Tembec's balance sheet illusions could make investors disappear

By DEREK DeCLOET

Tuesday, April 26, 2005 / GLOBE AND MAIL

In investing, numbers often lie. The numbers say that Tembec, one of the country's largest forest products companies, is among the cheapest stocks money can buy. With a market capitalization that's less than one-third of the company's $1.1-billion in net assets, how can you go wrong?

Don't be fooled. More than $500-million in shareholder wealth has been eviscerated since last summer, and if you watch what the bond market says, more pain lies ahead. Tembec's debt has been tumbling in recent weeks, an ominous sign. On Thursday, the company will report its second-quarter results, which management has already warned will be abysmal. It's rude to say it out loud, but in dark corners people are starting to wonder whether the company may be forced to consider bankruptcy protection.

The sad part is that many of Tembec's woes are not management's fault. Chief executive officer Frank Dottori couldn't have predicted the Canadian dollar would rise from 65 cents (U.S.) to the 80-cent range so quickly, crushing the company's profit margins. He couldn't help the fact that the Brazilians have built hyper-efficient new pulp mills that render Tembec's smaller mills uncompetitive. But it is also a case study for executives and investors on the dangers of foolhardy acquisitions.

Any analysis has to start with the balance sheet, which is rated R and should not be shown to small children or others who are easily frightened. Tembec started out in 1973 by buying and saving one doomed pulp mill in Temiscaming, Que., and steadily got bigger, partly by purchasing other doomed mills. Management bought small assets and tried to pay as little as possible, a strategy that has left it with 55 factories spread out over three continents.

There's nothing wrong with acquisitions as long as you're careful about how much debt you accumulate along the way -- especially in cyclical businesses, where you never know when the cycle is going to turn against you. But Mr. Dottori failed to heed this, with damaging consequences.

With $1.6-billion (Canadian) in long-term debt, Tembec's interest costs run to more than $30-million a quarter. It would be manageable except everything else has gone against them. Pulp prices have been good but not great, and since it's sold in U.S. dollars, price increases have been sabotaged by the rising Canadian dollar and euro. New mills in South America, Asia and Europe are adding millions of tonnes of new capacity and hurting prices.

To make matters worse, the Quebec government has proposed a 20-per-cent cut to the tree harvest in the province, exacerbating a shortage of fibre in Eastern Canada. In Ontario, power prices have gone up. You get the idea. Next week: a plague of locusts strikes. The bright side, if you can find one, is that Tembec doesn't have any huge debt repayments until 2009. But since it's not even covering its interest costs at the moment, a financial crunch could come sooner.

Having lost so much lately -- the stock is down 42 per cent this year -- a shareholder might be tempted to take comfort in the $2.4-billion in fixed assets on the balance sheet. But demand for high-cost pulp mills paying developed world wages is, shall we say, not robust. One forest industry insider, speaking on condition of anonymity, reckons the plants aren't worth half as much as it says on the books. Tembec's $1.1-billion book value is an illusion.

This is starting to dawn on bond investors, who have been marking down Tembec's debt in earnest. Yields on the company's 2009 bonds have jumped to more than 10 per cent, from the low 8-per-cent range at the start of the year, according to Bloomberg data. If the bond guys are getting nervous, you can bet there won't be much left for equity holders if Tembec renegotiates its debts. Is there a way out? If the loonie slides back to where it was two years ago, maybe. But a huge restructuring seems inevitable.

vox@globeandmail.ca

Forestry profits rising on efficiency gains, survey says

SOURCE: GLOBE AND MAIL / BY PETER KENNEDY / FRIDAY, APRIL 15, 2005 PAGE B10

VANCOUVER -- The trend towards bigger, more efficient sawmills is helping to boost lumber recoveries and make the Canadian forest sector more profitable, according to a PricewaterhouseCoopers survey. The survey released yesterday said profits reported by the top 10 forest companies in Canada soared to $930-million in 2004, compared with $242-million a year earlier.

The biggest winners were the solid-wood producers such as Canfor Corp. and West Fraser Timber Co., the survey said.

This was due in part to high lumber prices and investment in sawmilling technology that sent profits in the British Columbia lumber sector rising to a record $1.5-billion in 2004.

That was up from $340-million a year earlier, according to preliminary estimates by PwC. "We have seen a lot of capital invested on process controls, and lumber recovery to increase capacity and reduce costs,'' said Craig Campbell a partner with PricewaterhouseCoopers in Vancouver.

"Half a dozen significant capital projects, in excess of $50-million each, have been announced or are already under way at sawmills in the interior of B.C.,'' Mr. Campbell said.

This is part of a broader trend that has allowed the North American sawmilling sector to produce 40 per cent more lumber in the past 17 years, even though the number of mills is down 34 per cent. The B.C. industry, for example, has been able to increase the amount of lumber it can recover from the same amount of logs in the last decade by 1.4 billion board feet.

Mr. Campbell said record earnings in B.C. have helped to offset the impact on Canadian forest sector results of softwood duties, unfavourable exchange rates and an oversupply of newsprint.

Norbord Industries Inc. was the most profitable of the 10 companies included in the survey. The Toronto-based producer of oriented strandboard posted a profit of $424-million in 2004, up from $240-million.

CANADA'S TOP 10 FORESTRY FIRMS
2004 PROFIT (LOSS) IN $ MILLION
1 Abitibi Consolidated -$36
2 Domtar -42
3 Canfor 421
4 West Fraser Timber 212
5 Tembec -1
6 Cascades 23
7 Norboard 424
8 Norske -29
9 Fraser Papers -56
10 Pope & Talbot 14
TOTAL $930

Climate change could sour US maple sugaring

from the April 06, 2005 edition - http://www.csmonitor.com/2005/0406/p11s01-sten.html

By Christa Farrand Case | Correspondent of The Christian Science Monitor

PUTNEY, VT. - In the predawn darkness of Putney's maple-studded hills, Don Harlow begins his mornings by coaxing his truck down a rutted forest path. At the end is a cylindrical tank twice his height into which hundreds of gallons of sweet maple sap have flowed, siphoned through 11,000 taps and 40 miles of plastic tubing.

Mr. Harlow carts the sap up to his sugaring house to boil it down to syrup. It's a ritual Harlow loves, and one his family has performed for more than 100 years - albeit with horses and metal buckets in earlier days.

Despite having one of the most coveted labels in the industry - "pure Vermont maple syrup" - on their products, Harlow and other sugarmakers in the state are struggling to compete with Canada, where maple syrup production has more than tripled since the 1970s.

While much of Canada's syrup boom can be attributed to generous subsidies from the government, as well as its aggressive promotion of maple products, some researchers believe another factor may be coming into play: climate change.

As temperatures rise and weather patterns become more erratic, New England's maple trees are facing growing threats that may eventually force syrup aficionados and leaf-peepers out of the region and into Canada.

When Harlow took over the farm in the 1950s, the US produced 80 percent of the world's maple syrup, with Canada supplying the remaining 20 percent. Now the countries' market shares have flip-flopped, with Quebec alone providing over three-quarters of the global supply.

"Due to changes in both sap collection technology ... and climate ... the maple syrup industry is migrating from New England into Canada," concluded the New England Regional Assessment Group in a 2001 report. The study, spearheaded by University of New Hampshire researchers, also predicted that if current climate projections hold true, New England forests will be dominated by oak and hickory trees - not maples - by the end of the century.

Admittedly, maple trees won't flock northward one spring like Canada geese. Rather, the transformation of New England forests will come by a gradual change in the competitive balance of one species over another, says Timothy Perkins, who is nearing completion of a research project on the impact of global change on the maple sugar industry.

A projected rise in temperature of 6 to 10 degrees F. over the next century could heighten drought conditions, air pollution, and pests - stress factors that affect maples more than oaks or hickories.

But it's difficult to tell the degree to which climate change is affecting New England maples at the moment, says Dr. Perkins, director of the University of Vermont's Proctor Maple Research Center.

But a change that does present an immediate threat to the industry, he says, is a temperature-driven trend toward shorter sugaring seasons in New England but not in Canada.

At Morse Farm in Montpelier, Vt., that meant the sap "crop" was only one-third its usual size this year. The season started late, but winter morphed into spring practically overnight, reducing the number of freeze-thaw cycles that propel sap flow.

Just as air whistles out of a pierced car tire, sap flows out of a tree because the pressure on the inside of the tree is greater than the pressure outside the tree.

When the air temperature drops below freezing, a maple acts as a giant suction system, bringing the sap out of its branches and back down to its roots.

When the temperature rises above freezing, the action is reversed, sending sap surging through the branches - and out of any "wound" in the tree, such as the holes drilled for taps.

Traditionally, northern New England's climate has provided the optimal freeze-thaw patterns for sugaring. But in recent years, the transition from winter to spring has accelerated, leaving fewer days for the mercury to hopscotch across Vermont thermometers' 32-degree F. mark.

In Canada, however, warmer daytime temperatures have increased the number of freeze-thaw cycles there.

Technological improvements have also changed the season's timing in both countries. Back in the day of metal buckets, sugarmakers were wary of tapping their trees too early, when temperatures were liable to drop significantly below freezing for long periods.

"If [the sap] freezes hard, it can bust your bucket," explains fifth-generation sugarmaker Rick Marsh.

But now, with plastic tubing, sugarmakers can tap weeks earlier and get more out of their taps. This is especially true for those who have installed vacuum systems that draw more sap than would drip into a bucket. In Canada, tubing has facilitated greater sap collection in areas where deep snows make it difficult to reach individual trees for daily collection.

In recent years, Canada's booming syrup production flooded the global market, driving prices down and putting the squeeze on US sugarmakers. Five years ago, Harlow ended the season $30,000 in the red, but couldn't raise his prices to cover costs because of the low prices of Canadian syrup.

Jacques Couture, president of the Vermont Maple Sugar Makers' Association, has found himself in a similar position. But he notes that as someone who makes his living off sugaring, "It's pretty hard for me to criticize someone from another country who's doing the same thing."

"To the Canadians' credit, they've put a lot of effort into developing markets - not just in Canada, but in the world," notes Mr. Couture, who has mail-order customers in China, Japan, and Europe.

Back in Putney, Harlow's jovial tone turns somber as he acknowledges his biggest competition comes from Canada.

Is he worried? "Oh no, we can sell Vermont syrup anytime," says the fourth-generation sugarmaker. "The worst Vermont syrup I ever had was fantastic." (*)

Logging firm denied road-use appeal

By Frank Dobrovnik

Source: Sault Star / Tuesday, April 12, 2005 - 09:00

Local News - The Supreme Court of Canada will not hear a British Columbia timber company’s appeal to use a logging road in Lake Superior Provincial Park, effectively ending three years of legal wrangling and what an environmental group calls unsanctioned access.

Calling it “a victory for our protected areas,” a representative for the Wildlands League said Friday’s decision to dismiss leave to appeal, with costs, amounts to Canada’s top court barring the numbered company from continuing to use the road. “They’ve lost every decision and appeal along the way, so clearly they’re supposed to stop using the road,” said Evan Ferrari, director of the league’s parks and protected areas program.

The battle began after a B.C. man, Michael Jenks, bought former Algoma Central Railway land east of the park in November 2002 and Ontario’s Ministry of Natural Resources refused him access via Sand River Road. Most recently, last September the Ontario Court of Appeal sided with the MNR, saying that the 1995 park management plan allows access to Crown land rather than private land.

Although the MNR halted logging operations in the park in the late 1980s, it has allowed Clergue Forest Management to continue to use the road to access Crown land east of there.

The appeals court also granted Jenks’s company a temporary injunction to continue using the road while seeking leave to appeal to the Supreme Court. The Wildlands League, which was given intervener status in the Ontario appeals process, wrote to Jenks and the province last week “to discuss long-term closure of the road,” Ferrari said.

The “bigger issue” is now to “stop anyone from using the road, and possibly changing the forest management plan and park management plan . . . that the right-of-way will be rehabilitated,” he said.

One appeal court judge, in a written decision, said the management plan could have stated more clearly whether the road is limited to access to Crown land.

The environmental group is also heartened by recent moves by the Ontario government to update the Provincial Parks Act. One proposal is to ban industrial activities within parks altogether.

As to whether the ACR was allowed to sell off vast swaths of Northern Ontario to private interests in the first place, “that’s a much bigger fish to fry,” Ferrari said.

“It’s private land,” he said. “We have so many problems with the 85 per cent of Northern Ontario land that is in the public hands . . . as far as the forestry practices are concerned, we have no recourse.(*)

Forest Industry Needs to Grow

QUEBEC VIEW: LOGGING By KONRAD YAKABUSKI

SOURCE: Globe and Mail; Wednesday, April 6, 2005

The fate of Canada's forests has always been determined by the balance of power between the forces of industrialization and conservation.

For most of our history, the industrialists ruled the roost. We chopped our trees -- or rather, we allowed a handful of big companies to do so -- with alacrity so long as the exercise provided jobs and export income. Pleadings for preservation were like cries in the wilderness.

If there was a turning point -- a moment when the environmentalists moved from the margins to the mainstream and when sustainability became a collective concern -- it probably came in the late 1980s in British Columbia.

For months, the province fixated on the fate of Canada's tallest tree, a 94-metre Sitka spruce in Vancouver Island's Carmanah Valley. By 1990, MacMillan Bloedel, then the province's largest forest company, had badly lost the public relations battle and British Columbia declared most of the valley off limits to loggers.

It would take Quebeckers another decade before they would make sustainable forest management a political hot potato. The turning point came in 1999, when a popular folk singer named Richard Desjardins produced and narrated a devastating documentary, L'erreur boréale, the title a play on the term aurora borealis, or northern lights. The film, which chronicled the systemic overharvesting of trees in Mr. Desjardins' native Abitibi region, made the rounds of the Montreal festival circuit and permeated the collective consciousness. "Horror borealis" became the environmentalists' battle cry.

Jean Charest's Liberals heard them loud and clear while campaigning in 2003 and promised a top-to-root review of forest management practices once elected. The result of that promise -- the creation of a provincial commission chaired by former Hydro-Québec head Guy Coulombe that tabled a damning report in December -- will change Quebec's forest industry for good. And for the good.

Unfortunately, the situation will first get much worse for the forest companies -- and especially for the 245 Quebec communities that depend primarily on them -- before it gets better.

At the end of March, the Charest government passed legislation implementing the Coulombe commission's principal recommendation -- an immediate, 20-per-cent reduction in the estimated sustainable yield of Quebec's softwood forest that will translate into similar-sized cuts in companies' logging rights for the three years that began on April 1.

The axe comes just as Quebec's forest industry, which generates $15-billion in annual shipments and is responsible for at least 90,000 direct jobs, is showing the rot of decades of mismanagement. The fault is not entirely that of the industry. Successive provincial governments encouraged overexploitation of the forest with low stumpage fees -- the industry paid gross royalties of an underwhelming $390-million last year, even though that's a big improvement from $150-million a decade ago -- and incentives to keep inefficient, labour-intensive mills operating.

For decades, the promise of jobs in hard-pressed regions gave the industry the long end of the branch in bargaining with Quebec City. In fact, until 2001, the provincial government relied on data supplied by the companies to calculate the maximum sustainable yield, or the amount of trees that can be cut each year without sacrificing the forest's ability to regenerate (with the help of replanting) on a long-term basis. Needless to say, the industry did not err on the side of caution.

Years of overharvesting has meant that the diameter of trees cut today is substantially smaller than it was two or three decades ago.

Hence, it takes more trees to produce the same amount of lumber, paper and other wood products. This has made Quebec an increasingly expensive place to operate, despite relatively low stumpage.

With 20 per cent less wood to process in coming years, guess where the axe falls next? As it is, dozens of Quebec's saw mills are already operating at below 50 per cent of their capacity. And lofty lumber prices won't save them.

Although it produces 25 per cent of Canada's softwood lumber, and virtually all of its hardwood products, the Quebec forest industry is still primarily known as a paper maker. The province accounts for 45 per cent of Canada's newsprint production and Canada is the world's biggest supplier of newsprint.

Bowater, Kruger and Abitibi-Consolidated -- the biggest of the bunch and the biggest newsprint maker on the planet -- are household names in Quebec. Unfortunately, their names are not always uttered with affection. Indeed, Abitibi offers a case study of what has gone wrong in the province's forest industry.

In January, Abitibi finally announced the permanent shutdown of its Port-Alfred newsprint mill. There were days of local protests. But it shouldn't have been a surprise. The first of the mill's four paper-making machines was installed in the 1920s. How could a Model T be expected to outrace a Mustang GT?

Indeed, the average age and capacity of Abitibi's 20 newsprint-making machines in Quebec do not make it the envy of the industry.

Quebec, over all, is the newsprint-making jurisdiction with the oldest machines on the planet. In parts of the United States and Scandinavia, recently installed paper-making machines surpass 350,000 tonnes in capacity, compared with Abitibi's Quebec average of 130,000 tonnes. The bigger machines mean fewer fixed costs and less labour for the same amount of output.

The Quebec industry has no choice but to improve productivity. But replacing an old, low-capacity machine with a modern, high-output one, or one that uses recycled fibre, costs at least $500-million.

To its credit, Abitibi has just spent $210-million to switch its Alma, Que., mill from producing newsprint to a higher-grade alternative offset paper. Still, more than a quarter of the $385-million in capital expenditures Abitibi made in 2004 was related to the construction of its joint venture newsprint mill in China. Its Quebec operations are shrinking.

In January, in the face of the Coulombe report, a $219-million operating loss in 2004 and a crumbling share price, Abitibi CEO John Weaver said "new realities" in the North American newsprint market have forced the company to undertake a "strategic review" of all its operations.

Abitibi is not alone in its misery. The balance of power in Quebec's forest has shifted from the industrialists to the environmentalists. But it just might be what the industry needs to save itself from itself.

konrad@sympatico.ca

Transgenic poplars in China

from the March 10, 2005 edition - http://www.csmonitor.com/2005/0310/p14s02-sten.html

Now, bioengineered trees are taking root

Transgenic poplars could make China a big player in lumber. But some experts worry about effects on nature.

By Mark Clayton | Staff writer of The Christian Science Monitor

Scattered across at least seven provinces in China are more than 1 million common poplar trees with an uncommon bite. They can kill the insects that nibble their leaves. Their unusual defensive system is a genetically engineered bomb: Bacillus thuringiensis, or Bt, a naturally occurring toxin inserted into the tree's DNA. Other such transgenic species, such as the larch and walnut, are in the works, Chinese researchers report.

Such moves are shaking up the twin worlds of forestry and environmentalism. Transgenic trees are reaching the threshold of commercialization - a point bioengineered crops reached in the 1980s, observers say. This time, though, it's not the United States leading the charge, it's China.

Though little reported in the West, China's swan dive into large-scale transgenic forestry is essentially the first commercial-scale deployment of genetically engineered (GE) trees in the world, experts say. That could one day mean a potent new competitor to the lumber and paper industries. It also may mean that cutting-edge GE tree research in the US will fall behind, hobbled by regulation and public protest. It also puts decisions about a controversial - and, some say, potentially dangerous - technology into the hands of an authoritarian government, with less oversight and fewer technical controls than in the West.

"What the Chinese have done, planting [genetically engineered] trees across hundreds, maybe thousands, of acres, hasn't been done anywhere else in the world," says Yousry El-Kassaby, a forest geneticist at the University of British Columbia in Vancouver. "It marks a shift in the center of gravity away from the US, where there's a lot of genetic engineering tree research, but much of it is restricted to the labs or very regulated small field trials."

The case for GE trees seems straightforward. Faster-growing species can produce more lumber and paper in shorter time, which makes them a cheaper raw material. Supertree plantations could also mean less disturbance of natural forests - an environmental plus.

Scientists can "develop faster-growing trees, trees that produce more biomass that can be converted to fuels, and trees that can sequester more carbon from the atmosphere or be used to clean up waste sites," said Spencer Abraham, then US secretary of Energy, last fall.

Proponents also tout the technology as something that can be used to return vanishing species such as the American chestnut to the American landscape, by modifying its genetic makeup to defeat a devastating blight.

A problem with pollen

But there's a big catch, experts warn. Trees are perennial plants that produce large quantities of pollen released far higher into the air than ordinary crops. This "gene drift" in crops has caused problems as large seed companies have sued US and Canadian farmers for illegally using GE seeds. The farmers claimed their crops were contaminated by drifting pollen, but to no avail. A study last year by the Union of Concerned Scientists found that seeds of traditional varieties of corn, soybeans, and canola "are pervasively contaminated" with low levels of DNA from genetically engineered varieties of those crops.

If DNA can spread so broadly from GE crops a few feet high, there's no telling what will happen with pollen from trees 50 to 100 feet high or more, experts say. For example: Pollen from GE conifer trees can blow more than a thousand miles, new research at Duke University shows.

The potential for genetic contamination of forests - and potential rewards from using GE trees - are enormous, experts say. "For the first time, we have the ability to put a bacteria or even a fish gene into a tree," says Robert Jackson, professor of biology and director of Duke University's Center on Global Change. "Some make that a moral issue. Is it morally right? Another question is: Is it smart - or, maybe, is it dangerous?"

Indeed, the idea of releasing GE trees into the wild sends shudders through Alyx Perry of the Southern Forests Network, a coalition of loggers, landowners, and environmentalists. "Our conclusion is that the genetically engineered trees will inevitably contaminate nongenetically engineered stands of trees."

That, in turn, could lead to millions of acres of infertile private timber, possibly lacking enough lignin (a wood-strengthening substance) needed to be saw timber, Ms. Perry says. Combined with internal pesticide production in pine and poplar trees in the wild, it could lead to forests unable to reproduce, produce food for animals, or create marketable timber.

In the US, at least 69 field-test permits are in effect for three GE tree species - pine, poplar, and walnut. Most of those occupy two acres or less, says the US Department of Agriculture. Under USDA rules, such trees are closely monitored and not permitted to reach the flowering and pollination stage. So far, just one GE variety, a Hawaiian papaya, has been approved to be grown commercially. But commercialization is moving forward. In January 2004, the USDA announced its "intention to update and strengthen" biotechnology regulations for GE organisms, which some say is a key shift. And field research trials for GE trees in the US, including those conducted by ArborGen, a forestry-research firm in Summerville, S.C., have surged since 1997. ArborGen has been approved to conduct dozens of field trials with pine and poplar species genetically engineered for altered fertility, lignin levels, and other features, USDA database records show.

"We certainly see that genetic engineering in a plantation setting ... could play a big part in meeting world demand," says Les Pearson, ArborGen's director of regulatory affairs. ArborGen's first tree is at least seven years away from commercialization, he adds. Others see GE trees coming sooner.

"Government and industry are basically looking at what they can do to finalize regulations to streamline commercial release," says Neil Carmen of the Sierra Club. "We're talking about potentially millions of acres of genetically engineered trees."

Insight from papaya

At least two other transgenic tree species, a plum and another papaya, are undergoing USDA review. More than 30 species of GE trees - including 20 species valuable for timber or paper and pulp - are being developed, Dr. Carmen says. Ironically, Hawaiian farmers say the approved GE papaya has already contaminated groves, he adds.

"The regulation of this whole thing is lagging the technology," says Roger Sedjo, director of the forest economics and policy program at Resources for the Future, a Washington policy think tank. "A lot of countries are pursuing research in the area and some of it is coming to fruition. What we don't have is a global standard."

In Brazil, for example, researchers have embarked on large-scale research to develop a GE eucalyptus tree. The idea is to make the slow-growing Australian native mature faster and resistant to disease.

"We're certainly not ready to understand all of the risks yet," says Duke's Dr. Jackson. "There is immense commercial pressure to move ahead with this. And frankly, it's pretty easy to outline the economic benefits, but much more difficult to outline the long-term costs and what they will be - and how long they'll last if things go wrong."

A forest of facts

Trees are the world's largest and oldest plants. They cover nearly a third of the world's land surface (excluding Antarctica and Greenland). They blanketed two-thirds of the surface before humans began to farm.

• The double-coconut palm in the Seychelles boasts the largest tree seed: 50 pounds.

• California boasts the world's tallest trees, the redwoods, and the oldest, bristlecone pines. The former can grow 360 feet tall. The latter have been known to live more than 4,000 years. The average city tree lasts eight years.

• By turning carbon dioxide into oxygen, trees replenish the atmosphere. Two mature trees can produce enough oxygen for a family of four.

• Over one year, a tree can absorb the carbon created by a car driven 26,000 miles.

Sources: World Book; United Nations; Earth Policy Institute; International Society of Arboriculture

Demand aid North’s forestry is due

Demand aid North’s forestry is due

Sault Star Editorial Staff

Tuesday, March 08, 2005 - 09:00

Editorials - Municipalities, MPPs and MPs across Northern Ontario should back NDP Leader Howard Hampton’s call for more than $150 million a year to help the region’s forestry sector.

Why not? As Hampton points out, the province has just announced more than $680 million in grants and tax credits to assist in growth of Casino Windsor, General Motors and film and television production. Ottawa earmarked an additional $200 million for GM.

Both levels of government argue this is a good investment in Ontario’s future, creating employment.

So what is Northern Ontario, chopped liver? How about employment and the economy north of the French River?

Loggers and pulp-mill workers have to feed their families, just as auto workers do.

But Hampton says that in the first year of the Liberals’ mandate in Ontario, the North has lost 6,000 jobs, mostly in the forest sector in communities such as Chapleau, Opasatika and Sturgeon Falls.

That kind of news doesn’t seem to inspire the Toronto media, however, so southern politicians act as though it never happened. If a tree-cutter’s job falls in the Northern Ontario forest and there is no one there from Toronto to hear him scream in frustration, has he made a noise? Apparently not.

Northern representatives had better start making so much noise that it is heard all the way to Queen’s Park and Ottawa.

Part of governments’ role is to provide infrastructure, and that’s what both upper levels need to do better in Northern Ontario. As Hampton says, assistance with plant modernization could help meet environmental goals at the same time as enhancing employment.

Helping make energy efficiency improvements and build co-generation plants could be especially significant, since provincial hikes in electricity prices have already badly hurt the forestry sector and worse is expected.

Partisan politics must be set aside, with leaders of all stripes supporting a call for greater investment in Northern Ontario. The region has lost ridings as the southern Ontario population burgeons, and representatives who are left need to shout louder to be heard.

This is not whining. It’s demanding what the North is due as part of the Ontario and Canadian fabric. Southern power brokers can’t be allowed to keep turning a deaf ear.(*)

Forestry in N Ont. needs support

Hampton seeks support for forestry

By Brian Kelly

Monday, March 07, 2005 - 09:00

Local News - The provincial and federal governments should contribute more than $150 million per year to help the forestry sector in Northern Ontario, says Ontario NDP leader Howard Hampton.

If action is not taken soon, he warned, pulp and paper mills that are “close to the edge” in Kenora, Thunder Bay and Smooth Rock Falls could close and quash 2,000 direct and indirect jobs.

Hampton also called for a freeze on soaring electricity rates, which he said are crippling Northern industries that need vast amounts of power to run their operations.

“Major industries in Northern Ontario cannot afford to be paying five or six cents a kilowatt hour for their electricity and continue to remain in production,” Hampton said in an interview.

Speaking at a meeting in Sault Ste. Marie of the Ontario NDP’s Northern Council, the Rainy River MPP said industrial electricity costs have risen 30 per cent in the past four years. That spells trouble for Northern industries such as mining, steelmaking and forestry, Hampton said in a 35-minute speech. He told 50 delegates that 6,000 jobs, most of them in the forestry sector in communities such as Chapleau, Opasatika and Sturgeon Falls, were lost in the North during Premier Dalton McGuinty’s first year in office. No other part of the province saw as many jobs disappear, he said.

Since December, the provincial government has invested more than $680 million in cash and tax credits to help Casino Windsor, General Motors and film and television production in Ontario. The federal government chipped in another $200 million to aid GM’s $2.5 billion investment in its Ontario operations.

“Where are each of them when it comes to an investment strategy for the forest sector in Northern Ontario?”

Government dollars could target energy efficiency improvements and co-generation plants, Hampton said.

Federal NDP leader Jack Layton, who spoke to about 40 delegates Sunday morning, said his party will push the Liberals for industrial strategies for steel, pulp and softwood, agriculture and tourism.

“The idea of the government investing in some of these sectors and assisting in the plant modernization allows us to achieve environmental goals at the same time as we achieve employment possibilities,” he told reporters.

Hampton plans to take his campaign to many Northern communities with forestry operations, including the Sault, Chapleau and Espanola, during the next three to four months.

The Communications, Energy and Paperworkers Union of Canada and United Steelworkers of America, the two largest forestry-sector unions, are assisting with the NDP’s campaign. (*)

minds of plants

from the March 03, 2005 edition - http://www.csmonitor.com/2005/0303/p01s03-usgn.html

New research opens a window on the minds of plants

By Patrik Jonsson | Correspondent of The Christian Science Monitor

RALEIGH, N.C. - Hardly articulate, the tiny strangleweed, a pale parasitic plant, can sense the presence of friends, foes, and food, and make adroit decisions on how to approach them.

Mustard weed, a common plant with a six-week life cycle, can't find its way in the world if its root-tip statolith - a starchy "brain" that communicates with the rest of the plant - is cut off.

The ground-hugging mayapple plans its growth two years into the future, based on computations of weather patterns. And many who visit the redwoods of the Northwest come away awed by the trees' survival for millenniums - a journey that, for some trees, precedes the Parthenon.

As trowel-wielding scientists dig up a trove of new findings, even those skeptical of the evolving paradigm of "plant intelligence" acknowledge that, down to the simplest magnolia or fern, flora have the smarts of the forest. Some scientists say they carefully consider their environment, speculate on the future, conquer territory and enemies, and are often capable of forethought - revelations that could affect everyone from gardeners to philosophers.

Indeed, extraordinary new findings on how plants investigate and respond to their environments are part of a sprouting debate over the nature of intelligence itself.

"The attitude of people is changing quite substantially," says Anthony Trewavas, a plant

biochemist at the University of Edinburgh in Scotland and a prominent scholar of plant intelligence. "The idea of intelligence is going from the very narrow view that it's just human to something that's much more generally found in life."

To be sure, there are no signs of Socratic logic or Shakespearean thought, and the subject of plant "brains" has sparked heated exchanges at botany conferences. Plants, skeptics scoff, surely don't fall in love, bake soufflés, or ponder poetry. And can a simple reaction to one's environment truly qualify as active, intentional reasoning?

But the late Nobel Prize-winning plant geneticist Barbara McClintock called plant cells "thoughtful." Darwin wrote about root-tip "brains." Not only can plants communicate with each other and with insects by coded gas exhalations, scientists say now, they can perform Euclidean geometry calculations through cellular computations and, like a peeved boss, remember the tiniest transgression for months.

To a growing number of biologists, the fact that plants are now known to challenge and exert power over other species is proof of a basic intellect.

"If intelligence is the capacity to acquire and apply knowledge, then, absolutely, plants are intelligent," agrees Leslie Sieburth, a biologist at the University of Utah in Salt Lake City.

For philosophers, one of the key findings is that two cuttings, or clones, taken from the same "mother plant" behave differently even when planted in identical conditions.

"We now know there's an ability of self-recognition in plants, which is highly unusual and quite extraordinary that it's actually there," says Dr. Trewavas. "But why has no one come to grips with it? Because the prevailing view of a plant, even among plant biologists, is that it's a simple organism that grows reproducibly in a flower pot."

But here at the labs on the North Carolina State campus, where fluorescent grow-rooms hold genetic secrets and laser microscopes parse the inner workings of live plants, there is still skepticism about the ability of ordinary houseplants to intellectualize their environment.

Most plant biologists are still looking at the mysteries of "signal transduction," or how genetic, chemical, and hormonal orders are dispersed for complex plant behavior. But skeptics say it's less a product of intelligence than mechanical directives, more genetic than genius. Some see the attribution of intelligence to plants as relative - an oversimplification of a complex human trait.

And despite intensifying research, exactly how a plant's complex orders are formulated and carried out remains draped in leafy mystery.

"There is still much that we do not know about how plants work, but a big part of intelligence is self-consciousness, and plants do not have that," says Heike Winter Sederoff, a plant biologist at N.C. State.

Still, a new NASA grant awarded to the university to study gravitational effects on crop plants came in part due to new findings that plants have neurotransmitters very similar to humans' - capable, perhaps, of offering clues on how gravity affects more sentient beings. The National Science Foundation has awarded a $5 million research grant to pinpoint the molecular clockwork by which plants know when to grow and when to flower.

The new field of plant neurobiology holds its first conference - The First Symposium on Plant Neurobiology - in May in Florence, Italy.

The debate is rapidly moving past the theoretical. In space, "smart plants" can provide not only food, oxygen, and clean air, but also valuable companionship for lonely space travelers, say some - a boon for astronauts if America is to go to Mars. Research on the workings of the mustard weed's statolith, for example, may one day yield a corn crop with 1-3/8 the gravitational force of Earth.

Some Earth-bound farmers, meanwhile, see the possibility of communicating with plants to time waterings for ultimate growth. A new gene, Bypass-1, found by University of Utah researchers, may make that possible.

Still, it can be hard for the common houseplant to command respect - even among those who study it most closely.

"When I was a postdoc, I had a neighbor who watched me buy plants, forget to water them, and throw them out, buy them and throw them out," says Dr. Sieburth. "When she found out I had a PhD in botany, I thought she was going to die." (*)

Canada's Paper Makers Must Get Bigger

Canada's Paper Makers Must Get Bigger, Norske Skog CEO Says

Feb. 8 (Bloomberg) -- Canadian pulp and paper makers such as Abitibi-Consolidated Inc. are too small to compete globally and must merge with local rivals to avoid becoming takeover targets, said Norske Skog Canada Ltd. Chief Executive Officer Russell Horner.

``The ideal situation for Canada is to have at least one, maybe two global-sized players that can access capital markets,'' Horner said after an industry panel in Montreal. ``Otherwise we are going to find that Canadian companies are increasingly owned by operators from other countries.''

For consolidation to happen in Canada, competition authorities need to make it easier for pulp and paper companies to merge, Horner said. Merger reviews by the country's Competition Bureau can take at least six months and carry ``significant'' costs, he said.

``The problem is the law,'' Horner said. ``Government policy restricts the ability of companies to consolidate. We need our government to change Canadian law to allow market dynamics rather than government policy to determine industry structure.''

Even Abitibi, the world's largest newsprint maker, needs to get bigger, he said. Montreal-based Abitibi has a market value of C$3.2 billion ($2.5 billion), about one-fifth the size of Finland's Stora Enso Oyj, the world's largest paper maker.

``We in Canada look upon Abitibi as being a giant, but it's actually quite small by global standards,'' Horner said. ``We need something that has some weight.''

Vancouver-based Norske Skog Canada, the country's sixth- biggest forest products maker by market capitalization, is worth about C$794 million. Norway's Norske Skogindustrier ASA owns about 29 percent of Norske Skog Canada, while the remainder is widely held.

Close Plants

Horner and other participants in today's discussion suggested Canada's forest-products industry will continue to shut inefficient mills to cut costs.

``There is consolidation coming in the industry,'' Tembec Inc. CEO Frank Dottori said. ``We are going to rationalize between now and May 1.''

Horner thinks 15 to 20 ``significant'' production units could be shut across Canada in the next decade. Each unit employs 200 to 300 people, he said, though other workers would be hired as companies invest in new technology in the remaining facilities.

Horner said Canada's forest-products companies need to invest C$20 billion to C$50 billion in their facilities over the next decade.

``I see fewer mills operating with much higher energy efficiency producing higher-value products,'' he said. ``It's not a pretty picture but it is the basis we need to build our future platform. It's inevitable.''