Industry
Pulp and Paper in Canada

Paper trail: The decline of Canada’s forestry industry

Burgess COMMENTARY

Peter Burgess

Paper trail: The decline of Canada’s forestry industry

A Fort Frances sign faces eastbound traffic on the Trans-Canada highway. The closure of the Resolute Forest Products pulp and paper mill earlier this year threw hundreds of people out of work. (Fred Lum/The Globe and Mail)

For almost a century, the pulp and paper mill that hugs a sharp bend in the Rainy River in Fort Frances, Ont., provided work for members of Bob Armit’s family.

Mr. Armit’s grandfather, Ed Calder, helped build the mill more than 100 years ago. His father, Charles Armit, worked in the mill’s logging camp and later became an accountant at the mill. Bob Armit worked there for 28 years and his son Victor another 16.

But Victor may be the end of the line. After idling one of the plant’s three paper machines in 2012, Resolute Forest Products Inc. officially announced the closing of the operation on May 6, eight days before the facility’s 100th anniversary.

Unless a buyer can be found, the mill will no longer provide jobs for younger Armits – or the next generation of any family in the town of 7,700.

“There’s something wrong with the system if they let it go,” says Bob Armit, 75, who worked part-time at the mill during his high-school years, joined full-time in 1958 as a 19-year-old and moved on in 1986. “I can’t believe that they would shut it down.”

As the one-kilometre length of the mill physically looms over Fort Frances, talk of its future – mainly whether there is one – dominates the town’s conversation.

“We’re hanging on by our fingernails,” Mayor Roy Avis says.

The closing of the Fort Frances mill is an immediate example of how an industry that has been a pillar of the Canadian economy for centuries has crumbled.

When the forest products industry was at its height, such domestic giants as Abitibi-Price Inc., MacMillan Bloedel Ltd. and Noranda Forest Inc. employed more than 300,000 Canadians making newsprint, tissues, fine paper, cardboard, floor joists and wall studs. They were global powerhouses that shipped those products around the world.

That era has ended like the thud of a 25-metre-tall black spruce tree crashing to the ground, as laid-off workers from Campbell River, B.C., to Grand Falls-Windsor, Nfld., and scores of communities in between can testify.

The numbers are startling.

Notable mill closures since 2005

• Smurfit-Stone Container Corp., Bathurst, N.B., 2005

• AbitibiBowater, Stephenville, Nfld., 2005

• Domtar, Cornwall, Ont., 2006

• Western Forest Products, Woodfibre, Squamish, B.C., 2006

• UPM-Kymmene Corp., Mirimichi, N.B., 2007

• AbitibiBowater Inc., Grand Falls-Windsor, Nfld., 2009

• West Fraser Timber Co. Ltd., Kitimat, B.C., 2010

• Resolute Forest Products, Brooklyn, N.S., 2012

• Resolute Forest Products, Fort Frances, Ont., 2014

• Resolute Forest Products, Shawinigan, Que., 2014

• Cascades Inc., East Angus, Que., 2014

• Resolute Forest Products, Iroquois Falls, Ont., 2014

As recently as September, 2004, 308,664 Canadians earned a living from logging, paper making and wood products manufacturing. A decade later, the industry employed just 190,651 people.

That loss of 118,000 jobs is more than one-third of the industry’s work force and for the most part, high-paying jobs with good benefits and pensions. It’s the equivalent of eliminating every job in the auto assembly and auto parts sector in Canada.

It also underlines how the devastation of the country’s manufacturing sector has affected communities coast to coast.

In 2000, forestry outperformed the auto and oil and gas industries to rank as the single-largest contributor to Canada’s trade surplus, with a positive balance of $38-billion. By last year, the surplus tumbled by half to $19.1-billion.

Forest products provided 3 per cent of Canada’s gross domestic product two decades ago. Last year it was 1 per cent.

The names of those corporate giants, once proud symbols of Canada’s elite status in forest products, vanished in a convulsion of bankruptcy protection filings.

The biggest decline has been in pulp and paper, where the culprit is obvious – the Internet. As consumers shunned traditional printed newspapers, magazines and telephone directories in favour of websites and mobile apps, print advertising revenues plunged and publishers shrank their publications or stopped printing altogether.

There were 50 paper mills in Canada in 2000 and now there are 30, according to data compiled by Finland-based consulting firm Poyry PLC.

The drumbeat of closings in the pulp and paper sector continued Friday as Resolute announced that it will shut a mill in Iroquois Falls, Ont., on Dec. 22 and shut paper machines at two other mills in Quebec.

But both the lumber side of the business and pulp and paper have been battered by a series of blows:

The dramatic rise in the value of the Canadian dollar to as high as $1.10 against its U.S. counterpart pulverized the competitive position of the industry’s exports;

• U.S. duties on Canadian softwood lumber raised the industry’s costs; the Great

• The Great Recession of 2008-09 and the massive U.S. housing slump.

In many ways, the causes don’t matter – especially to the thousands of people who lost their jobs at pulp and paper mills in Kitimat, B.C., East Angus, Que., Miramichi, N.B., and the 400 people who are out of work in Fort Frances.

While lumber has rebounded somewhat with the recovery in the U.S. housing market, the jobs that depended on machines turning out newsprint are likely gone forever.

“Newsprint coming back?” asks Frank Dottori, founder of Tembec Inc. and a renowned figure in the industry. “I would say that’s just like the horse and buggy. Could they have gotten bigger, cheaper, faster horses to offset the car? No. You can’t cope with new technology. The world’s moved on.”

The best jobs in town

Steam from the Packaging Corp. of America paper mill in International Falls, Minn., (left) drifts past the shuttered Resolute Forest Products pulp and paper mill (right) in Fort Frances, Ont. (Fred Lum/The Globe and Mail)

Horses and buggies were still the dominant mode of transportation in Fort Frances when Ontario and Minnesota Paper Co. turned out its first roll of paper on May 14, 1914.

Abitibi-Price, which eventually became Resolute, was incorporated just a few months before that.

The Canadian mill was paired with Minnesota and Ontario Paper Co. across the Rainy River in International Falls, Minn. The U.S. mill opened in 1910.

The two mills are still joined by a pipeline that snakes along the International Bridge that joins the two towns, which sit about midway between Thunder Bay, Ont., and Winnipeg. Until the Fort Frances mill ceased operating, it shipped pulp in slurried form through the pipeline to the U.S. side.

“They were meant to be together forever,” says Bob Anderson, mayor of International Falls and a 51-year veteran of the U.S. mill, the last 25 of which he spent as public affairs manager.

The combined corporate ownership of the mills ended in 1995, when then-owner Boise Cascade included the Fort Frances mill in a package of three facilities it sold.

The towns are also closely linked. Every year between the Canada Day and Independence Day holidays, they stretch a rope across the river for an annual tug-of-war contest.

On a recent minus 13 degree morning, steam rising from the U.S. mill nearly obscured the Canadian mill and the International Bridge that Mr. Anderson travels across regularly during the winter months on his way to curl in Fort Frances. There’s no curling rink in International Falls, although it does boast a 7.9-metre-high statue of Smokey the Bear.

The Fort Frances mill made specialty papers for books, coloured paper for flyers and paper for school workbooks. Reader’s Digest and Bantam Books were among its customers.

“We never knew what the word downtime was,” says Mr. Avis, 68, a lifelong resident of the town and a second-generation mayor. “The mill ran 24-7, 365 days a year.”

Working at the Fort Frances mill meant you had one of the best jobs in town, “no doubt about that,” says Bob Armit, who started as a shipping clerk and later became a supervisor.

“A lot of people have been very fortunate to have had that employment for decades,” Victor Armit, 53, adds in an interview at his parents’ sun-drenched house along the river, five blocks from a street that bears his family name. “I was fortunate enough to get about 15 years in.”

He was paid $27 an hour and ended up working in the mill’s lab, testing fish to make sure no toxic emissions were leaking into the Rainy River.

He’s now working as a custodian at a medical centre on the nearby Couchiching First Nation reserve, but he’s happy because landing that job means he doesn’t have to move out of town.

Companies that depended on the mill are beginning to struggle.

The DeGagne family, which has operated an independent contracting company cutting wood for the Fort Frances mill since 1974, survived the 2009 bankruptcy protection filing made by Resolute’s predecessor AbitibiBowater Inc., but they have now lost a customer that bought about half the logs they cut.

Since the mill ceased production, Leon DeGagne Ltd. has been sending trucks it once sent to Fort Frances to a mill in Thunder Bay, a four-hour drive one way.

“It’s a longer haul, so it takes twice as many trucks, takes twice as many men and there isn’t twice as much money there,” president Leon DeGagne says.

Shanda DeGagne-Begin, secretary-treasurer and daughter of Mr. DeGagne, says her husband lost his job at the mill and is now working for DeGagne. “Most of our friends live down east near the GTA [Greater Toronto Area] or out west, they say ‘oh, has he found another job yet.’ When you’re in a small town like this ... it’s not as simple as going down the street and getting a job.”

The impact on other businesses shows how much the entire town depends on the mill.

People are postponing eye exams and putting off buying new glasses, says optometrist Bruce Lidkea, who is running the business his father started in 1952.

Dr. Lidkea is also the pipe major of the Fort Frances Highlanders, the local pipe band that has existed since 1956.

“The closing of the mill has decimated my band,” he says. At least 10 members of the band have moved away.

Trucks that used to head to the Resolute Forest Products pulp and paper mill now go to Thunder Bay. (Fred Lum/The Globe and Mail)

The new scarcity of high-paying jobs in Fort Frances has led to a migration from the town and the reserve, even before Resolute shut the kraft mill and halted production on one of the paper machines in 2012.

Sherry George was one of 10 people laid off from the mill in 2009 when AbitibiBowater was in protection from creditors under the Companies’ Creditors Arrangement Act.

Ms. George found a part-time job at the Fort Frances Museum in November of that year before becoming curator in 2011.

Her husband James George owned a woodland business running a slasher – which cuts trees to 2.4-metre lengths to fit into trucks – and doing subcontracting work for others in the bush.

The rising costs of fuel, safety equipment and parts, combined with the low returns from logging, led him to sell his machines and other equipment in 2010.

He has been working in road construction and logging in the Alberta oil patch since then while Ms. George stays in Fort Frances.

Nonetheless, Ms. George says she was among the fortunate because some of those 10 employees had worked for more than three decades at the mill and received no severance when they were laid off.

Many independent contractors went bankrupt themselves or sold businesses at a loss after the CCAA.

Mr. Avis says the full impact of the closing is yet to come, in part because some severance packages are still paying out and some people hold out hope that a buyer will be found to reopen the facility.

The finances of the municipal government have already been dealt a blow, however, because the mill’s taxable assessment fell to $12.8-million this year from $22.6-million in 2009. So the mill’s taxes will provide 12 per cent of the town’s tax revenue this year, down from 18 per cent in 2009.

The assessment will fall another $3-million next year, cutting the revenue contribution to 8 per cent.

“You’re not going to see the real impact until four or five years down the road when you should have [repaved] this street here and you can’t do it or you should have fixed those water lines and you’re not going to fix them,” Mr. Avis says.

Communities across the country battered by the shutdowns of their largest employers know what he faces.

In Kitimat, B.C., nearly 535 workers lost their jobs after West Fraser Timber Co. Ltd. closed its Eurocan pulp and paper mill in 2010.

“That was a big loss when that shut down. The mill had all those direct jobs there, plus all the spinoffs,” Kitimat Mayor Phil Germuth says.

Protesters march toward the shuttered Resolute Forest Products plant in Fort Frances, Ont., on Nov. 13 2014. The effects of the closure still have yet to be fully realized in the town of approximately 8,000 residents. (Fred Lum/The Globe and Mail)

In Miramichi, N.B. – a forest products hub in the late 1990s – 10 wood and paper mills in and around town employed as many as 3,000 workers. Today, two small wood-product mills remain, employing about 250 people.

“It’s a huge hit when 20 per cent of your work force doesn’t have anywhere to work any more,” says Jeff MacTavish, a born-and-raised Miramichier who is director of economic development for the municipality of 18,000. Because the industry is so interconnected – with different mills using different parts of the tree, production from one facility generating waste that becomes the raw materials for another, and many mills sharing transportation and other services – the closing of the pulp and paper mill in 2007 set off a domino effect where the business was suddenly uneconomic for other producers.

“All these mills were reliant on each other,” Mr. MacTavish says. “It just cascaded down on everyone.”

Wade Hallihan was caught in that cascade. He was working security at the lumber mill in nearby Blackville, which employed about 150 workers in a town of 1,000.

“At the time it was quite a blow,” says the 41-year-old Mr. Hallihan, who now sells cars at the local Mazda dealership. “It was the heart and soul of Blackville.”

There are several projects in the works that could restore 200 jobs, but the people of Miramichi know the boom times are gone, and there’s no going back.

“It’s removal of markets forever more,” says Catherine Cobden, executive vice-president of the Forest Products Association of Canada.

The hunt for a buyer

Scenes of decline: Once the backbone of Fort Frances, the Resolute mill sits idle under a blue November sky. With hundreds out of work, the town is feeling the effect as some businesses close and some residents look for work elsewhere. (Fred Lum/The Globe and Mail)

Mr. Avis has spent some time since the Fort Frances mill closing was announced trying to find a buyer.

The most promising opportunity appeared to come from Expera Specialty Solutions LLC of Kaukauna, Wis., but it recently bought a mill in Maine, so community leaders fear it has lost interest in the closed mill.

Hope that a buyer might be found was restored last week when Resolute agreed to heat key parts of the mill this winter so that any buyer will be able to restart it.

But the key issue in finding a buyer, Mr. Avis and others believe, is that Resolute still controls the rights to harvest timber in the area and therefore the price of wood.

“There’s a forest licence out there and what we’ve been told is it says on the licence to supply wood to the Fort Frances mill,” says Sarah Mainville, chief of Couchiching First Nation. “To me, that’s a package, the kraft mill and the sustainable forest licence, so if Resolute refuses or cannot make a business operating the kraft mill, then I think the forest licence shouldn’t stay with Resolute.”

Seth Kursman, Resolute’s vice-president of corporate communications, says the forest products company has offered the same deal on wood to all the companies it has spoken to about buying the mill. Those include Canadian, U.S., European, Chinese and other Asian companies.

“If Resolute did the harvesting, fibre would be delivered on an open book, full transparent, true cost basis,” Mr. Kursman says. “Parties looking at the mill were also given the option of harvesting their own fibre, with saw-log-quality logs going to the sawmills and pulp-quality logs going to the pulp mill.”

He notes that the mill posted an operating loss of $88.3-million between 2009 and 2014.

Ms. Mainville spoke at a recent protest rally in the town, where she urged the provincial government to intervene.

An operating mill provides some hope and opportunity for younger generations to remain in the area, she notes. Some members of her community are working in the Alberta oil patch, while some others are away four days a week hauling logs to Thunder Bay and elsewhere.

“It’s not just our kids in high school that don’t know what the path is, I think it’s all the high-school kids in the district.”

Watch an excerpt from The Way of the Logger, a documentary on the history of the forestry business in Northwestern Ontario.

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