The political battle over black liquor subsidies is taking its toll on Catalyst Paper, and likely won’t do much to help coastal mills.

And now, the battle has spread to have damaging effects on the company’s recycled newsprint mill in Snowflake, Arizona, which has so far been mostly insulated from the company’s troubles with taxation and a poor economy. Catalyst announced this week it would be idling its Snowflake, Arizona recycled newsprint mill for 20 days this July.

“The U.S. black liquor tax credit puts recycled paper mills at an enormous competitive disadvantage,” said Richard Garneau, Catalyst president and chief executive officer, in a news release. “Snowflake makes an environmentally desirable paper product in an environmentally friendly way, but cost-efficiency cannot overcome the subsidy represented by the tax credit.

“It is ironic that the black liquor tax credit arose from legislation that was supposed to help the environment and now threatens the well-being of an environmentally focused enterprise.”

Starting in 2007, American pulp mills became eligible for so-called green subsidies of up to $200 per ton of product produced if they added diesel fuel to black liquor, a byproduct of the pulp-making process. Pulp mills have been using black liquor as a fuel source for years, and didn’t have to change much to be eligible for the subsidies, Mike Fenton explained last month.

Fenton, national spokesperson for the Communications, Energy and Paperworkers union which represents Elk Falls mill workers, led union members to occupy North Island MP John Duncan’s office in May. They asked the MP to persuade the federal government to protest black liquor subsidies in the United States.

Their efforts paid off last week, he said, after the federal natural resources ministry announced its own billion-dollar subsidy program for Canadian pulp and paper producers, providing funding of $0.16 per litre of black liquor, up to a maximum program total of $1 billion. The money will allow companies to upgrade aging equipment.

But it’s too late for the Elk Falls pulp mill, shut down permanently in November, and likely won’t help any of the company’s other coastal mills, said Andre Bernier, manager of the Crofton mill.

“The credit can be used in the next three years to make investments, but it does nothing to lower our costs today or provide us the same competitive edge as the U.S. mills have,” he said. “It also does not solve the liquidity crisis (involving impending debt repayments) which is one of the major issues that still exists out there.”

Lyn Brown, Catalyst’s vice-president of communications, said the subsidy was aimed at kraft pulp mills, which use a chemical process, while Catalyst's coastal mills use a thermo-mechanical process.

"The aid package as it's currently designed is not going to be particularly helpful to us," she said. "We've already made the investments in improved energy efficiency by moving away from kraft pulping to mechanical pulping processes.

"We don't see the program focused on those of us who have been making investments in appropriate ways in our business."

Plus, she added, a billion dollars spread out over three years won't go very far when it's intended to benefit the entire Canadian industry. The money is linked to capital improvements – equipment upgrades, for example – and Brown said this year, despite downtime, Catalyst intends to spend up to $25 million on capital improvements. In a good year it would spend $80 million, she added.

She concluded by saying she hoped the program will be adjusted to benefit the entire pulp industry, not just certain portions of it.

–With files from the Ladysmith Chronicle