Thank you, Mr. Chair and members of the standing committee, for the opportunity to appear before you today. My name is Terry Skiffington. I'm the CEO of Kap Paper, a pulp and paper mill located in Kapuskasing, in northeastern Ontario. Our mill has operated for 103 years and remains the cornerstone employer and economic engine of our region.
For generations, Kap Paper has played a central role in supporting Ontario's integrated forestry model. The strength of that model comes from long-term sustainable harvesting, regeneration and silviculture, ensuring that our northern boreal forest remains a perpetual and renewable resource.
For this model to function properly, every component of the forest must be used in a way that generates the highest possible value. Today, the greatest value of the boreal forest comes from solid wood products, and in our region, northeastern Ontario, the high pine and spruce content allows us to produce what is widely recognized as some of the strongest, clearest and most consistent dimensional lumber in the world.
When logs are harvested and converted from round to square, roughly 65% of the volume that's harvested becomes what we call residuals: bark, sawdust, shavings and chips. These residuals must have a home for the system to remain viable. Typically they flow to facilities that produce energy or pulp and paper products, and that's where Kap Paper comes in. We use bark, sawdust and shavings to produce energy. We use chips to manufacture paper products, anchoring the integrated sustainable model for the three regional sawmills in our area, located in Hearst, in Kapuskasing and in Cochrane, Ontario.
Collectively, these operations support 600 direct jobs, more than 1,900 indirect jobs and numerous first nation forestry contractors. Together they contribute $330 million per year in regional economic activity, along with $69 million per year in direct revenue to the Province of Ontario through energy purchases, rail and payroll deductions.
Unfortunately, the situation we face today is stark. In 2002, Ontario had 21 facilities like Kap Paper spread across the north. Today, only three remain, two in the northwest—in Thunder Bay and Dryden—and just us in the northeast. These closures were driven by declining financial viability in global pulp and paper markets. As these facilities disappeared, harvesting levels collapsed by over 50%. Large volumes of merchantable timber are now left in the bush, where they ultimately burn, and sawmills struggle to manage residual chip and biomass volumes.
That struggle has an endpoint, and we are rapidly approaching it. Kap Paper itself is now on the verge of closure. Newsprint markets have been declining for years, but our competitive cost structure allowed us to stay marginally profitable. The recent trade war, however, has collapsed those markets entirely. At present, we are no longer economically viable.
At this point, I'd like to acknowledge and sincerely thank those who have helped us to continue to operate as we seek out alternatives. Premier Ford and the Province of Ontario have supported us with operating loans since mid-2024. More recently, the federal government, with the support of Ministers Hajdu, Joly and Hodgson, provided loans to keep us operating, along with funding to accelerate our search for new products and new markets.
We are also applying to the strategic response fund for large-scale capital assistance as we prepare for a major transformation of our facility. The challenge for us, and for the broader sector, is time. COVID, followed by the trade war, compressed what would normally have been two decades of market evolution into just five years. No company could adapt that quickly.
We are fortunate, however. Ontario has one of the best forest resources in the world and one of the largest inventories of unused, sustainably available timber, and that's nearly three times our current harvest level. That forest is in the bush, and we're not harvesting, and it's ultimately rotting and turning to forest fire fuel. There is a future for Kap Paper in higher-value, tariff-resilient and diversified markets, and with rapidly developing technology there's even growing potential to use surplus fibre to displace oil. Technologies emerge that can produce from a cubic metre of wood what has traditionally come from a barrel of oil.
Maintaining an active and managed forestry sector positions Ontario and other regions of Canada to thrive as the world transitions to a zero-carbon economy, but this cannot just be a transition for Kap Paper. There must be a broader pivot across the sector. Without it, we face a cascading collapse, hundreds of thousands of jobs lost, and lasting economic harm.
At Kap Paper, we have been working on and are closing in on a plan to transition away from traditional pulp and paper products towards engineered wood products aligned with the federal government's housing strategy— products that Canada and the world urgently need and that are not targeted by U.S. tariffs. We believe this plan will attract strategic capital investment from partners experienced in producing these products, enabling us to repurpose existing infrastructure, expand first nations participation in the sector and sustain and grow our economic activity.
The benefits to the taxpayer will be substantial, both in absolute terms and relative to the alternative. This is an opportunity to preserve and strengthen a way of life that the people of northern Ontario deeply value, but to realize this potential, we need time and support from both levels of government to complete this transformation.
Thank you, Mr. Chair.
