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Northern B.C.’s economy is still strong despite forestry industry downturn

Mining and energy activity is supporting some northern towns that have otherwise been hammered by sawmill and pulp mill closures throughout the region
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The City of Prince George has an economy that is more diversified than smaller, one-industry towns in B.C.’s north

Mackenzie, Houston, Chetwynd, Prince George – these northern B.C. towns and cities have been affected by major sawmill and pulp and paper mill closures over the last couple of years. A number of closures have happened in recent months and weeks.

But thanks to increased activity and investment in mining and energy, the economies of B.C.’s northern towns are proving resilient, despite a major downturn in the forestry sector. Some are positively booming.

Perhaps not surprisingly, the region of B.C. with the highest unemployment rate – the Cariboo – is one where forestry has traditionally been a major employer. As of March, the region’s unemployment rate was 7.1 per cent, while the B.C. average was just 4.5 per cent.

Houston (population 3,600) once hosted two large sawmills, one of which permanently shuttered in 2014. More recently, Canfor (TSX:CFP) shut down its sawmill there four weeks ago and a planer mill earlier this month, said Houston Mayor Shane Brienen.

“We have about 300-plus employees out of work,” Brienen said, adding the mill closures will also result in job losses for loggers.

A mill the size of the one in Houston spends about $90 million a year on goods and services in the region, he said. That spending is now gone.

“It’s a lot of money out of our local economy in a hurry,” Brienen said.

Fortunately, the Coastal GasLink pipeline project has provided work for loggers and other workers.

“That ramped up at a fairly good time,” Brienen said. “We were going through the downturn from the last mill when the pipeline came along. There are lots of people in town that work on the pipeline, or out at many of the mining camps in the north or work for CN.”

Similarly, Mackenzie was hammered with Canfor sawmill and pulp mill closures in 2019 and 2020, respectively, but has managed to avoid the hollowing out that might normally happen with the sudden loss of 400 jobs, thanks to demographics and the restart of mines in the region – notably the Conuma Resources coal mines to the east in the Tumbler Ridge area, and the Mount Milligan gold mine to the west.

“What has been our saving grace – as opposed to when we had a big downtown in 2008-09, and every mill shut down and people gave their keys back to the bank – in 2011 Mount Milligan opened,” said Mackenzie Mayor Joan Atkinson. “And then Conuma Coal, many people in Mackenzie now work at those coal mines. We have 100 families supported by the mining industry.”

Atkinson also noted that many workers who lost jobs were Baby Boomers who took early retirement, so there has not been the kind of exodus one might normally expect with so many job losses.

The biggest impact of the loss of a major sawmill and a pulp mill has been the impact on Mackenzie’s industrial tax base. The town has lost $900,000 a year in taxes just from the pulp mill, which has resulted in a heavier tax burden on residents.

In Prince George, the capital of B.C.’s north, the city is losing 300 jobs with the closure of a Canfor pulp line. With a population of close to 77,000, and a much more diversified economy, Prince George is able to absorb closures and business losses better than smaller, one-industry towns.

“Prince George is still growing, attracting investment and is very busy,” said Joel McKay, CEO of Northern Development Initiative Trust.

There are several sawmills in Prince George that are still operating, and the city continues to diversify its economy, including with new clean-tech industries.

“We see the writing on the walls,” said Deklan Corstanje Prince George’s manager of economic development. “The industry is in transition. And because of our close ties to the industries, we are also sort of in transition.”

One new industry being developed in Prince George is Arbios Bio – a joint venture between Canfor and Australia’s Licella Fibre Fuels to develop a new biofuel plant. Hydra Energy is building a $62 million green hydrogen plant in Prince George, and Tidewater Midstream and Infrastructure – which owns the oil refinery in Prince George – is building a new biofuel plant there.

Last year, Prince George had $250 million in development permits issued for residential, commercial and industrial projects – a record.

“We have the LNG projects out on the coast, and that will have a regional impact and benefit to our economy,” Corstanje said. “We have our low carbon and fuel projects, and we’re also working on trying to solve our housing challenge in Prince George as well. And hopefully all those things will culminate in stabilizing the growing the economy here.”

Commodities produced in B.C. – from metallurgical coal and copper, to propane and wood pellets – move through the Port of Prince Rupert, which is thriving and growing.

“The economy is strong,” said Prince Rupert Mayor Herb Pond. “As a matter of fact, the challenges we have here are far more around recruitment and retention of both skilled and unskilled labour. In Prince Rupert, if you want a job, there are jobs to be had.”

Kitimat is also booming, thanks to heavy industry – specifically aluminum smelting and liquefied natural gas (LNG). About 5,000 workers are employed building the $18 billion LNG Canada project in Kitimat, and about 1,000 are employed at the Rio Tinto (ASX:RIO) BC Works aluminum smelter.

While construction of the LNG Canada plant will start winding down next year, Kitimat Mayor Phil Germuth said there is reason for optimism that the town will continue its boom as work starts on other LNG projects there – Cedar LNG and Phase 2 of LNG Canada.

“There’s definitely some brighter things on the horizon, too,” Germuth said.

Meanwhile, just a 45-minute drive north of Kitimat, the City of Terrace struggles to provide public services. It doesn’t have the multi-million industrial tax base that Kitimat has: $20 million annually from Rio Tinto alone.

Terrace is a service centre hub for the region. With a population of just 12,000, Terrace has some of the same problems bigger cities have – including a highly visible homeless population, and a rental vacancy rate of less than one per cent.

“The businesses in Terrace are doing well because you’ve got the Golden Triangle (mining), the Port of Prince Rupert and LNG Canada (in Kitimat), so there’s lots of work for folks,” said Terrace Mayor Sean Bujtas. “But Terrace itself doesn’t see any industrial revenue, so it makes it a struggle for the community to deal with infrastructure challenges.

“Last year we had one road-paving project on the go because that’s all we can afford.”

Terrace is one of 21 local governments in northwest B.C. now lobbying for revenue sharing from the province through the Northwest BC Resource Benefits Alliance. The ask is modelled on a revenue-sharing agreement between the province and regional and municipal governments in the Peace region of Northwest B.C.

Dawson Creek is one of the communities that benefits from the Peace River agreement. In addition to getting a share of oil and gas revenue from the province through that agreement, Dawson Creek has a diversified economy – a mix of agriculture, forestry and oil and gas extraction – that has made it less vulnerable to commodity cycle shocks.

“Dawson Creek has always been a very stable economy,” said Dawson Creek Mayor Darcy Dober. “There’s a lot going on up here – oil and gas, agriculture, forestry.”

About 450 kilometres north of Dawson Creek, the activity from oil and gas and forestry slows to a trickle. More than a decade ago, Canfor shut down its sawmill and oriented strand board plant there, and while the region experienced some oil and gas activity, most of the investments in oil and gas over the last decade have been further south in the Montney region around Fort St. John and Dawson Creek.

“From Dawson Creek-Fort St. John up to about 200 kilometres on the Alaska Highway towards Fort Nelson, it’s busy,” said Rob Fraser, mayor of the Northern Rockies Regional Municipality. “You go beyond that and the traffic just drops.”

The municipality of Fort Nelson and the Fort Nelson First Nation have been trying to revitalize the local forestry sector. The region has a large amount of timber, and Peak Renewables has proposed building a wood pellet mill in Fort Nelson to help revitalize the region’s forestry industry. But for that investment to happen, a Canadian National Railway (TSX:CNR) line between Fort St. John and Fort Nelson needs to be upgraded, and the B.C. government has refused to kick in funding.

Until that happens, Fort Nelson’s economy remains depressed.

“As a transportation community, we’re still doing OK,” Fraser said. “But from the historical resource industries that we’ve had in Fort Nelson, we’re still lacking hugely.” 

nbennett@biv.com

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