Power rebate sends mixed messages.

A new provincial energy rebate program to help Northern Ontario's struggling forestry industry received mixed reviews from industry stakeholders.

Premier Dalton McGuinty chose the hit-hard forestry City of Thunder Bay, Nov. 20, to announce his government's plan to offer rebates for large pulp and paper mills to reduce electricity costs by 15 per cent over the next three years.

The $140-million Northern Pulp and Paper Electricity Transition program will provide quarterly electricity price rebates for pulp and paper mills that purchase a minimum of 50,000 megawatt hours annually and commit to increased energy efficiency.

Although McGuinty had earlier promised northwestern Ontario community leaders to study their regional pricing proposal to reduce hydro costs from its current $70 per megawatt hour to $45, his independently-commissioned study is showing regional pricing isn't the answer to solve the crisis.

The rebate announcement was praised by the presidents and CEO's of St. Marys Paper, Bowater Inc., Tembec, Abitibi-Consolidated and Buchanan Forest Products.

"This is great news for Ontario's forest sector," said Buchanan president Ken Buchanan in a statement through the Premier's Office. "It helps us stay competitive. It will keep jobs in the North.

"This is good for our industry and a win for the communities in our region. Our sawmills need pulp and paper operations to use the wood chips they produce, and this helps to ensure that."

The plan was also hailed by the Northwestern Ontario Associated Chambers of Commerce (NOACC).

"Rising energy costs have hit pulp and paper companies particularly hard as electricity accounts for approximately 30 per cent of their operating costs," said NOACC president Barry Streib in a statement.

"I was pleased the government worked with the participating companies to reduce their electricity costs by 15 per cent."

Thunder Bay Chamber of Commerce president Mary Long Irwin praised local MPPs Michael Gravelle and Bill Mauro for their hard work on the forestry industry energy issue.

"They did not give up, they continued to talk and listen to the industry. I would also commend Premier Dalton McGuinty and Minister Ramsay for their commitment to this issue as others may have not understood that investing in Northern Ontario Pulp and Paper Mills is vital to Ontario and the North."

But not everyone was overjoyed with the news.

Bob Fleet, Grant Forest Product's vice-president of woodlands and environment, says the rebate program "does nothing" for his northeastern Ontario company which operates two Oriented Strand Board (OSB) mills in Timmins and Englehart.

"It helps eight mills out 100 in Ontario. It still leaves an awful lot of mills that still need some electricity relief."

Fleet says although each of their two OSB mills use more than 50,000 megawatt hours of power annually, he was disappointed the rebate program is restricted to only largescale pulp and paper mills.

"I was told that they wanted to deal with the largest consumers of electricity first, which leads me to believe they're going to do something more."

Fleet says OSB mills are struggling much the same as pulp and paper mills due to the combination of energy prices, a high Canadian dollar and a declining U.S. housing market.

"In fact, OSB mills are hurting a lot worse than pulp and paper mills for the most part. We've come off of three good years, but we're in the (downward) housing cycle ... and we're hurting pretty bad."

He was hopeful Queen's Park will expand the program to all forestry producers and that the North's call for regional industry pricing of $45 per megawatt hour will remain on the government's agenda so the province can remain competitive with Manitoba and Quebec.

Greenstone Mayor Michael Power, the president of the Northwestern Ontario Municipal Association, (NOMA) called the policy a "really good first step" but says it falls short of his group's stated goal of a $45 per megawatt hour "all-in" energy plan for industry.

NOMA was preparing a recovery strategy and plan to find solutions to help northwestern Ontario's devastated forest communities. Their final report was to be delivered to Queen's Park in early 2007.

Previously, the group put forward a northwestern Ontario energy development strategy to government to help the forestry sector.

Power praised the work of Natural Resources Minister David Ramsay for the government's larger forestry package of loan guarantees, grants, stumpage fee refunds and uploading of bush road maintenance costs to reduce wood delivery costs. "This is a big step toward that. When you put the whole package together everybody in the industry will benefit."

But Power says Ramsay made it clear regional energy pricing is off the table.

"They're saying to us that this is it for Northern Ontario in providing investment for the pulp and paper industry. They're saying they invested more in forestry than the auto industry ..."

By IAN ROSS

Northern Ontario Business