NOVA SCOTIA (From news reports) -- Nova Scotia taxpayers are out another $15 million unless the province grants Northern Pulp an environmental approval of the mill's controversial proposed effluent treatment plant.
British Columbia Supreme Court Justice Shelley Fitzpatrick approved the terms of a $50-million loan to the beleaguered Pictou County mill from parent Paper Excellence Canada and Pacific Harbour North American Resources Ltd. Her ruling allows Northern Pulp to take an initial payment of $15 million to keep it afloat until the end of the year.
To get more from the pot, Northern Pulp and Paper Excellence will have to come back for Fitzpatrick's approval.
The terms of that debt put it ahead of the $85 million Northern Pulp and its associated companies owe the province.
The terms also make payments from the $50-million loan actually an advance on the following milestones being reached by 2022:
- An environmental approval to build a replacement effluent treatment plant.
- An agreement with the province to help fund its design and construction.
- A court decision or negotiated settlement with the province paying lost profits and damages associated with the idling of the kraft pulp mill.
So if the Abercrombie Point mill doesn't appear to be on track to meet those goals, Paper Excellence retains the ability to call in the loan.
Northern Pulp filed documents in B.C. Supreme Court this spring seeking credtor protection under the Companies' Creditors Arrangement Act.
The company's only real asset is about 170,000 hectares of forestry land the province loaned it the money to buy in 2010.
Without a working effluent treatment plant, the mill site itself is described as a likely environmental liability by both the company and the province in court filings.
Fitzpatrick's decision to grant creditor protection and approve the loan was over significant opposition.
Much mud was slung by mill manager Bruce Chapman, the province and the mill's other creditors in the hearings that led to the judge's decision.
First the province pointed out that Northern Pulp funnelled $65 million to its parent company, Paper Excellence, in 2018 as the date loomed for the legislated closure of its Boat Harbour effluent treatment plant.
The mill retorted that it had actually funnelled $70 million to the parent company while not paying on its loans to the province and that provincial government staff were at the board meetings where the decision was made.
The company was also accused of shady dealing by Terrapure Environmental.
That company was contracted to remove 284 tanker loads of landfill leachate and stormwater runoff from the mill site this spring but never got paid by Northern Pulp.
"Terrapure entered into a contract, fulfilled that contract to the benefit of Northern Pulp, to the benefit of the Province of Nova Scotia, to the benefit of the Pictou Landing First Nation and it got stuck with a debt of over a million dollars," Heath Whitely, the company's lawyer, told the court Wednesday.
"There ought to not be any dispute - Terrapure performed a critical activity at a critical time."
That was despite the province giving Northern Pulp $10 million in May to pay for the work done by Terrapure, along with the capping of the effluent pipe that ran to Boat Harbour and stabilization of the mill site. Though Northern Pulp promised to match the $10 million, it didn't, and also used the funds to pay non-eligible expenses under the contribution agreement it had signed with the province.
Although the budget for the initial $15 million advanced to Northern Pulp includes hundreds of thousands of dollars for lawyers to fight the provincial government's environmental rulings, it doesn't allow the company to pay the millions of severance and pension contributions owed to its laid-off or retired employees and unpaid contractors.
Both Northern Pulp and Paper Excellence had been seeking permission to pay those costs but the province had opposed it.
In a further twist, the former owners who sold the mill to Paper Excellence appeared at the hearing to lobby against the loan.
Natasha MacParland, lawyer for Blue Wolf Capital Management and Atlas Holdings LLC, told the court that money to keep Northern Pulp afloat could be found from other lenders on better terms.
Furthermore, she alleged that the money on offer was actually a takeover bid, rather than a loan.
"This is really a planned sponsor disguised as an interim creditor," MacParland said in court Wednesday.
"My clients are industry players, they have looked quite closely at this and they don't think Paper Excellence is the only game in town."
Of the $50 million on offer, $40 million is coming from Pacific Harbour. Sources say it's an investment firm that, like Paper Excellence, has Asian financial backers, but who they are remains unclear.