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Not long after billions of dollars in tax loopholes for U.S. forest producers lapsed in December of 2009, competing Canadian mills have yet another U.S. subsidy to contend with.
Thunder Bay Rainy River MP and Forestry Critic John Rafferty is calling on the Canadian government to pressure the Obama administration to negotiate the end of the U.S. Biomass Crop Assistance Program (BCAP), which is estimated to provide subsidies of $3-10 billion to U.S. mills, or match those subsidies to Canadian mills
It was estimated that a now lapsed alternative fuel tax credit, involving the pulp byproduct black liquor, saved the U.S. forest industry up to $6 billion in 2009. In Canada, the federal government responded with a nationwide Green Energy Transformation Program aimed at making mills more energy efficient and self-sufficient.
“When they did act on black liquor, it was too little too late,” said Rafferty. “We’re giving the government a heads-up on this newest subsidy, which is as big as black liquor. This is cash to U.S. forest companies, it’s not even a tax credit where you have to make a profit to get a break on your taxes. It’s going to put us at a disadvantage. We either have to close them, or match them.”
Locally, the previous U.S. black liquor subsidies have not had any direct affect on Domtar’s Dryden pulp mill operations. In fact the company reported that its many U.S.-based mills had reaped a $137 million windfall in tax credits by September of 2009.
Kenora MP Greg Rickford says that the government is aware of the threat to the Canadian forest sector posed by the U.S. programs. He says recent efforts to move mills closer to becoming energy self-sufficient is a step towards a longer term solution to the problems plaguing the industry.
“It was embraced by industry and in fact it was embraced by the member from Thunder Bay/Rainy River in front of the minister,” said Rickford. “Unfortunately, once she left the room, he proceeded to criticize it for reasons we don’t understand.”
In terms of the BCAP program, Rickford says Canada’s concerns have been formally raised with U.S. trade representatives and various departments.
“We’ve also had some discussions with provincial counterparts and we’re assessing our options around international implications with the European Union, Chile, Brazil and Australia,” said Rickford. “I think we need a bit of time to structure a Canadian-made policy in accordance to that.”
– Chris Marchand