On the Level – One-industry towns have had their day

Should government be bailing out one-industry towns that inevitably run into trouble?

Ontario’s Elliot Lake is a classic example. Did its founders and fathers really think its albeit large deposits of low grade uranium ores — mined at high cost for upwards of 40 years and sold at artificially high prices to Ontario Hydro — would last forever?

Kapuskasing is another whose day has come. This is a remote pulp and paper town l,000 kilometers north of Toronto. It is totally dependent on an antiquated mill that would require an investment in the hundreds of millions of dollars to restore it to economic viability in that intensely competitive industry. Its town fathers are likewise lining up at Premier Bob Rae’s door looking for massive handouts.

Although spending money like there’s no tomorrow in a nightmarish debt build-up, Ontario’s new NDP administration simply can’t afford these kind of no-win bail outs. But even worse, Rae is using the so-called politically free Ontario Hydro as his whipping boy.

In the case of Elliot Lake, he has told Hydro’s newly government-appointed chairman Marc Eliesen to pay that town “a community assistance package” totalling $250 million to placate it for cancelling a lucrative uranium contract. Ironically, this comes after pumping in $1.2 billion more than it needed to for uranium purchased over the past 10 years.

At Kapuskasing where 1,450 jobs are at stake, the U.S. owners have offered to turn their newsprint mill over to the employees for free, providing Hydro pays Kimberly-Clark $136 million cash for its water rights and power station on the Mattagami River. Hydro would also be obliged to supply the employee-owned mill with free power for an extended period.

Ontario Hydro, apparently, is interested in a deal but only after completion of a full environmental assessment being demanded by the James Bay Coalition of aboriginals, who have recently been granted awesome powers over northern development. It is prepared to pay only half that figure, with the remaining $68 million only if expansion of the generating plant is approved. That could drag on for years.

Kimberly-Clark, I suspect, simply sees its aging Kap project as a losing proposition and wants out, probably with another eye on the high cost of stringent rules now involved in closing a plant in Ontario.

Should Hydro, already saddled with a $35-billion debt and double digit rate hikes staring it in the face for at least the next three years, be turned into a milch cow for government largess at ratepayer expense? This certainly spells higher rates for the mining industry already struggling as never before to stay competitive in the global marketplace for metals. What we are seeing at Queen’s Park today is in violation of Hydro’s original mandate to supply electric power to Ontario at the lowest possible cost. This renowned utility is now becoming a political football. With governments at all levels teetering on bankruptcy, they simply can’t increase spending (except Rae’s Ontario). So we’ll be more dependent than ever on exports to pull this country out of its current economic slump. Where better to turn than mining?

But that’s easier said than done, for high interest rates, a high dollar and sky-high taxes make the boosting of exports difficult, as the industry is already experiencing. As long as Ottawa keeps spending $30 billion more each year than it takes in, building its staggering debt ever higher, hopes for any early significant turnaround borders on wishful thinking. New mines are needed, wherever they can be found. Ideally they would be near existing infrastructures. But more frequently they are in remote areas. But no new mining towns, please.

With the life of an average mine something less than 20 years, the cost of providing necessary infrastructure to attract good personnel — family homes, schools, hospitals, recreation facilities — is simply too high. While diversification of the economy may be ideal in theory, it seldom works in the real world of mining.

Echo Bay’s Lupin mine and Northgate’s Colomac, both in the N.W.T., have clearly demonstrated the feasibility and desirability of fly-in, fly-out around the clock operation, as has Placer Dome at Detour Lake. It’s the new way to go.