This afternoon, Nova Scotia time, the British Columbia Supreme Court will hear arguments on whether Northern Pulp and six affiliates should get yet another six-month extension – their eighth – of the creditor protection the Paper Excellence companies have been enjoying since June 2020 under the Companies’ Creditor Arrangement Act or CCAA.

Given the history of the case, the odds are that Northern Pulp, which owns the 55-year-old pulp mill in Pictou County, will get what it is asking for again today.

Counsel for Nova Scotia don’t opposed the application. Their two-page response to the latest extension application is in stark contrast to the detailed and strongly worded 143-page response from the province’s lawyers in April 2022 when they stridently argued against the application from Northern Pulp et al for an extension and provided a factual and legal basis for their opposition.

Counsel for Nova Scotia’s superintendent of pensions has informed British Columbia Supreme Court Justice Shelley Fitzpatrick that the superintendent will not be attending today’s hearing. He refers the court to his April 2022 submission in which the superintendent expressed “serious concerns” that since 2020, Northern Pulp has failed to pay outstanding special pension contributions for 2021 and 2022, and that there is $3.34 million owing.

However, there is no sign the special pension contributions will be paid any time soon.

In his October 24 affidavit – his 13th since the CCAA proceedings began – Paper Excellence Canada general manager Bruce Chapman writes that Northern Pulp et al “do not anticipate making any Post-2020 Special Pension Payments” during the six-month extension they have asked for, which would last until April 2023.

Mediating behind closed doors

Chapman writes that since the court granted them a six-month “stay” extension on the creditor protection in April, Northern Pulp et al – the “Petitioners” – “have engaged in good faith in the Mediation Process” and “agreed to a pause from taking further actions.”

In March this year, Nova Scotia vigorously opposed that mandated mediation, which Chapman requested in February 2022. But British Columbia Supreme Court Justice Shelley Fitzpatrick ordered the mediation proceed anyway, forcing the province to participate. In April, the province applied to appeal the order to the British Columbia Court of Appeal.

Related: The “weird” legal mechanism being used by Northern Pulp in its $450 million lawsuit against Nova Scotia

The mediation, led by court-appointed and Northern Pulp-chosen mediator and former Supreme Court of Canada Justice Thomas Cromwell, is ongoing, involving the province, Northern Pulp and its affiliates, and their owners, Paper Excellence Canada and Hervey Investment BV (Netherlands).

Corporate Structure of Paper Excellence mills in Canada from recent report “Papering over corporate control: Paper Excellence relationship with Asia Pulp & Paper and the Sinar Mas Group.”

Justice Fitzpatrick’s order stipulates that all mediation discussions, statements and offers remain confidential, so Nova Scotians have no way of knowing what is happening behind closed doors.

But they have a great deal at stake if Paper Excellence gets its way.

The purpose is to “mediate a settlement” of mediation claims. Those could cost Nova Scotians dearly.

Included in the mediation ordered by the British Columbia Supreme Court is the $450-million lawsuit that Northern Pulp, Paper Excellence and Hervey Investment BV filed against the province in the Nova Scotia Supreme Court in December 2021.

Related: Report: Paper Excellence, the owner of Northern Pulp, is part of the corporate group of Asia Pulp & Paper and Sinar Mas. This matters to Nova Scotians.

Chapman’s 13th affidavit states that “Bill 143 Relief (as described in paragraphs 35 to 44 of the 12th Chapman Affidavit)” is also being mediated.

Although all the court documents for the Northern Pulp CCAA proceedings are to be posted online by the court monitor, Ernst & Young, the monitor has failed to post Chapman’s 12th and 13th affidavits in full.

Despite numerous calls and emails to Ernst & Young court monitors, the Halifax Examiner has yet to receive those complete copies. As a result, it is not possible to say what Chapman wrote about “Bill 143 Rrelief.”

Presumably, however, given that Bill 143 is the 2015 Boat Harbour Act that legislated an end to the use of Boat Harbour for pulp effluent in January 2020, Northern Pulp is seeking compensation for the loss of the use of that facility before its lease ended.

Political ties

In 2002, then-Progressive Conservative Premier John Hamm extended the mill’s lease for the use of Boat Harbour until 2030.

Hamm later became chair of the board of Northern Pulp Nova Scotia Corporation and board director of several of its affiliates.

According to an April 26, 2010 press release from Atlas Holdings, which partially owned the mill at the time, Hamm helped “conceptualize and execute” a 2010 provincial loan of $75 million to the mill owners to buy 475,000 acres of land in Nova Scotia. That loan is currently not being repaid because of the creditor protection afforded Northern Pulp affiliate Northern Timber by the British Columbia Supreme Court.

Hamm didn’t leave as Northern Pulp board chair until January 2020, the month the pulp mill closed.

Former Progressive Conservative Premier John Hamm (left) with MLA Alfie MacLeod in 2021. Photo: Jennifer Henderson

In August 2021, before the provincial election, Hamm publicly endorsed Tim Houston for premier.

When Houston’s Progressive Conservatives won the provincial election, Houston appointed a seven-member transition team. Two of them had worked closely with Premier Hamm.

One, David MacGregor, who worked as Hamm’s principal assistant, is business development manager with MacGregors Industrial Group in New Glasgow. President and CEO of MacGregors, Andy MacGregor, is a founding member of the group calling itself “Friends of a new Northern Pulp” that formed to “support the transformation of the Northern Pulp Mill in Pictou County.”

Website of Friends of a New Northern Pulp

The second member of Houston’s transition team with close links to Hamm is Karen Oldfield, now president and CEO of the Nova Scotia Health Authority. Oldfield was Premier Hamm’s first chief of staff. When she left, Hamm described her as “a confidante, advisor and most importantly a good friend.”

How or whether these political ties with former Premier Hamm, until recently the board chair of Northern Pulp Nova Scotia Corporation, could affect how Tim Houston’s government decides to approach the legal wrangles with Northern Pulp and Paper Excellence are questions Nova Scotians should be asking.

In March this year, Houston ordered African Nova Scotian Affairs Minister and Pictou Centre MLA Pat Dunn to remove a sign for the “Friends of a new Northern Pulp” from the window of his constituency office, as the Examiner reported here. At the time, Dunn’s constituency office assistant said Dunn had never hidden his support for Northern Pulp.

Interfering with Nova Scotia’s environmental assessment

Also being mediated as part of the CCAA insolvency proceedings in the BC court is Northern Pulp’s decision to challenge and ask for a judicial review of the final Terms of Reference (TOR) developed by Nova Scotia Environment and Climate Change for the Class II environmental assessment of its proposed “transformation” of the pulp mill in Pictou County.

In their April 28, 2022 response to Northern Pulp’s previous request to the British Columbia court for a six-month extension of creditor protection, legal counsel for Nova Scotia wrote that Northern Pulp’s appeal and judicial review challenge of the TOR for the environmental assessment (EA) process in Nova Scotia are “not aimed at complying with the legal requirements of the Environment Act.”

“Through these blunt and limited instruments, the Petitioners seek to dismantle the structure of the EA Process established under the Environment Act to suit their requirements,” wrote counsel for Nova Scotia.

Related: Northern Pulp and its wealthy owners seem intent on taking Nova Scotians to the cleaners.

Related: The demise of Mountain Equipment Co-op could spell expensive trouble for Nova Scotia.

In his 13th affidavit, Chapman continues his efforts to influence Nova Scotia’s environmental assessment process.

Chapman’s affidavit states that in June 2022, at its own request, Northern Pulp began to meet every month with Nova Scotia Environment and Climate Change (NSECC).

The meetings are to inform NSECC of Northern Pulp’s “progress in completing the work required by the final TOR [Terms of Reference]” for the environmental assessment report for the refit of the Pictou County pulp mill and a new effluent treatment facility, “and to discuss issues encountered in obtaining feedback or answers to the Final TOR items requiring input from federal departments.”

In July, Northern Pulp also held a joint meeting with provincial and federal regulators, including NSECC, Environment and Climate Change Canada, Fisheries and Oceans, and Pictou Landing First Nation.

Northern Pulp is also counting on getting permission to submit its environmental assessment (EA) report to NSECC at the same time it submits its application for an industrial approval (IA), Chapman writes.

The Examiner asked NSECC if it is standard procedure for a company to submit EA and IA applications at the same time, or if legislation requires the Minister of Environment and Climate Change to first approve and set terms for a project before the proponent can submit an IA application.

The NSECC reply: “We cannot comment on a matter currently before the Courts.”

However, industrial approvals do typically seem to be issued after environmental approvals to ensure compliance with any terms and conditions set by the minister in the environmental approvals. This was certainly the case with the Touquoy gold mine in Moose River and with the Alton Gas project.

In his affidavit, Chapman says that Northern Pulp also wants the panel appointed to review the Northern Pulp EA report to also review the IA application and make recommendations to the minister on the project, and to do so in one go.

In addition, the company expects that, “Any public comments on the IA applications would be provided and considered at the same time (an [sic] at the same meetings) as public comments on the EA Report.”

“The Minister would provide a decision on the EA Report and NSECC would make a decision on the IAs immediately following the Minister’s decision,” Chapman writes, as if policies governing environmental assessment in Nova Scotia were Northern Pulp’s to shape.

Ernst & Young, the court monitor, seems fine with that.

In the October 27 court monitor report, Ernst & Young’s Holly Palmer writes:

The timelines for the industrial approvals to construct and operate and the construction approvals remain unchanged and are still expected to be obtained at the same time the final decision on the EA is anticipated to be given by the Climate Minister (August 30, 2024).

In the report, the court monitor repeatedly refers to Nova Scotia’s Environment and Climate Change minister as the “Climate Minister.”

The court monitor states that the EA report should be submitted by March 14, 2024, with the minister’s decision due on August 29, 2024. The IA applications to construct and to operate the mill, according to the monitor, should be submitted to NSECC by January 9, 2023 (more than a year before the EA report is submitted) and approvals issued by August 30, 2024.

But that’s not all the court monitor — at the behest of Northern Pulp — seems willing to pressure Nova Scotia into granting the company. It is also urging the province to give the company all the fresh water it is asking for.

Northern Pulp wants lots of water

In his affidavit, Bruce Chapman writes that Northern Pulp has asked for a renewal of the Water Supply Agreement with the province, noting that in the 1960s the Scott Maritimes Act Agreement accorded the mill “a minimum of 25 million Imperial gallons [113,652,250 litres] of water per day.” The water came from the Middle River, across which a dam was built.

The water supply agreement provided the mill with extraordinarily cheap water. In 1995–1996, for example, the mill paid just $157,124 and a commodity charge of $64.84 for a million imperial gallons (4.5 million litres) for the water.

The water agreement was renewed in 1995, and expired in 2021.

Before the Northern Pulp mill closed in January 2020, its IA permitted it to use up to 92.3 million litres of fresh water every day, and pipe almost that much back out in pulp effluent that eventually flowed into Boat Harbour. Photo: Joan Baxter

In his affidavit, Chapman states that Northern Pulp wrote to Nova Scotia Public Works in August 2022 to request a renewal, and says, “It is imperative that Northern Pulp negotiate a renewal of the Water Supply Agreement in a timely manner.”

The court monitor in British Columbia repeats this Northern Pulp demand:

It is critical that a water supply agreement is finalized prior to the submission of the final EA report in March 2024; such is required in order for the EA to be approved per the TOR. The Monitor urges the Province and the Petitioners to work diligently during the Eight [sic] Stay Extension to ensure an adequate water supply agreement is finalized.

Writes Chapman:

The re-starting of the mill has been and remains the objective for the Petitioners [Northern Pulp affiliates under creditor protection] in these CCAA Proceedings. In order to re-start the Mill, it is critical that the Petitioners (i) obtain all regulatory approvals required to commence construction of the Project and operation of the Mill, (ii) negotiate an acceptable settlement of their legal disputes with the Province and satisfy conditioners precedent thereto and (iii) obtain additional financing required to construct the Project.

All this Chapman wants to have happen before the end of 2024, so that Northern Pulp can restart the mill “as soon as possible for the benefit of all stakeholders.”

The people of Nova Scotia are all “stakeholders” in this legal wrangling, and the costs of the outcome and settlements that Paper Excellence and Northern Pulp are seeking could be very high indeed.

Meanwhile, assuming the British Columbia Supreme Court agrees today to extend Northern Pulp’s creditor protection for another six months, the secret mediation process will also continue.

Joan Baxter

Joan Baxter is an award-winning Nova Scotian journalist and author of seven books, including "The Mill: Fifty Years of Pulp and Protest." Website: www.joanbaxter.ca;...

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  1. Shortly after the publication of this article, I received an email from Ernst & Young saying they may be able to send the documents requested (complete copies of Chapman’s 12th and 13th affidavits) today.