Canada Gives Pulp Mills Billion Dollar Bailout

OTTAWA (AP) -- Canada's government is giving $1 billion Canadian (US$884 million) to it its struggling pulp and paper industry in an effort to match billions of dollars in subsidies available to U.S. rivals.

Natural Resources Minister Lisa Raitt said Wednesday the money will be available on a one-time basis for up to three years to Canadian mills that make capital investments for the production of alternative fuels.

Raitt said the money is needed because U.S. mills had already received about US$8 billion in subsidies for producing so-called black liquor, a liquid byproduct of the chemical pulping process used as an alternative fuel.

"The credit in the U.S. is a significant incentive for producers to overproduce pulp and make investments in their pulp mills, which coming out of a recession, place them in a much more competitive position vis-a-vis the Canadian (mills)," Raitt said.

The Canadian program will pay 16 cents Canadian (US14 cents) a liter to mills that produce black liquor and spend the money on capital improvements to increase energy efficiency and the production of alternative fuels.

Raid said the aid will help the industry become more green and preserve jobs in a sector that has been battered by falling demand in the U.S.

Ottawa and the industry have been working on a program for months that would not violate the Canada-U.S. Softwood Lumber Agreement.

Raitt said everything within the program is within both the spirit and the language of the softwood lumber agreement, adding she had spoken to all her provincial counterparts and the U.S. deputy Secretary of Commerce.

Raitt would not guarantee the program would not become the subject of a new trade challenge.

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