According to Jack Mintz, co-author of a C.D. Howe Institute report on tax reforms, New Brunswick is the lowest taxed province in Canada for people wanting to do business.


In making the announcement, he also pans the idea of industry-specific tax-breaks on property.


On July 4th, NB Power amended its April rate application which requests an average 9.6% increase. The amendment if approved would increase rates for large industrial users (paper mills) to 10.7% even though the increased rate would only recover 91% of the cost to supply large industrials.


It’s estimated that approval of the amendment would translate into a $30 million subsidy for the industrial sector, contrasting with Government directives that require the Utility to recover its full costs.

To bridge the gap, NB Power would up-charge smaller industrial and commercial businesses. The smaller industrials would pay something in the order of 125% of the cost for their power, producing an estimated $40 million surplus that would underwrite the large industrials’ rate break.

The large industrials would appear to get a double benefit – lower property taxes and lower than cost electricity. Mitz says the property tax break is wrong-headed, that Government shouldn’t be making judgments about business winners and losers.


I would suggest there should be no difference in power rates by class of customer except for volume benchmarks and further that rates should reward conservation or off-peak use and penalize excessive consumption.

Property tax relief combined with an electricity subsidy is presumably intended to make the forest industry more competitive. In fact, over time, it could make it less competitive if it delays investment in off-electricity/off-oil energy alternatives.

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  New Brunswick’s Forest Products Association says that fourteen New Brunswick communities depend entirely on forestry operations to survive.


• Forty others rely heavily on local mills to maintain their economic viability.


• The industry provides some 24,000 direct and indirect jobs, generates nearly a billion dollars a year in wages and salaries and $264 million a year in tax revenue for the Province. It’s also a huge consumer of electricity.

Canada is the world's largest exporter of forest products.


80% of our exports go to the United States. We have traditionally enjoyed advantages in the international marketplace including: abundant forest resources; access to low-cost energy, a low cost dollar and proximity to major markets.


In recent years, the cost of electricity and the value of the Canadian dollar have risen significantly. In order to maintain its international competitiveness, the forest industry has to make major investments to modernize its mills and increase production of value-added products and it has to invest in alternatives to electricity.

The Forest Products Association of Canada (FPAC) says more than half of the Canadian forest products industry's energy is now sourced from renewable biomass (pulping by-products and wood waste such as bark), and some mills operate entirely self-sufficiently. To the best of my knowledge, that would not be the case in New Brunswick.


Purchased fossil fuels and electricity supply 19% and 20% respectively, of the Canadian forest sector's energy needs. In New Brunswick, I believe that number is substantially higher, likely in the 70% range. As mills move away from fossil fuels and into renewable energy sources for primary and secondary processing, they become more cost competitive.


Energy self-sufficiency frees the industry from the uncertainty of soaring energy prices and is one of the most pro-competitive strategies it can pursue. That being the case, one has to wonder why NB Power would be discouraging such action in New Brunswick by continuing to subsidize the industry’s electricity costs.

Biomass energy utilization has enabled FPAC’s pulp and paper sector to reduce the use of fossil fuels by 45% since 1990, and to reduce greenhouse gas emissions by 44% in the same period—seven times Canada’s Kyoto targets.


There is enormous potential for the industry to go even further. FPAC believes that, with the right kind of (tax) policy incentives, Canada’s forest products industry could become a net source of green power, while further improving its productivity and cost competitiveness.

Over the past decade, Canada’s industry has invested over $8 billion in facility upgrades and innovative processes in a continued effort to improve its environmental performance.


By switching from fossil fuels to biomass, a clean, green carbon-neutral energy source derived from industry by-products such as bark, sawdust and wood shavings, the industry has reduced its fossil-fuel dependence to the point where 60% of the pulp and paper sector’s energy needs are self-generated from renewable sources and there is technology on the horizon that could increase that to 100%.


The sector is now the largest industrial source of cogeneration (combined heat and power capacity) in Canada, which is largely powered by carbon-neutral renewable biomass. According to FPAC, that cogeneration combined with the sector’s small hydro generation already produces enough renewable energy to replace three nuclear reactors.

From a clean air and general environmental perspective, the results have been tangible for FPAC members: since 1990, these include a 74% reduction in particulate matter per tonne of output; a 64% reduction in sulphur dioxide emissions; a 40% reduction in landfill waste; and a 44% reduction in greenhouse gas emissions.


These environmental improvements have taken place during a period when production volumes in the industry have increased by 20%.

The industry has the potential to be a net exporter of renewable energy with the potential of servicing the power needs of the communities in which it is present.


The forest industry is extremely important to New Brunswick. The industry represents 11.4% of the Province’s GDP as compared to 3% across Canada and represents 40% of New Brunswick’s current export values.


The industry might need help to wean itself off electricity but not subsidy to lower its cost of operation.

W.E. (Bill) Belliveau is a Shediac resident and Moncton business consultant. He can be contacted at bill.bellstrategic@nb.aibn.com Atlantic Insight is a published Blog inventory of opinion articles published weekly in New Brunswick's print media as written by W.E. (Bill) Belliveau, who is a resident of Shediac, New Brunswick, and small business owner, operating his Moncton-based marketing consultancy, Bell Strategic. He can be reached by e-mail at bill.bellstrategic@nb.aibn.