A way forward for Ontario's forestry-dependent communities

July 10, 2006

In the past year, Queen’s Park has unveiled no less than three packages aimed at boosting the fortunes of Ontario’s forest industry. First, came $350 million in loan guarantees. Then a promise to absorb road maintenance costs. Then, most recently, a retroactive rollback in fees charged to companies logging trees on publicly owned forestlands.

Curiously absent, however, was any talk of what is needed to secure a better future for rural communities, which are suffering the brunt of the fallout associated with the closure of 16 major milling facilities since 2003 - closures that yanked 3,500-plus high-paying jobs out of communities that were already suffering as a result of plummeting population declines and dwindling tax bases.

Yet, if it turned its mind to it, Queen’s Park could do much, and at very little cost, to make tangible differences in rural communities that desperately need help.

Following is but a small sample.

First, it could allocate tracts of publicly owned forest directly to communities, First Nations, regional governments or boards. Not only does Queen’s Park have the power to do this, but it also has a golden opportunity to do so. Those 16 mills to close their doors collectively processed more than 4.5 million cubic metres of wood annually. Rather than make timely investments in them, the companies chose to walk away. Why not now take at least a portion of the timber that was allocated to those companies and reallocate it to communities for public benefit? In addition, why not let the communities that receive new forest tenures keep the stumpage revenues that are generated when trees on those lands are logged? These two simple reforms would give communities a land base on which to generate new economic opportunities and would offset some of the losses associated with population flight and tax revenue declines.

In addition to these changes, other substantive issues must be addressed in order to provide greater certainty to rural, forestry dependent communities. In northwestern Ontario in particular high hydro costs are proving to be crippling. In some cases, 35 percent of the costs associated with operating pulp and paper mills is hydro, a cost outstripping every other including labor. The trouble is in northwestern Ontario it only costs about 2 cents per kilowatt hour to produce the power, while forest companies are paying more than three times that. With the region isolated by a lack of transmission infrastructure from the power hungry south, it makes sense to create a regional power authority that would have jurisdiction to both set regional hydro rates and make important decisions on future transmission options.

The other area the province can and should place effort is in encouraging the further manufacturing of forest products. A 2003 study paid for by Ontario taxpayers noted that the provincial forest industry could, with the right mills making the right products, capture another $2 billion in market share in the US housing market. Realistic opportunities existed to make higher value lumber products, more door and window frames, factory-built housing systems such as wall units and a host of other “value-added” products, the report said. To encourage such an outcome, the government could use some of the timber no longer processed by those companies that chose to walk away from communities and auction it to bidders. Instead of straight auctions, however, the province would call for “partnership” bids. Bids would be restricted to teams consisting of mills making lower value lumber products who shared a portion of their output with secondary manufacturers who took the wood, re-cut it and reformed it into higher value products.

These options and many others could be pursued with relative ease, helping bring much-needed stability and self-sufficiency to communities badly in need of substantive forestry reforms. The big question is why Queen’s Park continues to content itself with offering Band-Aid solutions to forest companies as opposed to policy changes that place a premium on public returns from publicly owned forest resources.

Ben Parfitt is a resource policy analyst with the Canadian Centre for Policy Alternatives and author of Public Forests, Public Returns: A Way Forward for Ontario. The report is available on-line at www.policyalternatives.ca.