Features Harvesting
One year after Northern Pulp’s closure, contractors ‘really suffered’

In light of Northern Pulp’s closure in January 2020, many people in the province’s forest industry now are asking, ‘What comes next?’

In an effort to answer that question, on March 2, the Canadian Woodlands Forum (CWF) hosted a webinar called “One Year Later; Looking Ahead,” to look at how the pulp mill’s closure has affected the forest industry and possible steps forward. Around 130 people tuned in to hear three presentations on the subject.

Peter Robichaud, executive director of the Canadian Woodlands Forum, kicked things off with a brief overview of the impact of Northern Pulp’s closure.

Those impacts are manifold: Northern Pulp’s closure has caused changes in fibre flows and the way the industry works, resulted in the downsizing of the harvesting and trucking infrastructure workforce and the loss of a profitable market for woodchips, and impacted the local communities. There has also been a significant reduction in revenue across the supply chain.

“But, our industry is a resilient bunch and we understand the need to look ahead,” Robichaud said.

Full effects not yet felt

Jeff Bishop, executive director of Forest Nova Scotia, then provided an update on the province’s forest sector and the impact of Northern Pulp’s closure on the sawmill sector.

The mill was a critical consumer of Nova Scotia’s pulpwood, which accounts for 51 per cent of the province’s available wood fibre. Before it was shuttered, 95 per cent of all sawmill chips produced in the province went to Northern Pulp, and 80 per cent of the pulpwood that the mill bought came from private lands.

Consequently, when the mill closed, there was an immediate impact felt across the supply chain, from the sawmill sector to those buying and selling wood on the market, Bishop shared.

In the months leading up to the shutdown, Forest Nova Scotia communicated the expected impact on the industry to the provincial government and key stakeholders. They expected there to be a decrease in value of timberland (which meant lost income for more than 30,000 landowners), a contraction in the logging force, sawmill closures and a reduction of the forest industry by at least 50 per cent (which would mean the loss of 6,000 direct and indirect jobs).

They also foresaw that the Lahey Report would be rendered meaningless, Bishop said. This is because the practices recommended in the report involve the removal of pulpwood in the forest to allow higher quality trees to grow. But, if there isn’t a market for pulpwood, then the forests’ health cannot be improved.

To address these potential consequences, the Nova Scotia government formed the forestry transition team. Bishop is a part of that team, which has looked at 31 initiatives in the past year and invested in projects in areas such as roadbuilding, silviculture, small-scale wood heat and workforce development.

The transition team also held a virtual trade mission with the forest sector and government partners in Maine and Scandinavia to better understand what new markets and products these jurisdictions are exploring, and what might lead to supply chain viability in Nova Scotia.

Now, one year on, the industry is starting to feel the effects of the mill’s closure. However, the COVID-19 pandemic resulted in a few silver linings for Nova Scotia’s forest industry, Bishop said.

The most obvious is that the price and demand for softwood lumber has jumped. According to the Maritime Lumber Bureau, in 2020, there was a 1.7 per cent increase in lumber production in Nova Scotia compared to 2019.

“This enabled some changes to the economy of some of those operations and, to an extent, to landowners themselves to be able to continue to have markets for these products [such as the repair and remodeling market],” he said.

On top of that, the U.S. and Canadian housing numbers were strong in 2020 and into 2021, as were the renovation numbers.

“I quite honestly don’t believe we have felt the full effect of [Northern Pulp’s closure] because of the silver linings,” Bishop said.

Contractors suffering after closure

Ryan Scott, from Scott and Stewart Forestry Consultants Ltd., and Dave MacMillan, owner of MacMillan Logging, then shared how the closure has impacted logging contractors in Nova Scotia.

Since the mill closed, Scott and MacMillan have been working with a group of logging contractors called the NS Forestry Contractor Group, and the CWF. In June last year, they conducted a survey of contractors representing harvesting, trucking, construction and silviculture to determine how contractors’ operations have been affected by the pulp mill closure.

The vast majority – 89 per cent – of contractors said their companies’ long-term viability had been affected by the closure, Scott and MacMillan shared.

Contractors were also asked how they thought the closure would impact their finances. On average, contractors thought there would be a 22 per cent decline in the number of people they employed in 2020 compared to 2019, and an estimated revenue drop of 33 per cent.

Now, a year after Northern Pulp’s closure, contractors have reported the actual revenue drop from January 2020 to January 2021 was 30 per cent.

The NS Forestry Contractor Group also took a look at the impact on prices.

When Northern Pulp originally closed, there was an immediate drop in the price of sawables and Grade 2 pulp wood, Scott and MacMillan explained. The pulpwood was redirected into the biomass supply chain, but resulted in significantly decreased rates for the material. On the sawables side, it wasn’t until October 2020, when the price of lumber had risen by three times, that it reached pre-closure levels.

“So, until then, contractors really suffered,” Scott said.

The spike in lumber prices and demand due to COVID-19 also is not sustainable to keep the province’s forest industry going.

“It’s helped in the short-term and helped offset a lot of hurt, but that hurt will come back when the prices return to where they were,” he said.

The group also examined the effect of the closure on roadside prices. In 2019, when the mill was running, the price for low-grade pulp wood at the roadside was $38 per metric ton (MT) on average. But, most of that pulp now goes to the biomass industry, where the average price for the fibre in 2020 was $13 per MT. However, the cost of clear-cut harvesting is $25 per MT on roadside, and for selection harvesting, it’s $35-$50 per MT.

“My particular operation has been harvesting biomass since the mill closure, and our average revenue was just over $13 [per MT],” MacMillan said. “Biomass doesn’t support the supply chain and we don’t really see it supporting it in the future because supply and demand determines the price, and the demand is not high enough.”

They also asked contractors whether they believe Nova Scotia’s forest industry is sustainable with only the wood chips, biomass and lumber markets. The results were “overwhelmingly no.” Instead, the loss of the kraft pulp market will lead to high-grading forests, because contractors will be forced to choose woodlots with a higher percentage of high-grade lumber and clear-cut those areas. This would go against the recommendations of the Lahey Report.

As a result of these difficulties, the majority of contractors said their motivation to stay in the forest industry is at an all-time low and they are concerned about what the sector will look like in five years.

“One of the troubling comments to me is when I hear people say that we shut down the pulp mill and the forest industry kept on chugging, that there was little impact,” MacMillan said.

In reality, there are 29 businesses in Nova Scotia that have reported they are downsizing, looking to do something different or have quit the forest industry in the past year. And the number of employees this represents is triple or quadruple that.

Potential solutions

Now, 14 months after the closure of the mill, a lot of contractors are operating at a loss, Scott said. Consequently, the industry needs a high-end market for the one million metric tons of sustainably harvested low-grade wood available in Nova Scotia. The contractor group has therefore come up with a few market proposals.

One would be to increase the use of locally produced biomass to achieve energy targets. However, to meet the targets laid out in the Lahey Report, Nova Scotia would need to build hundreds, if not thousands, of community heating plants, Scott said.

There have also been discussions around exporting pulpwood to B.C. or Europe, as pulp mills around the world are interested in supporting the supply chain. But, due to COVID-19 and the economics around this suggestion, these proposals have not moved forward.

According to Scott, restarting the kraft pulp mill in Abercrombie, N.S., seems most reasonable, as this is the only proposed solution that would pay enough to allow contractors to do selection harvesting, as recommended by the Lahey Report.

Northern Pulp’s parent company, Paper Excellence, also believes that restarting the pulp mill is the most viable option. Dale Patterson, a consultant for Northern Pulp and Paper Excellence who is leading the charge to determine the next steps that might lead to the mill’s reopening, provided an update on the company’s efforts in this regard.

Northern Pulp is looking to create a new environmental plan for the mill, in consultation with key stakeholders, that would be mutually beneficial, he shared.

“We want to make the best efforts to develop an alternate treatment plant and operating approach for Northern Pulp that is economically viable, environmentally sustainable and sensitive to the host community,” he said.

The environmental liaison committee released a report in February with recommendations that Northern Pulp and Paper Excellence are now reviewing. The report identified issues associated with odour, wastewater quality, water use, sludge burning, trust and community involvement.

The committee also sent their findings to a consultant company, KSH, which has developed a concept to deal with these issues at the cost of $350 million, Patterson said. The committee is now working on a communication rollout plan for the mill’s environmental solution.

Patterson then shared some more details about Northern Pulp’s plans to modernize the mill. With the proposed upgrades, the mill would be the No. 1 kraft mill in Canada in terms of greenhouse gas emissions, effluent colour and solids in waste water, he said.

“Overall, this will be what I see as the top kraft mill environmentally in Canada, and it will challenge some of the environmental outputs of many mills around the world,” Patterson said.

Moving forward, the mill will develop a project description and discuss the Environmental Agency’s requirements with the provincial government. It will take approximately one year to put the plan together and two years to implement it, Patterson said.

“Paper Excellence-Northern Pulp are fully committed to doing whatever we can to have a kraft mill operating here in Abercrombie. We will work the hardest we can to have that process be effective,” he concluded.