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B.C. sawmill shutdowns face ministry review

Martin Ellefson, General Manager, of the West Fraser Timber Co. Ltd. lumber mill in Quesnel, B.C. December 16, 2010.

JOHN LEHMANN/THE GLOBE AND MAIL

The B.C. government and the federal Competition Bureau will review plans by West Fraser Timber Co. Ltd. and Canfor Corp. to shut down sawmills in each other's backyard.

Last Thursday, West Fraser announced that it will close its B.C. Interior mill in Houston by next May, while Canfor plans to shutter its mill in Quesnel next March. Mountain pine beetles have damaged large swaths of timber in the B.C. Interior over the years, prompting West Fraser and Canfor to also sign a new deal last week to exchange forest tenure rights due to limited timber supplies. The infestation of pine beetles peaked in 2005.

Industry analysts say the moves by the two forestry companies will result in West Fraser's Quesnel plant and Canfor's Houston mill emerging healthier next year than they are today because the firms currently compete in both markets and the local mills struggle to cope.

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On Tuesday, the B.C. Forests and Lands Ministry said the proposed transactions were not preapproved for West Fraser to take over Canfor's Quesnel harvesting rights, and Canfor to acquire West Fraser's Houston rights.

"The ministry found out about the companies' plans when they issued their news releases," ministry spokeswoman Vivian Thomas said in a statement.

The shutdown of West Fraser's Houston mill will affect 225 workers and Canfor's Quesnel closing will affect 209 employees.

"Ministry staff will conduct a competition assessment and also co-ordinate their review with that of the federal Competition Bureau," Ms. Thomas said.

She noted that the planned transactions involving the Crown forest licences must be allowed to proceed unless it is determined that the deals will unduly restrict competition in markets for timber, logs or chips.

West Fraser chief executive officer Ted Seraphim said the Vancouver-based company had to take tough measures to address the challenges of having to operate with ever-decreasing supplies of beetle-infected timber.

"A number of us were up in Houston last week, talking to our employees. And as you can imagine, it was quite a shock for them," Mr. Seraphim said Tuesday during a conference call with industry analysts. "We're going to run the mill probably until May of next year. That's seven months – it gives the employees some time to think about what their options are."

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West Fraser will be distributing relocation packages to its Houston employees this week, encouraging them to transfer to positions elsewhere in the company's B.C. and Alberta operations.

Mr. Seraphim said West Fraser officials have met with provincial government representatives to discuss the next steps to help cushion the blow of the Houston mill's looming shutdown.

Vancouver-based Canfor said its Quesnel staff will be offered positions elsewhere in its forestry operations.

A Competition Bureau spokesman declined to comment about the B.C. Interior, but noted that in general, the bureau is in a position to examine transactions to determine whether they might result in a substantial lessening of competition.

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About the Author

Brent Jang is a business reporter in The Globe and Mail’s Vancouver bureau. He joined the Globe in 1995. His former positions include transportation reporter in Toronto, energy correspondent in Calgary and Western columnist for Report on Business. He holds a Bachelor of Commerce degree from the University of Alberta, where he served as Editor-in-Chief of The Gateway student newspaper. Mr. More

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