Costs killing resource-based towns.

As the sawdust settles it is going to be an "absolute challenge" for forestry-dependent communities like Dryden to remain in existence, says Mayor Anne Krassilowsky.

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Her comment comes on the heels of Weyerhaeuser Co. announcing it will permanently shut down one paper machine, removing 155,000 tons of uncoated free sheet capacity from its operations annually and 80 people from their jobs. Weyerhaeuser public affairs manager Bonnie Skene says the remaining machine, which produces approximately 332,000 tons of white paper per year, is undergoing "strategy reviews" as the company attributes the slowdown to the continued market slump, rising energy and fibre costs, including wood delivery expenses. "The whole site is being challenged," Skene says.

The mayor is calling on the senior levels of government to figure something out.

"I sincerely hope that the provincial and federal governments have the best (experts) in the business and can provide a provincial forest industry solution, but so help me they have to be quick. Time is of the essence. Decisions are being made to close these mills as you and I are sitting here."

It was not more than three years ago that Weyerhaeuser saw a need to ramp up technology and spend $220 million creating a state-of-the art, globally competitive facility. It is not a lack of new infrastructure that is tightening the noose around the facility.

The company pays about $78 a cubic metre for delivered wood. In Dryden, they would like to reduce that by $10. Weyerhaeuser has challenged Queen's Park to find a way to shrink delivered costs by five dollars a cubic metre and in turn they will match it.

"We want to share this challenge," Skene says. "Our delivered wood costs are not competitive."

Ontario companies have had one of the highest delivered wood costs in the world, according to Jamie Lim, president of the Ontario Forest Industries Association (OFIA).

Ontario's wood costs average approximately $55 a cubic metre. The recent provincial forestry support package reduces wood costs by one dollar a cubic metre. The industry requires a $20 reduction to increase its competitiveness, Lim says.

Dryden city council is taking a multitude of steps to soften the blow of the layoffs. At a special meeting, council approved the following measures: to restrict 2006 property tax increases to two per cent or less, implement a hiring freeze with no enhancements to city services, and a review of economic diversification issues. City managers were also told to streamline operational budgets. The city is welcoming senior levels of government to discuss forestry operations and issues.

Should Weyerhaeuser go down it will "have an absolutely devastating impact on our community," Krassilowsky says. The trickles down effect will take young families out of the town, she says.

In three-and-half years the city of 8,000 has lost close to 500 jobs at the mill, city manager Arie Hoogenboom says.

"That is brutal," he says. "We are in trouble now. The mill is by far our largest taxpayer and largest employer. We are about 70-per-cent dependent on the forest industry in the community."

Weyerhaeuser provides approximately 25 per cent of the town's tax base.

In preparation for any anticipated restructuring, a volunteer group has offered to find any businesses interested in relocating in Dryden to help offset the loss.

Compared to many other mills in Ontario, the Dryden operation is a sound investment, Hoogen-boom says.

"We want to be the last mill standing if that is the way the industry is going to go and I think we can be."

Months from now the mill may likely be standing with fewer employees than it has today, Hoogenboom says.

"That is our economic reality."

www.weyerhaeuser.com

www.cityofdryden.on.ca

By KELLY LOUISEIZE

Northern Ontario Business