Nova Scotia Reaches Settlement with Paper Excellence Group, Sets New Path Forward

The Province’s negotiations through a court-ordered mediation process have resulted in a settlement agreement with Paper Excellence Group, owner of the Northern Pulp mill in Pictou County.

The agreement addresses several issues, including a $450-million lawsuit against the Province related to the Boat Harbour Act and the mill’s closure in 2020, about $99 million in loans the company owes to the Province, pensions of former mill workers and the opportunity for a significant new economic investment – a new mill – in rural Nova Scotia.

The settlement agreement is subject to approval by the British Columbia Supreme Court. If approved, the company’s lawsuit will be dismissed, and all motions against the Province within the court process will be withdrawn.

The court will hold a hearing on the agreement on May 31.

“We’ve come a long way and have come to a resolution that is fair to all sides – settling legal and financial issues, protecting pensioners and setting a new path forward,” said Premier Tim Houston. “The company believes there could be a future for them in Nova Scotia, working with the forestry sector in southwestern Nova Scotia, and we’re open to hearing them out.”

The agreement approval would see Paper Excellence move forward with an independent feasibility study of the potential for a new kraft pulp mill in Queens County, in the area of the former Bowater mill. The company would withdraw its proposal to upgrade the mill in Abercrombie, Pictou County.

A new pulp and paper mill in Queens County would respond to observations from the 2018 report on forestry practices by Prof. William Lahey, which outlined that the western region experienced significantly weaker demand for its lower-grade forestry products and sawmill byproducts after the closure of the Bowater mill in Brooklyn in 2012. Demand was further impacted by the closure of Northern Pulp in 2020. A mill returning to Queens County would provide a new, reliable market for the region’s forestry sector and result in greater distance between two paper mills working in the province – the other being Port Hawkesbury Paper in Richmond County.

It is expected Paper Excellence would launch its feasibility study immediately and it could take up to nine months. The results of the study would determine how the company’s remaining debts and assets would be handled.

If the study finds a new mill is viable, the company will:

• pay about $50 million for costs incurred by the company through the court process
• pay the Province $15 million to settle its debts; the Province will release its security
• top up Northern Pulp pension plans by about $30 million
• seek financing and work with the Province and other stakeholders to establish a new mill.

If a new mill project moves ahead in Queens County, the company will determine the next steps for the Pictou County mill site.

If the study finds a new mill is not viable, the company will decommission the current mill site in Pictou County and sell its timberlands, allocating the proceeds as follows:

• about $50 million for costs incurred by the company through the court process
• $30 million to top up the pension plans
• $30 million to the Province to settle its debts; the Province will release its security
• $15 million toward the cleanup and maintenance of the Northern Pulp site and implement a site closure plan
• any remaining funds to the Province.

“Ensuring fair treatment for the company’s pensioners was a priority for us, as well as finding a pathway to a stronger economic outcome for Nova Scotians,” said Premier Houston. “The investment to build a new mill would be $1.4 billion, and Nova Scotians can be assured that any project that might come forward would need to be designed to today’s standards and undergo an environmental assessment and significant public consultation. The company has committed to meeting these expectations.”

Documents related to the settlement agreement were filed May 22.

Quotes:

“The closure of the Pictou County mill in 2020 was a big blow to its employees and their families, as well as to the forestry families who have worked across the supply chain for generations, primarily in rural Nova Scotia. A modern, efficient mill operating in the Liverpool area could create the pulp market this sector needs to rebuild, bringing with it good-paying, export-focused jobs.”
— Tory Rushton, Minister of Natural Resources and Renewables

Quick Facts:

• the Boat Harbour effluent treatment facility used by the Pictou County mill was closed on January 31, 2020, as specified in the 2015 Boat Harbour Act
• the company has been under creditor protection with the British Columbia Supreme Court since June 2020; the Province has been a participant as a secured creditor
• in December 2021, the company filed a lawsuit against Nova Scotia for $450 million
• the company owes the Province (through Invest Nova Scotia) about $99 million, which is principally secured by timberlands
• in April 2022, the court ordered the Province and company to participate in mediation, appointing retired Supreme Court of Canada justice Thomas Cromwell to oversee the process; the parties were bound by confidentiality

Additional Resources:

The settlement agreement is available on the court monitor’s web page: https://documentcentre.ey.com/#/detail-engmt?eid=2

The 2018 report An Independent Review of Forest Practices in Nova Scotia is available at: https://novascotia.ca/ecological-forestry/

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