Stumpage fee closes Sault hardwood mill.

• Author: Ross, Ian
• Position: NEWS

Onerous stumpage fees are being blamed for the indefinite shutdown of a Sault Ste. Marie hardwood mill.

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Boniferro Mill Works issued layoff notices to 41 employees, April 27.

"We've had four years of very little downtime, so this came as quite a shock to the employees," says president Jim Boniferro, a former Domtar manager who resurrected the once-antiquated mill when the Montreal paper giant wanted to close it in 2002.

Boniferro says his operation has weathered the usual industry challenges of high- energy costs and a strong Canadian dollar, but the province's residual value charge, attached to stumpage fees, has hit his mill particularly hard.

In the mill's first four years of operation under new company, Boniferro says his company has paid $1.1 million in residual charges, including $459,000 in 2004-2005. He says his operation has barely broke even financially, adding he would rather have invested his value charges in new production equipment.

"As a small, independent company that's been devastating, and we've telling the Ministry (of Natural Resources) that for years."

The one-shift operation produces 15-million board feet of lumber annually, exporting mainly to the U.S. for flooring, kitchen cabinetry, furniture and some low-end industrial products such as pallet board components.

"I've been dealing with the ministry for three years and it just came to a point where you can't take away a million over four years, which is really our start-up (period), and expect it to continue on.

"We just decided we had to do something to preserve cash or I won't be able to pay my bills."

The residual value charge is one of four charges in Ontario's Crown Timber Pricing System--also known as 'stumpage' charges--paid by forest product companies for harvesting on Crown lands.

Stumpage fluctuates according to market prices of lumber, panels, paper and pulp. It ensures the Crown reaps some financial rewards from strong forestry product markets.

Boniferro doesn't dispute the principle of stumpage but questions the MNR's formula to determine the value charge.

He's been asking for a review from the MNR, but to no avail.

"One of the challenges is we can't get a clear definition of how they actually calculate it."

The Ministry of Natural Resources' website indicates how the residual value charge formula is arrived at on a dollars per cubic metre charge. But the calculation posted is for softwood lumber only, not hardwood.

Ironically...