Pitching pellets

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When Corner Brook Pulp and Paper stopped taking timber from the Northern Peninsula in 2008, forestry workers there were hit hard.

Loggers no longer had a bulk market for timber. It was uneconomical just to cut logs for sawing, which meant the Holson Forest Products sawmill in Roddickton had no raw material.

So the owner, Ted Lewis, came up with a plan:

turn the bulk of his operation into a pellet plant, with an aim to corner some of the European market.

The ingredients were all there for a juicy government subsidy. Workers in a specific region thrown out of work, combined with an innovative plan to restart an industry.

And that’s just what Holson got: $7 million in provincial loans and $2 million in grants, for a total of $9 million in taxpayers’ money.

It wasn’t a far-fetched idea. It wasn’t rubber boots or cucumbers or garbage shipped up the eastern seaboard. It was a wood product replacing another wood product.

But there’s a negligible market for pellets in mainland Canada, and mostly only talk of it here in this province. The main market would be overseas, and the post-2008 world was hardly one in which to expect such markets to remain stable.

On Wednesday, as part of his annual report,  provincial auditor general Terry Paddon unveiled a knotty legacy of poor paperwork and monitoring of that $9 million on the part of the Department of Natural Resources.

Paddon actually pointed to problems with four companies receiving Forestry Industry Diversification funding, but the pellet plant was by far the largest.

As you sift through the details, you get a sense of someone trying to fast-track the process. Money was paid out before a number of assurances were met.

Some information was missing on the company’s application, and its business and marketing plans were not complete.

Further, Paddon wrote, “issues related to long-term viability and sustainability of the project had not been adequately addressed.”

That included factors such as transportation and the availability of trained workers.

Paddon also pointed to the fact that other sources of funding were not confirmed before the province ponied up. In particular, a tentative ACOA contribution was eventually reduced to one-third the original amount.

And the company even managed to double dip, receiving reimbursement for $1 million in HST it

didn’t pay, and making claims to two different departments using the same documentation.

For its part, Natural Resources responded stiffly to Paddon’s assessment, characterizing much of it as subjective opinion, while curtly acknowledging the scattered oversight.

The pellet plant sits idle now; its owner blames the slumping euro.

In a letter to The Telegram last September, Ted Lewis slammed Liberal MHAs for questioning the government’s investment in his plant, accusing them of making “political hay” out of a rural dilemma.

“As for Holson.” he wrote, “the company is moving forward.”

That may be so. But right now, there’s not a lot to show for $9 million in public funds.

Organizations: Holson Forest Products, Department of Natural Resources.Paddon

Geographic location: Northern Peninsula, Roddickton, Canada

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Recent comments

  • Will Cole
    January 26, 2013 - 10:27

    Ted Lewis reminds me of Phil Sprung. The only difference is this time it's wood pellets instead of cucumbers. The editorial states that the pellet plant "sits idle now". Unfortunately, the funding provided by the NL taxpayer via a questionable government subsidy process "sits idle now" as well.

    • Foghorn Leghorn
      January 27, 2013 - 14:00

      The only difference between Sprung and wood pellets is that in the end the old Sprung site was redeveloped into a substantial real estate development with tens of millions of dollars of residential construction. Somehow I don't think we have to worry about that happening in Roddickton!

    • david
      January 28, 2013 - 14:48

      So FL, should one conclude form your post that if a taxpayer swindle takes place at a location that eventually, completely serendipitously, becomes "valueable" for alternative development, that this should relieve any feelings of anger or resentment? If so, perhaps you could provide the "definitive" list of acceptable future locations for boondoggles and embezzlement, just to make it easy next time.

  • david
    January 26, 2013 - 09:39

    Actually, this was touted to be a viable business idea (ha!) on little more than the potential demand on the island alone for cheaper heat. A small problem with that was almost no one on the island had pellet--burning stoves. Again, the govenment steps in with a whopping $2000 consumer grant for converting to a pellet stove.....BUT which required consumers to have such stoves "properly installed" by a registered furnace professional, at a set price of ---and this shows how the free market is so undeniably shrewd --- $1600. With the entire financial incentive now lost, very few consumers converted to pellet stoves. Long story short: the only thing that eventually got "incinerated" was not pellets, but taxpayer money...again.

    • why govt does not want this to succeed
      January 27, 2013 - 16:26

      Muskrat Falls, get with the program people

  • saelcove
    January 26, 2013 - 09:10

    2013 and Newfoundland is still operates as it did in the fifties and sixties