22 October 2007

Update: Kruger machine closure and government subsidies

The official government news release came in the middle of Monday afternoon.

Turns out the provincial government has subsidized the newsprint industry to the tune of $30 million over just the past two years.

In the release, natural resources minister Kathy Dunderdale notes:

"We met with Kruger officials last week and told them very clearly that this was unacceptable. We reminded the company of the support it has received from this government. In the last two years, we have provided over $30 million in assistance to the pulp and paper industry in this province. The company has revisited its plans and moved ahead with today’s action that will see the shutdown of one machine. The impact of their business decision has been lessened because of the significant support this government has provided, and continues to provide, to this industry."


The last time issues like this came up, the provincial government wound up shelling out millions in subsidies. In 2006, it was an unspecified amount to deal with a cost problem with operations on the island. Later in 2006, it was a $10 million subsidy on power costs. A bit of simple math suggests that the earlier subsidy was upwards of $20 million but the actual figure was never made public; it could be there have been other subsidies that Dunderdale or her predecessor never announced publicly.

Subsidies to private industry are nothing new for the current administration. In a failed effort to salvage the Abitibi mill in Stephenville, the provincial government was prepared to offer the company upwards of $10-12 million annually to keep the mill open. Bond Papers concluded that subsidy actually worked out to more than the provincial government's tax take from Abitibi's Stephenville operation in certain circumstances.

No one should be surprised if there is a government decision between now and next spring, while the legislature is conveniently closed, to announce further subsidies for the pulp and paper industry in the province.



BNB said...

The pulp and paper industry in this province has long enjoyed great subsidies and rights. They practically own timber rights for the entire island and Labrador has even been stripped to accomodate them. They bring tremendous employment to Central Newfoundland and West. I suspect your words will indeed come true whenever the legislature awakes from their long nap. It won't be anything new though in our history.

Edward G. Hollett said...

Well, it is something new in a climate when there are supposed to be no more give aways of resources.

babe in boyland said...

very good point, mr hollett.

how does this fit into the "no more giveways" matrix?

we won't give away nl resources, but we'll pay you to take them?

WJM said...

we won't give away nl resources, but we'll pay you to take them?

Unless you're the Iron Ore Company of Canada, which makes you worse than Hydro-Quebec.

Edward G. Hollett said...

Just go back and follow the link to the Stephenville post. If I did the math correectly, the province was prepared to pay Abitibi to process pulp into paper.

One of the things to really notice though was the extent to which the government attempted to understate or incorrectly state the amount of the subsidy or the circumstances which might drive it higher than the figures they first released.

BNB said...

No doubt the Paper companies have historically had a very sweet deal in N&L. Primary access to all of the best pulp timber. Access to rivers and waterways for generating power for their own use, and anyone from Norris Arm can tell you the river bed in that area is thick with decades of bark and waste from processing the timber for pulp from the Grand Falls mill.

To the question of what about the "no more give-away"? It would be a great departure for this government to do anything different. Maybe the present government should have specified "no more new give-aways."

Of course coming from a mill town my opinion wouldn't be too popular. Since the days of the first unions in Central Newfoundland the pay has been generous and the prosperity of the region is fundamentally connected to that industry.

Edward G. Hollett said...

But of course Darren, the whole premise of this current administration is that things are different.

Completely different.

I don't think people are ready for "no new give aways", but then again you might be able to get away with changing the stuff scribbled on the barn wall.

BNB said...

I don't get to scribble on the walls Ed, I only get to try and deceiver what others have put there :)

Edward G. Hollett said...

The allusion was to Animal Farm, in case you missed it.