On Friday, British Columbia Supreme Court Justice Shelley Fitzpatrick once again approved an extension of Northern Pulp’s creditor protection, this time for four months, until August 30, 2023.
In doing so, Justice Fitzpatrick said she was “fully satisfied” that Northern Pulp is “acting in good faith and with due diligence” and that the extension is “appropriate” to allow “further restructuring efforts to continue.”
This is the eighth time Northern Pulp and six affiliates (“the petitioners”) have asked for and been granted an extension of their creditor protection since they first declared themselves insolvent and applied to the British Columbia court under the Companies’ Creditor Arrangement Act (CCAA) in June 2020. [1]
In granting the extension, Fitzpatrick said, “It appears that the window of opportunity is narrowing in the sense that these four months are likely to be quite material in terms of whether a light emerges at the end of the tunnel to allow this restructuring to proceed, as has been signaled by the petitioners.”
“I will await further applications in terms of how that evolves, hopefully on a positive note, but that remains to be seen, of course.”
Related: Northern Pulp and its wealthy owners seem intent on taking Nova Scotians to the cleaners
To date under the CCAA proceedings, Fitzpatrick has never not granted Northern Pulp what it asked for.
Closed-door mediation continues
In April last year, in response to a request from Northern Pulp and despite strident opposition from Nova Scotia counsel at the time, Fitzpatrick ordered the province into closed-door mediation with Northern Pulp and its owners, Paper Excellence and Hervey Investment B.V. (Netherlands), with retired Supreme Court of Canada Justice Thomas Cromwell as mediator.
At the start of Friday’s hearing on the latest extension application, Fitzpatrick told the (mostly virtually) assembled lawyers — representing the petitioners, Paper Excellence Canada Corporation, Unifor, Pictou Landing First Nation, and the province of Nova Scotia — that she had not had an opportunity to read the material “other than looking at the first page of the application.”
Lance Williams, a lawyer for Northern Pulp then took the court paragraph-by-paragraph through two affidavits the petitioners submitted for the hearing.
One affidavit was from Carlo Dal Monte, Paper Excellence Canada Holdings’ vice president of energy and business development.
Fitzpatrick heard that Dal Monte’s affidavit introduced a new plan — called the “Power Island Option” — that had been developed during the last six months of creditor extension.
As the Halifax Examiner reported before the hearing on Friday, Northern Pulp says the Power Island Option involves restarting the power boiler at the Pictou County pulp mill to burn biomass, downed trees from post-tropical storm Fiona, which it would sell through a power purchase agreement to an unnamed “local energy authority.”
Related: Northern Pulp wants to burn biomass and sell the energy
No questions were asked during the court proceedings about who the energy authority might be. The Examiner did check last week with Nova Scotia Power and a spokesperson replied, “We aren’t aware of any discussions.”
Alternative pulp mill sites in NS?
On Friday, the court heard that Dal Monte’s affidavit noted that the viability of the Power Island Option depends on satisfying several conditions, including reaching “agreeable terms” for a power purchase agreement with the unnamed energy authority, completing an environmental assessment process, and renewing Northern Pulp’s water supply agreement with the province.
Dal Monte also noted that this would not replace the ongoing provincial environmental assessment process for the revamping and reopening of the Northern Pulp mill, which has been in hibernation since January 2020.
Williams explained to Justice Fitzpatrick that while Northern Pulp was asking for a four-month extension, if a mediated resolution to the restart of the pulp mill were to be reached before August 30, Northern Pulp would be back before the court with that resolution.
“Alternatively, if a resolution can’t be reached, time will be required to prepare what the alternative restructuring [of the companies] would be and to present that to court,” Williams said.
Williams paraphrased from Dal Monte’s affidavit, which states:
While the Petitioners remain committed to the Mill EA [environmental assessment] Process, and restarting the Mill at the current site remains the preferred outcome, during the Stay Extension the Petitioners may explore options for alternative mill sites as a potential option if restarting the Mill at the current location is not feasible. To this end, the Petitioners may seek expressions of interest from communities in Nova Scotia. These explorations would not delay the Mill EA Process.
Williams then took the court through the latest affidavit from Bruce Chapman, general manager of Paper Excellence Canada Holdings Corporation and general manager of Northern Pulp. That affidavit is Chapman’s 14th since the creditor protection began. It emphasized, among other things, the imperative of a renewed water supply agreement.
Nova Scotia takes no position
Responding to Northern Pulp’s application for a four-month extension of creditor protection under the CCAA, Nova Scotia Counsel Sean Foreman told Fitzpatrick:
It’s a very simple response, as we had last October. The province, we don’t oppose. So we’re not taking any position on the motion. And we’ll continue to participate in good faith in the mediation process and other discussions during the period of this extension.
As the Halifax Examiner reported here, Nova Scotia’s Superintendent of Pensions refused to attend Friday’s hearing, as he did the previous hearing in October 2022. In a written submission, he said everything in his April 2022 response to the court still stands.
In that response, the superintendent expressed concern that Northern Pulp had not paid special defined benefit pension contributions due in 2020 ($342,267), in 2021 ($3.34 million), or in 2022 ($3.34 million). “The Superintendent continues to harbour serious concerns with the failure to make contributions in respect of the post-2020 Special Pension Payments,” said his response to the court last year. This failure, the superintendent wrote, “is contrary to law.”
At Friday’s hearing, it was clear that the special pensions are not about to be paid any time soon, not unless Nova Scotia gives in to a list of big Northern Pulp demands.
Northern Pulp still not making pension payments
Northern Pulp lawyer Lance Williams told Fitzpatrick that Northern Pulp spent less than it had expected in the last six-month extension and wouldn’t need to draw any more interim financing in the next four months. But, he added, “The milestones have not occurred to trigger the special pension payments.”
Those “milestones,” laid out in Bruce Chapman’s affidavit, are remarkable in their audacity. By August 2023, Northern Pulp would expect to have evidence for their interim lenders that they can expect some big concessions from the province of Nova Scotia.
Among others, by August 2023, Northern Pulp will have all “material regulatory approvals required” to start constructing a replacement effluent treatment facility, this even though the company has yet to submit an environmental report for the project to Nova Scotia Environment and Climate Change. A timeline in Chapman’s affidavit foresees the environmental report will be filed with the province in March 2024.
Another milestone is that by August, Northern Pulp will have had entered “into an agreement” with Nova Scotia to settle claims or compensate the company for “losses associated with the shutdown of the existing Boat Harbour Effluent Treatment Facility, hibernation of the Mill, and cessation of operations and share the costs associated with obtaining approvals for and construction” of the new effluent treatment facility, and have obtained financing for that facility.
Further, Chapman wrote, by the end of August 2023, Northern Pulp will have “obtained a final non-appealable decision from a court of competent jurisdiction awarding the Petitioners damages payable by the Province for losses associated with the hibernation of the Mill and cessation of operations.”
Mediation at a ‘critical point’
A representative of the court monitor, Ernst & Young, told Fitzpatrick that based on Northern Pulp’s affidavits to the court, the mediation had reached “a critical point.”
“As flagged by the petitioners, if they don’t achieve a final resolution in these next four months, then it appears that there will be a shift at that stage and parties redirecting their attention on what are the alternatives,” she told Fitzpatrick, continuing:
So this seems to be, if we can say, the last four months is the last attempt that we have, and using Justice Cromwell’s assistance and seeing if we can get something done. But we just wanted to flag that that is the evidence coming through the petitioners, and that this may be the last four months. You may recall, in the mediation order, if at any point Justice Cromwell or Mediator Cromwell indicates that the mediation is at an end, then … he’ll call that it’s at an end. If that should occur, we’ll come back and update the court with respect to that. So as Mr. Williams says, we have a four-month extension period. But should something be needed to update the court earlier, we will do so.
The court monitor spokesperson also said that should the Power Island Option “opportunity” be finalized and conditions be met, Northern Pulp would come back to the court to seek a “more formal overview and update and approval.”
If that doesn’t happen, all parties will be back in the British Columbia court at the end of August to find out what the next chapter of the Northern Pulp saga will be.
Paper Excellence to be quizzed on Parliament Hill
In other Paper Excellence / Northern Pulp news, four Paper Excellence executives will appear before the federal Standing Committee on Natural Resources at its May 2 meeting. They are Stew Gibson, Chief Operating Officer; Jean-François Guillot, Chief Operating Officer, Fibre Excellence, Northern Pulp Nova Scotia, Prince Albert Pulp Inc.; Lana Wilhelm, Manager, Community and Indigenous Relations; and John Williams, Non Executive Chairman of the Board, Paper Excellence Group.
NDP Natural Resources critic Charlie Angus called for two meetings of the committee to discuss Paper Excellence in response to the findings of a months-long investigation by the Halifax Examiner, CBC, Glacier Media, Le Monde and Radio France into Paper Excellence, part of the Deforestation Inc. investigation led by the International Consortium of Investigative Journalists.
Endnotes
[1] The “petitioners” who declared themselves “insolvent” in June 2020 and sought creditor protection in the Supreme Court of British Columbia under the Companies’ Creditor Arrangement Act are 1057863 B.C. Ltd., Northern Resources Nova Scotia Corporation, Northern Pulp Nova Scotia Corporation, Northern Timber Nova Scotia Corporation, 3253527 Nova Scotia Limited, 3243722 Nova Scotia Limited, and Northern Pulp NS GP ULC.
Are these guys serious? They want us to pay them for their loses? Really!! Go pound sand. You should be held responsible for the raping and pillaging you did of our great land and water and air. Why are these clowns still in town anyway? Run them out and never let them back in. If Houston wants to be re-elected he better not give in to these thugs.
Northern Pulp is trying to extort money from NS taxpayers. Period. Their claim to “compensation” for losses from their closure is akin to a convicted criminal seeking compensation for lost wages while in jail. This is the most disgusting thing I have ever seen in Nova Scotia government operations. The mill is the worst polluter in the province. They were given ample opportunity to comply with the law, and chose to ignore it. They should be further penalized, not rewarded.
This is Nova Scotia and we have a Conservative government so my money is on the government agreeing to pay this scam company a boatload of money and then give it grants, tax breaks, interest free loans and whatever else it can throw at it so we can have another polluting and environmentally damaging company operating in the province. What should happen is legislation allowing expropriation of all the company’s assets in Nova Scotia.