Nanaimo, British Columbia, Canada, 20 October 2010 -- Upgrades to the power boiler at Nanaimo's Harmac pulp mill likely will use most of the CAD 27 million in federal funding the mill expects to receive. David Bramley, Harmac's environmental superintendent, said the upgrades to the boiler, which converts hog fuel into steam to create energy for the mill, would make the facility self-sufficient in energy use for the first time and allow Harmac to produce extra electricity that can be sold to B.C. Hydro and used on the provincial power grid.

There likely won't be much money left for expansion plans at the mill (which could include an electrical generation plant and other stand-alone projects at the 500-hectare site), but financial institutions may be willing to provide Harmac more affordable credit to move forward with diversification plans as a result of the federal cash infusion.

Bramley said plans are to replace portions of the power boiler, which will allow it to burn hog fuel (consisting mostly of wood chips, which is considered a renewable energy source) and create steam more efficiently while removing the need to shut down the boiler daily to manually remove the ash.

Emissions from the mill will be slightly decreased, but the use of nonrenewable natural gas to keep the power boiler in operation during the daily shutdowns will be eliminated, which should fit well with the environmental criteria laid out for mills in the federal program.

"This funding is a wonderful opportunity for us to upgrade the power boiler, which has been on our radar screen for quite some time," Bramley said. "There are timelines around this funding and we'll be taking a closer look at what's involved with the upgrade during our regular six-day maintenance shutdown expected later this month. There are also a number of smaller projects to help us increase our efficiencies that we're considering but the boiler upgrade will use most, if not all, of the federal funding."

International Trade Minister Stockwell Day announced at Harmac on Friday that the mill is among 38 pulp and paper mills across the country to receive funding under the CAD 1billion federal Pulp and Paper Green Transformation Program.

The money must be used within three years to improve energy efficiency or environmental performance.

Kevin Mason, an industry analyst who predicted the old mill's quick demise when it reopened under new management last year, said upgrading an aging infrastructure will provide "huge opportunities" for Harmac as it moves forward but warns of new subsidies for American pulp and paper mills that would put Canadian mills at a disadvantage once again. Mason, who works with Vancouver's Equity Research Associates, said officials at Harmac must be "thrilled with the money."

"Once the boiler upgrade is complete, it's likely the banks will look at Harmac more aggressively in regards to offering more affordable credit," he said.

However, Mason also said Canadian pulp mills are facing new challenges because the U.S. government is expected to provide subsidies to American mills that use wood biomass for energy production.

"It's basically rotten politics being played out in the U.S. where mills have learned that the best way forward is to hire lobbyists to push these initiatives instead of investing in capital projects," Mason said. Harmac president Levi Sampson said the mill is watching the probability that the U.S. will establish a whole new subsidy for pulp mills "very closely."

"It would certainly give the American mills a leg up on us and we don't know at this time how the Canadian government would respond to a new subsidy south of the border," he said.