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When you have lemons make lemonade

Communities making their living in and around the solid wood, newsprint or uncoated free sheet business are taking another hit on the chin. Weak demand and economic contractions will likely cause more facilities to close.

Communities making their living in and around the solid wood, newsprint or uncoated free sheet business are taking another hit on the chin.

Weak demand and economic contractions will likely cause more facilities to close. Northern Ontario has not been immune to these happenings. I have yet to hear of a forest community that has not been impacted by temporary layoffs and outright closures.

But there is an opportunity for the industry to redefine itself over the next few years, particularly if there is high energy pricing driven by carbon pricing, as Don Roberts, CIBC World Market analyst says. There are opportunities to be had in the bioenergy and biochemical sectors. Strategic alliances with communities and energy companies can be formed to reflect this fundamental shift.

Companies whose mainstay is the fossil fuel business are reaching out to those with renewable resources, like wood. This is a new field opening up and could well be the catalyst that changes the nature of how the wood game is played.

The North needs to determine how to position itself for the coming change.
Other regions and countries are doing the same and acting on it. Russia's emerging forestry sector has been a sleeping giant for decades. Its government has openly targeted to have more than $50 billion invested in the forest industry by 2020. Much of this investment will go toward infrastructure and in case we've forgotten, Russia has more standing timber than Canada and Brazil combined.

So, we are in the midst of some big picture changes. This is where the fun begins because we are literally developing our own masterpiece, our own direction and transformations.

We are already beginning to see competition for biomass in the form of wood pellets and that could grow if cellulosic ethanol becomes a reality. Perhaps some pulp mills in the North could easily stand to become cellulosic ethanol pilot facilities. It takes forward thinking on behalf of the communities, various levels of government and private industry to determine how they can participate or benefit from this trend.

Some companies are already doing this. Tembec is manufacturing a bioenergy liquid to sell on the market. On a larger scale, chemical companies are matching up with feedstock, whether it is Weyerhaeuser and Chevron, Stora Enso or UPM, to form strategic alliances. People are starting to think about this more, although it has not fully penetrated the consciousness of the folks who occupy corner offices in the government or industry. Maybe these executives can't lead their companies through the next generation of change, but I do think change is inevitable and they know it to.

If Brazil can grow a tree in seven years and it takes 70 years for Canada, then that's a problem for Canada and Russia. We have to rethink our position in the market place in the coming years because when the forestry sector does take off, Canada, Ontario and the Northern region should be in a position to obtain premium benefits for sticking their necks out for as long as they have.

Communities suffering from a mature declining market have a very promising future, as Hearst economic developer Daniel Sigouin so appropriately put it. They need to overcome some hurdles though.

Current government policies and governance mechanisms for access to land and forest resources often discourage new investment, including a lack of participation in Crown land decision making. Natural Resource tenure models need to include communities for revenue sharing and management control. This will help towns become self-sufficient and provide capital investment for new ventures.

Projects such as municipal infrastructure development and enhanced forest silviculture and inventory, alternative crop development for food and bioenergy can be actively pursued, employing thousands that have lost their forestry jobs over the years.

The forest industry is going to be a meaningful winner with bioenergy and biochemicals on its side. It could well be the catalyst for change.
The question is, can the governments of the day and corporations pull themselves out of a tailspin and head in an upwards direction so that we are not just picking lemons, we are now making lemonade.