Prince Albert eyes tax hit on Domtar mill

The city of Prince Albert, Sask., is bracing for a big hit to the city's coffers in the wake of the pending demolition of a local pulp and paper mill.

The city currently receives $1.8 million a yearin tax revenue from Montreal-based paper giant Domtar for its plant, located 12 kilometers east ofthe city.

Domtar announced less than two weeks ago that it would remove machinery and equipment from the site, which was permanently closed in 2006.Seven hundredpeople lost their jobs.

The companyalso saidit wasset to hire a demolition contractor and will file for a demolition permit for the site.

But if the buildings come down, so does the city's revenue, said Prince Albert Mayor Jim Scarrow.

"That's a pretty good hit," Scarrow said.

Despite the expectedloss of revenue, Scarrow expressed hopePrince Albert's once-prosperous days as a pulp and paper town could be regained.

"We're fairly confident that the industry would recognize this as a valuable resource," Scarrow said.

The city will factor the revenue decrease into its futurebudget plans, Scarrow added.

Might become biofuel facility

He told CBC News he's also holding out hope a new buyer will take over the Domtar site before the company demolishes the mill and hauls away the pieces.

On May 29, the provincial government signed a letter of intent between its energy and resources department, Ottawa-based biofuels makerIogenCorporation and Domtar that could ultimately see the plant redevelopedas an ethanol production facility.

If the Iogen project a partnership with Royal Dutch Shell were toproceed, it would also include a power plant producing green electricity from forest and ethanol plant residues. About 100 jobs would be created, Iogen said.

Under the agreement, the government says, it will "assume ownership" of mill property that's not part of the new proposal. It will also be responsible for paying for an environmental cleanup. Domtar will then pay the government a portion of the costs.

In a project overview, Iogen says it's still evaluating the project and is consulting with the public and conducting an environmental impact assessment, among other things.

A local media report on Dec. 22 said talks between Domtar and Iogen have stalled, but neither company has issued a public statement to this effect.