be eligible for funding from the federal government's $1-billion aid package for the nation's struggling pulp and paper industry, announced on Wednesday.

Natural Resources Minister Lisa Raitt said only mills producing black liquor (a biomass byproduct of the pulping process that is used by many mills to generate energy for their operations) between Jan. 1 and Dec. 31 will be eligible for funding from the Green Transformation Program.

Successful applicants will receive 16 cents in funding per litre of black liquor used and the money must be used during the next three years on either improvements to each mill's energy efficiency or their environmental performance.

Harmac uses 458 million litres of black liquor per year with one pulp line in operation, which could increase by 50% when the mill starts a second line as anticipated later this year, and has plans to produce up to 100 gigawatts of power from wood waste (considered green energy) that will be added to the province's power grid.

Harmac president Levi Sampson said the mill stands to acquire a "significant amount of money" from the program if Harmac meets all the criteria of the program, which he expects to see soon.

But David Elstone, an industry analyst with Vancouver-based Equity Research Associates, said while the program is good for mills that fit the criteria, it does little overall to counteract the market damage caused by approximately $7 billion in black liquor subsidies American mills are receiving.

"It would appear that the Canadian program may work well for Harmac, but some mills don't use black liquor and some don't have any green projects on their agendas," he said. "As well, comparing the American subsidies to this new Canadian program is like comparing apples and oranges in that the American mills receive the cash from their black liquor subsidies immediately and can use the money for whatever purposes they choose, while Canadian mills that receive subsidies will get it over time and it must be used for very specific purposes."

Sampson acknowledged the Canadian subsidies will not provide immediate assistance to pulp mills that "don't have their costs under control" and are already in financial trouble.

The nation's pulp and paper industry is running at only 50% capacity as pulp prices remain low due to lack of demand. "It will likely help some mills that are staying competitive and are battling through these hard times in the industry, like Harmac, and, at the end of the day, we'll have a stronger industry in Canada that will be one of the greenest in the world," Sampson said.

Sampson said funding for Harmac from the program would be "very helpful" due to the mill's problems with accessing credit that's needed to fund new projects at the mill site, including the electricity-generation plant.