Millions in taxpayer dollars spent over decades couldn't save The Pas mill

Since the very beginning, the biggest employer in The Pas has had difficulty turning a profit. But the latest blow could be the final strike that fells the mill for good.

Main employer in Manitoba town born into scandal, plagued by losses since beginning

Tolko Industries is the largest employer in The Pas, a town of about 5,500 in northern Manitoba. (Tyson Koschik/CBC)

Since the very beginning, the biggest employer in The Pas, Man., has had difficulty turning a profit.

But the latest blow could be the final strike that fells the mill for good.

On Monday, Tolko Industries officials said after spending 19 years trying to make money in The Pas, the Vernon, B.C.-based company will close the mill in December.

The Manitoba mill has hummed along for more than 40 years, producing heavy-duty kraft paper and lumber — often with help from government.

This time, the federal and provincial governments are notably silent on whether any more public money will be spent trying to keep the mill alive.

Problems from the start

The Pas's mill was born out of a desire to tap the resources of Manitoba's boreal forest. Strong, healthy trees surround The Pas and their pulp makes excellent paper products.

What started as a desire to spur the economy in northern Manitoba led to millions of dollars disappearing into a company that didn't deliver on its promises, with the provincial government pursuing an Austrian businessman behind the deal for years in an attempt to recoup its funds.
CBC's investigation into Churchill Forest Industries in The Pas, a company plagued by scandal. 2:01

The plan to build a mill in The Pas was conceived during Duff Roblin's time as premier. 

Under pressure to attract industry to the province, the Conservative government struck a deal with Austrian businessman Alexander Kasser to create Churchill Forest Industries, the company that built the mill in 1966.

The arrangement operated with little oversight and about $93 million flowed from the government into CFI accounts.

The Manitoba government pursued Kasser in an attempt to recoup around $30 million that he had taken from the company, but eventually settled in 1983, with Kasser pleading guilty to theft over $200 and paying $1 million in fines. The province dropped 34 related charges.

NDP premier Ed Schreyer called the affair the "blackest moment in Manitoba's economic history."

CFI was the subject of a commission of inquiry that found a number of cabinet ministers, civil servants, lawyers and economic consultants failed to recognize and stop Kasser's fraud.

An October 1974 edition of the Montreal Gazette called it a "lesson in government folly."

Crown takes over, losses continue

In response to the fraud investigation, Manitoba took over the mill in 1973. 

It was managed by Crown corporation Manfor from 1973 to 1988. During this time, Manfor lost $300 million, according to the Winnipeg Free Press.
The sign outside Tolko Industries' forestry products mill near The Pas, Man. The company, which employs 332 people in the community, announced on Monday that operations will cease there Dec. 2. (Sean Kavanagh/CBC)

Tolko's predecessor, Repap Enterprises, bought the facility in 1989 for $132 million. Less than 10 years later, it sold the mill for $47 million.

In 2006, Tolko threatened to close. Gary Doer's NDP government responded by providing millions in aid through the Financial Stabilization Plan to help keep the mill running.

Four years later in 2010, when the mill was facing slumping demand for Canadian lumber in the U.S., the federal government gave Tolko Industries $2.26 million to improve its energy efficiency under the pulp and paper green transformation program.

Tolko remains the largest employer in The Pas, but in December, all 332 employees will be laid off.

Comments

To encourage thoughtful and respectful conversations, first and last names will appear with each submission to CBC/Radio-Canada's online communities (except in children and youth-oriented communities). Pseudonyms will no longer be permitted.

By submitting a comment, you accept that CBC has the right to reproduce and publish that comment in whole or in part, in any manner CBC chooses. Please note that CBC does not endorse the opinions expressed in comments. Comments on this story are moderated according to our Submission Guidelines. Comments are welcome while open. We reserve the right to close comments at any time.