Pitching pellets

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.