Aaron Beswick (firstname.lastname@example.org)
Published: Jan 17 at 5 a.m.
Part One of a four-day series by journalist Aaron Beswick looks at how Nova Scotia became so tied to Northern Pulp and what would happen if the pulp mill shuts down. Tomorrow: The interdependent forest industry and the likely effects of Northern Pulp pulling the plug.
On Feb. 18, 2014, Stephen McNeil, the newly minted premier, had just said no to a request for money from Northern Pulp.
In a speech to the Halifax Chamber of Commerce that set out the Liberal government’s agenda, he gave a word of warning to industry.
“We will be a partner in economic development across the province, but we cannot be your banker and we cannot be the lead,” McNeil said.
But the province was already Northern Pulp’s banker.
Also, a series of contracts signed over the years by politicians of every political stripe had put taxpayers on the hook for the kraft pulp mill’s environmental liability, whatever that might be.
“I have to live by the rule of law. Previous governments have signed contracts,” McNeil told The Chronicle Herald.
“That’s what I am doing.”
Government’s latest estimates put cleanup costs at more than $200 million.
Then there’s the question of how much the government owes Northern Pulp for cancelling its lease at Boat Harbour — where its effluent now goes — nearly a decade early.
But it’s not an entirely one-sided relationship. According to its own figures, the mill is responsible for 339 direct jobs and spends $315 million annually, primarily on wages (averaging over $84,000 a year), trucking and purchasing fibre.
It also buys the woodchip residue from most of the province’s sawmills and is a centre of supply and exchange for an industry that, according to a 2016 Gardner Pinfold Consultants analysis, directly contributes $419 million to Nova Scotia’s gross domestic product.
The numbers are big on both sides of the ledger with Northern Pulp.
As the January 2020 legislated deadline for the closure of the Boat Harbour effluent treatment site — owned by the province and leased to the mill — draws nearer, the long relationship between the mill and government has turned to finger pointing.
“The Boat Harbour Act was introduced by the Nova Scotia government in May 2015 having no advance notice or consultation with Northern Pulp or (owner) Paper Excellence,” reads a statement from the mill titled Has Northern Pulp Delayed or Stalled the Replacement Project?
That statement blames delays in the effluent treatment planning process on the province for attempting to tighten water-use limits set out in the mill’s industrial approval. Negotiations around that approval, which allows it to operate, ran into 2016 and delayed the preliminary engineering work on Boat Harbour’s replacement.
Northern Pulp also argues that the province has increased the number of studies the mill must conduct as part of the environmental assessment process.
“That number has increased to 28. Some of these studies can only be conducted during certain seasons of the year.”
For his part, McNeil won’t consider extending the deadline unless the Pictou Landing First Nation and other local stakeholders request it.
“We gave plenty of notice,” said McNeil.
“We thought we’d have an (environmental assessment) long before now.”
Chief Andrea Paul will not approve a delay in closing Boat Harbour and, along with local fishermen’s associations, any replacement that puts treated effluent into the Northumberland Strait.
But there aren’t any northern bleached softwood kraft pulp mills operating anywhere that don’t end with an effluent pipe.
So what happens if Northern Pulp shuts for good?
McNeil confirmed the government is planning for that potentiality.
Over the next four days, we will examine what a permanent closure of the Northern Pulp mill would mean for government and taxpayers, Pictou County’s business community, the Northumberland Strait’s ecosystem and the province’s forest industry.
We start with what it means for government and the looming questions around Nova Scotia taxpayers’ liability to a company ultimately owned by a family of Indonesian billionaires.
Northern Pulp: A Timeline
Taxpayer becomes banker
Paul Black was in the thick of it from the start.
Darrell Dexter’s NDP had just taken power. The financial crisis of 2008 had seemingly spared the province’s pulp industry.
But there were surprises to come.
“The reality is you inherit positive things that were started and moved along by predecessors and you inherit results of decisions that either don’t turn out as intended, or were bad decisions,” said Black, Dexter’s director of policy.
The mill, built in 1967, had been sold by owner Neenah Paper in 2008 to Atlas Holdings LLC and Blue Wolf Capital Management — investment firms that buy up operations they believe can be made profitable through restructuring, then sold.
On its way out the door, the previous Tory government had loaned the newly formed Northern Pulp Nova Scotia Corp. $15 million to keep it afloat during the restructuring.
But then the Dexter government doubled down, lending the company $75 million in 2010 to buy 475,000 acres of woodland from the mill’s former owner, Neenah Paper.
The next year, Paper Excellence, a subsidiary of Asia Pulp and Paper, bought Northern Pulp Nova Scotia Corp. from Blue Wolf as part of a cross-Canada mill-buying spree.
Under Paper Excellence’s ownership, the mill got another loan for $14.7 million in 2013 for equipment that would decrease pollution coming out its stacks.
So we became the banker.
For reasons to be explained later, we may also be on the hook for an undetermined amount of money if the mill is forced to shut.
But government is aware of it.
“I’m sure there are conversations about that,” said McNeil.
“At the same time, this province has a loan which is owed.”
How much we as taxpayers are still owed by Northern Pulp is something we as taxpayers are apparently not allowed to know.
On Dec. 27, the Department of Business refused to provide The Chronicle Herald with details on the loans, saying they are “commercially sensitive.”
While the province is tight-fisted with details, Kathy Cloutier, spokeswoman for Northern Pulp parent company Paper Excellence, said that as of November the company had paid back $34.6 million in interest and $18.8 million on the principal . . . whatever that is.
“You never have complete information,” said Black of how problems come from left field and decisions are made on the fly.
“The situation doesn’t stop to let you analyze. It continues to move.”
After the NDP was voted out in 2013, Black started his own consulting firm — of which Blue Wolf became a client.
He doesn’t see a conflict — though Blue Wolf owned Northern Pulp when it borrowed $75 million for land, it had sold it by the time he started working with them.
The only thing more confusing than the possibility the taxpayer will have handed over 475,000 acres of woodlands to a subsidiary of an Indonesian paper conglomerate, is the contractual obligations by which it happened.
The contracts and The Boat Harbour Act
Three documents — an indemnity agreement, a lease for Boat Harbour and a memorandum of understanding — signed by provincial governments going back to 1995 guaranteed that Nova Scotians would provide an effluent treatment facility to the company until 2030 and potentially cover its lost profits if we don’t.
In 2002, John Hamm’s Progressive Conservative government renewed a lease for Boat Harbour that runs until 2030. Hamm is now chairman of Northern Resources Nova Scotia Corporation and a director of Northern Pulp Nova Scotia Corporation.
And then there’s the Memorandum of Understanding also signed by Liberals in 1995 that states among other things: “Nova Scotia agrees to use its best efforts to (help)…obtain all necessary permits, consents and approvals to permit the construction and operation of a replacement effluent treatment facility to replace the Facility at the expiration of the term of the Lease.”
Nova Scotia, as defined in the Memorandum of Understanding, includes the province’s Department of Environment that will be conducting the environmental assessment whenever one is filed by the mill.
But unlike you or me, provinces have a ‘get out of jail free’ card for the contracts that they sign.
It’s called legislation.
“The Legislature within its jurisdiction can do everything that is not naturally impossible, and is restrained by no rule human or divine,” ruled Justice William Riddell of the Ontario High Court in the precedent setting 1909 case Florence Mining Co v. Cobalt Lake Mining Co.
“The prohibition, “Thou shalt not steal,” has no legal force upon the sovereign body.”
Though over a century old, the precedent stands that provincial and federal governments can legislate their way out of contracts. While American citizens and private companies are at least granted a constitutional right to compensation, no such thing exists in Canada in the face of legislative authority.
“The Federal Parliament and Provincial Legislatures may pass laws of any kind, including laws that change or cancel legally binding agreements,” recently wrote Queens University law professor Bruce Pardy in a legal brief for the Fraser Institute.
“This power exists even if the enactment has the effect of expropriating property or causing hardship to innocent parties who negotiated with government in good faith in entering into the contract in the first place.”
The Boat Harbour Act, passed in 2015, got us part way there by stating: “No action lies against Her Majesty in right of the Province or a member of the Executive Council in respect of the cessation of the use of the Facility for the reception and treatment of effluent from the Mill as a result of this Act.”
However, a final clause, adds, “The enactment of this Act is deemed not to be a repudiation or anticipatory repudiation by Her Majesty in right of the Province of the lease agreement dated December 31, 1995 …”
According to the premier, our liability is for ending the lease early.
“There is a belief we are negotiating to build the effluent treatment facility but that is not what we’re doing,” said McNeil.
“We’re looking at what compensation do we have for closing Boat Harbor nine years earlier.”
However, according to documents obtained by The Chronicle Herald through a Freedom of Information request, the amount of compensation to be paid by the province for ending the lease early is being negotiated based on the cost of building the proposed new activated sludge effluent treatment facility.
Although the province has a cost estimate for the new facility, it won’t say what it is or what portion we are likely on the hook to pay. A 2015 letter by Northern Pulp technical manager Terri Fraser to then Environment Minister Randy Delorey estimated the cost of such a facility to be “in excess of $100 million.”
McNeil said a number won’t be released until negotiations conclude.
But if Northern Pulp doesn’t get to build that new effluent treatment plant because it is blocked through civil disobedience, that raises other questions.
“I know the tensions are high and this is a very divisive issue in the community but my hope is that they will allow the process to happen while respecting each other’s position,” said McNeil.
“The rule of law will apply and we will let a decision be made based on science. That’s what my hope is.”
Fishermen haven’t appeared to be overly concerned with the premier’s hopes.
“We are great hunters in Pictou Harbour,” reads a quote attributed to Edwin Donald Shaw in a court affidavit filed by members of a survey boat contracted by Northern Pulp who claim to have been threatened and intimidated by local fishermen.
“If you come back to Pictou Harbour you are going to be gone. We are real good shots.”
Northern Pulp sought and received a court injunction against seven community members from further hampering its survey work.
Mill spokeswoman Kathy Cloutier said in December that the mill is working on the logistics of completing its survey work.
Fishermen have said they also don’t plan to back down.
For his part, McNeil’s government is also planning for the possibility of a future without Northern Pulp.
“How do we protect jobs,” said McNeil.
“The impact of this mill will be felt far beyond Pictou County to every mill in the province.”
The other question — what we owe Paper Excellence — could end up in court.
In the meantime, faced with a convoluted and uncertain mess of liability and contracts to Northern Pulp, McNeil is standing by his deal with the Pictou Landing First Nation.
“It might have been seen as OK in the '60s to put (the effluent treatment plant) next to an aboriginal community, but it’s not in 2020,” said McNeil.
As for what happens next, whether for Northern Pulp, the economy, the environment or the taxpayer, no path appears certain.