Dubreuilville sawmill operator frustrated by wood competition – by Ian Ross (Northern Ontario Business – July, 2011)

Established in 1980, Northern Ontario Business  provides Canadians and international investors with relevant, current and insightful editorial content and business news information about Ontario’s vibrant and resource-rich North. Ian Ross is the editor of Northern Ontario Business ianross@nob.on.ca.

Community struggling

Dubreuil Forest Products (DFP) is facing a future without a Crown wood supply. One of Canada’s last great company towns will not go down without a fight, said its sawmill general manager.

Dubreuil Forest Products (DFP) mill manager Dave Jennings said despite the government’s rejection of his company’s application for Crown fibre in the provincial wood supply competition, the dimensional lumber producer will find a way to carry on.

“We’re going to fight on, we’re not going to quit, we’re not going to go away and we’re going to do whatever it takes to ensure that the community and the mill survives.”

Jennings called the province’s plan to put Crown wood back to work “anything but fair” and said the Ministry of Northern Development, Mines and Forestry’s (MNDMF) decision to strip his mill of wood supply will “imperil the town” and affect future livelihoods.

Jennings is part of a campaign to save the franco-Ontarian town of 773. Established in the early 1960s by the Dubreuil brothers who built a sawmill just off the Trans- Canada Highway, north of Wawa, the idled mill had been limping along for most of the past decade.

The U.S. homebuilding slump and economic crash forced the shutdown of the sawmill and planer operation in June 2008, forcing the layoff of 225.

Jennings blasted the ministry in an April letter to Northern Development, Mines and Forestry Minister Michael Gravelle after the company’s application to retain its annual softwood allocation of 196,000 cubic metres for the Magpie Forest was rejected. The business plan is operate the more modern side of the mill whenever North American lumber markets improved.

Although DFP doesn’t produce any value-added products or employ any leading edge ‘green’ technologies, the mill provides chips, hog fuel and wood shavings for companies like Terrace Bay Pulp, St. Marys Paper and Flakeboard in Sault Ste. Marie.

In his letter, Jennings takes issue with the ministry’s selection criteria based on a points scoring system, in particular its evaluation of the social and economic benefits of the Dubreuil proposal, which scored three of 30.

As the town’s largest employer, Jennings said the company is woven into Dubreuilville’s social fabric and has been providing economic benefits for surrounding communities for 50 years.

“To say that this mill doesn’t contribute anything in terms of social or economic benefits is just ludicrous.”

Jennings said a follow-up conference call with the ministry didn’t offer any clarity and he feels the whole process “was basically slanted against the solid wood industry.”

In a face-to-face meeting with Gravelle, Jennings said the minister offered no assurances that he would personally intervene to secure wood on behalf of the company.

“He said they would do what they can to help us,” said Jennings. “He was taking the stance that he can’t intervene politically in the process.”

The wood traditionally allocated to Dubreuil went to Terrace Bay Pulp, Haavaldsrud sawmill in Hornepayne and Lecours Lumber in Hearst.

The wood awarded to Terrace Bay (part of Buchanan Forest Products chain) had been withdrawn from the competition as part of the refinancing negotiations with lender Callidus Capital to restart the mill last October.

Jennings said: “To select one over another and save 100 jobs (in Hornepayne) at the expense of 225 jobs when there is probably room for both just doesn’t seem right.”

However, Bill Thornton, the ministry’s assistant deputy minister for forestry, said Dubreuil was simply “out-competed” by more “solvent” neighbouring sawmills that are in much better financial shape to put wood to work.

In an emailed response, Thornton said Dubreuil has been closed for three years and is bankrupt.

“So while DFP officials may indicate they ‘intend to reopen’ the mill, their financially ability to do so is very much in question, relative to other sawmills that received wood in this competition.”

Thornton said DFP has a lengthy list of unsecured creditors “who will not be paid” and the company owes the province “millions of dollars” in unpaid stumpage fees. The largest secured creditor, Buchanan Forest Products, has six sawmills in receivership or bankruptcy.

Given the circumstances, Thornton said “one has to seriously question the ability of the organization to reopen this mill once it reverts to them following the bankruptcy process.”

Thornton said there have been talks with Buchanan officials on how the Dubreuil mill can be best utilized in moving toward value-added opportunities.

“It’s very unfortunate for Dubreuilville, but it makes sense to allocate Crown timber to those mills that can realistically use it.”

Michael Gravelle defended his ministry’s selection process in sorting through 115 applications to build “an industry of top performers” to receive unused wood

In a response to a June 13 statement by Dubreuilville Louise Perrier, who accused the McGuinty government of trying to destroy her town, Gravelle sympathized with frustration felt by some communities, but said he will not dictate the results of the wood competition. The government’s appointment of a fairness commissioner ensured there was independent “oversight” of the entire process.

“In the end, the higher scoring proposals were successful and the lower scoring proposals were not,” said Gravelle.

Jennings said with the government’s forest tenure reforms to create Local Forest Management Corporations to market Crown wood still two years away, his plan now is to secure a sustainable and economic wood supply for when the market rebounds.

“We’ve got an owner that’s dedicated to operating the facility,” said Jennings, “we’ve got some of the best workers around, and we’ve got a community and union behind us. We want to operate.”