British Columbia Supreme Court Justice Shelley Fitzpatrick yesterday heard arguments from Northern Pulp about why it has asked for yet another extension of its creditor protection, the 12th since June 2020 when Northern Pulp and its affiliates first sought and received creditor protection in the court.
Fitzpatrick called the extension until June 30, 2024, “appropriate in the circumstance” and granted Northern Pulp’s request. It was unopposed by Nova Scotia, which is Northern Pulp’s second largest creditor after the company’s owner, Paper Excellence.
Paper Excellence is part of the multi-billion-dollar corporate conglomerate of the multi-billionaire Wijaya (sometimes Widjaja) family of Indonesia. Officially, it is owned by Jackson Wijaya, son of Teguh Ganda Widjaja, who heads the corporate behemoths Sinar Mas and Asia Pulp & Paper (APP).
Related: Halifax Examiner’s Deforestation Inc. articles
As the Halifax Examiner reported yesterday, Northern Pulp owes Paper Excellence more than $213 million.
Northern Pulp also owes Nova Scotia — or rather the people of Nova Scotia — more than $86 million. Nearly $65 million of that outstanding debt is from the 2010 loan of $75 million that the government of Darrell Dexter offered to Northern Pulp for the purchase of 475,000 acres of land in Nova Scotia.
None of those loans are being repaid while Northern Pulp is under creditor protection.
Main plan is ‘to restart the mill’ with funding from NS
At yesterday’s court hearing, Lance Williams, counsel for Northern Pulp, told Justice Fitzpatrick, “We thought we would be here in December to either seek approval for a mediated settlement or be trying to set down the necessary applications to deal with a transition to litigation to the next phase.”
However, Williams said, “We’re not there yet, we are still mediating.”
Williams walked Fitzpatrick through the affidavit from Northern Pulp’s acting general manager, Dale Paterson, noting that, “the mediation process is coming to a conclusion.”
“The petitioners [Northern Pulp and its sister companies that are under creditor protection] anticipate by early 2024 they will either reach a mediated agreement or will be seeking alternatives to a mediated settlement, which includes litigation with the province,” Williams told Fitzpatrick.
“So what’s really anticipated is that it will be back in front of you in January to implement a mediated settlement,” Williams said.
If such a settlement is not reached, Williams said, “… it is anticipated that should alternatives be necessary, there will be material relief sought by both the petitioner and the province, and it will be necessary to schedule a hearing of these applications.
Williams also suggested that no matter what the outcome, Northern Pulp’s aim is to get funding from the province of Nova Scotia for revamping and re-opening its pulp mill in Pictou County, telling Fitzpatrick:
If a mediated settlement is not reached, it is considered to be a large asset that they [Northern Pulp and Paper Excellence] wish to preserve. And so the main plan remains to restart the mill, just the funding would have to come from a settlement with the province.
The $450 million lawsuit
It would not be an understatement to call Northern Pulp’s ongoing creditor protection case under the Companies’ Creditor Arrangement Act (CCAA) in the British Columbia court a complex and never-ending puzzle.
First there was the declaration in June 2020 that seven Northern Pulp companies, the “petitioners,” were insolvent and seeking relief from debt payments while they sought “a plan of compromise or arrangement.”
As mentioned earlier, Northern Pulp’s biggest debt by far is to its owner, Paper Excellence.
On June 19, 2020, the British Columbia Supreme Court granted those companies — 1057863 B.C. LTD., Northern Resources Nova Scotia Corporation, Northern Pulp Nova Scotia Corporation (“Northern Pulp”), Northern Timber Nova Scotia Corporation, 3253527 Nova Scotia Limited, 3243722 Nova Scotia Limited, Northern Pulp NS GP ULC — creditor relief under the CCAA.
Then in December 2021, Northern Pulp and its owners, Paper Excellence and Hervey Investment BV (Netherlands), filed a lawsuit in the Nova Scotia Supreme Court for $450 million, which they claimed as “indemnified losses” because of the 2020 closing of the Pictou County pulp mill.
The mill closed after Northern Pulp failed to get environmental approval for a new effluent treatment system to replace its Boat Harbour facility on the doorstep of Pictou Landing First Nation. Boat Harbour was described as one of Canada’s worst examples of environmental racism.
In April 2022, despite strong opposition from Nova Scotia counsel, Fitzpatrick agreed to Northern Pulp’s request that outstanding legal issues between the province of Nova Scotia and Northern Pulp be dealt with behind closed doors in mandatory mediation, led by retired Supreme Court of Canada Justice Thomas Cromwell.
The parties have been in mediation ever since, as part of Northern Pulp’s creditor protection case under the Companies’ Creditors Arrangement Act.
That mediation continues. Williams told Fitzpatrick at yesterday’s court hearing that the next mediation session was scheduled for today.
Northern Pulp mill in cold shutdown, not so its forestry business
Williams also told Fitzpatrick that while the pulp mill is in “cold shutdown to maintain the status quo at least possible cost,” Northern Pulp’s woodland operations “will continue an ordinary course.” Said Williams:
They are cash-flow positive and they’re important because restarting the mill is only possible with a reliable fibre supply, and a necessary condition to the operation of the mill is an adequate and reliable fibre supply. The woodlands serve those purposes. Therefore, they are necessary to retain the ability to restart the mill.
Northern Pulp continues to harvest on Crown land in Nova Scotia. According to the Department of Natural Resources and Renewables, Northern Pulp can access up to 308,000 hectares (761,000 acres) of Crown land to meet its 100,000 green metric tonne annual allowable cut under its current timber licence in central Nova Scotia.
Northern Pulp can also bring in revenue for land it purchased with the 2010 loan from the government of Nova Scotia, a loan it is currently not repaying. Northern Pulp is leasing parcels of that land for gold mining, the Higgins Mountain wind project in Wentworth, and the massive 58-turbine Windy Ridge project that EverWind Fuels has proposed for Colchester County to power its planned green hydrogen and ammonia plants in Point Tupper.
Coming next: mediation settlement or “litigation mode”
Ernst & Young, the court monitor for the case, said in its latest report that the mediation process would benefit from the 12th extension.
“The balance of the proposed stay extension would either be used to implement a mediated settlement or litigate the initial applications needed to determine the nature of the future proceedings,” read Ernst & Young’s 15th report to the court.
The court monitor report also noted that several legal issues between Northern Pulp and the province that were paused for the mediation process have already been laid to rest.
Nova Scotia will no longer apply to appeal the court’s April 2022 order that it participate in the mediation process. Northern Pulp will no longer legally challenge the terms of reference Nova Scotia Environment and Climate Change established for a new effluent facility it proposed.
However, other paused legal actions — Northern Pulp’s and Paper Excellence’s litigation against the province and their efforts to invalidate the province’s 2022 amendments to the Boat Harbour Act — will be reactivated should the mediation process fail.
In granting Northern Pulp’s application for an extension on its creditor protection until June 30, 2024, Fitzpatrick said:
We are reaching, as the [court] monitor puts it, “a critical stage,” where the substantial efforts of all parties will either see the fruits by way of a settlement and a resolution of all of the issues between the petitioners and the province. Alternatively, if there is no mediated settlement, then the parties are already discussing, very generally I might add, what those next steps might be, which I applaud as being pro-active in that sense, although certainly an alternate and less favourable outcome than a mediated settlement, which is still underway.
Although this is not written in stone, obviously, the thinking is that we will either have a mediated settlement early in 2024, alternatively, if that does not come to pass, then parties will proceed in what I would term litigation mode, and that will proceed apace towards providing a resolution of those issues whatever they ultimately end up being. Which will anticipate a hearing date the before this court probably in the spring of 2024, after which we can see … either in this court or the courts in Nova Scotia, some clarity on the various issues before the parties.
“Some clarity” would make for a welcome change in Northern Pulp’s convoluted and complex creditor protection case.
Stay tuned. It’s not over yet.
And no matter what the outcome of the mediation and court case, it is likely to cost Nova Scotians very dearly.
They pillage and destroy everything in sight and they are suing us !! What a joke.