Can N.S. bail on Northern Pulp?
Deals, deal-breaking and who owes what to whom
The only thing more confusing than the possibility the taxpayer will have handed over 475,000 acres of woodlands to a subsidiary of an Indonesian paper conglomerate, is the contractual obligations by which it happened.
Three documents — an indemnity agreement, a lease for Boat Harbour and a memorandum of understanding — signed by provincial governments going back to 1995 guaranteed that Nova Scotians would provide an effluent treatment facility to the company until 2030 and potentially cover its lost profits if we don’t.
In 2002, John Hamm’s Progressive Conservative government renewed a lease for Boat Harbour that runs until 2030. Hamm is now chair of Northern Resources Nova Scotia Corporation and a director of Northern Pulp Nova Scotia Corporation.
And then there’s the Memorandum of Understanding also signed by Liberals in 1995 that states among other things: “Nova Scotia agrees to use its best efforts to (help) ... obtain all necessary permits, consents and approvals to permit the construction and operation of a replacement effluent treatment facility to replace the Facility at the expiration of the term of the Lease.”
Nova Scotia, as defined in the Memorandum of Understanding, includes the province’s Department of Environment that will be conducting the environmental assessment whenever one is filed by the mill.
But unlike you or I, provinces have a “get out of jail free” card for the contracts that they sign. It’s called legislation.
“The Legislature within its jurisdiction can do everything that is not naturally impossible, and is restrained by no rule human or divine,” ruled Justice William Riddell of the Ontario High Court in the precedent setting 1909 case Florence Mining Co. v. Cobalt Lake Mining Co. “The prohibition, ‘Thou shalt not steal,’ has no legal force upon the sovereign body.”
Though over a century old, the precedent stands that provincial and federal governments can legislate their way out of contracts. While American citizens and private companies are at least granted a constitutional right to compensation, no such thing exists in Canada in the face of legislative authority.
“The Federal Parliament and Provincial Legislatures may pass laws of any kind, including laws that change or cancel legally binding agreements,” recently wrote Queens University law professor Bruce Pardy in a legal brief for the Fraser Institute. “This power exists even if the enactment has the effect of expropriating property or causing hardship to innocent parties who negotiated with government in good faith in entering into the contract in the first place.”
The Boat Harbour Act, passed by McNeil’s government in 2015, wiped the slate of the province’s contractual liability to Northern Pulp partially clean by stating: “No action lies against Her Majesty in right of the Province or a member of the Executive Council in respect of the cessation of the use of the Facility for the reception and treatment of effluent from the Mill as a result of this Act.”
However, a final clause in the legislation leaves us on the hook for cancelling the lease early.
“The enactment of this Act is deemed not to be a repudiation or anticipatory repudiation by Her Majesty in right of the Province of the lease agreement dated December 31, 1995 ...” reads the clause.
According to the premier our liability is for ending the lease early.
“There is a belief we are negotiating to build the effluent treatment facility but that is not what we’re doing,” said McNeil. “We’re looking at what compensation do we have for closing Boat Harbor nine years earlier.”
However, according to documents obtained by The Chronicle Herald through a Freedom of Information request, the amount of compensation to be paid by the province for ending the lease early is being negotiated based on the cost of building the proposed new activated sludge effluent treatment facility.
Though the province has a cost estimate for the new facility, it won’t say what it is or what portion we are likely on the hook to pay. A 2015 letter by Northern Pulp technical manager Terri Fraser to then environment minister Randy Delorey estimated the cost of such a facility to be “in excess of $100 million.”
McNeil said a number won’t be released until negotiations conclude.
But if Northern Pulp doesn’t get to build that new effluent treatment plant because it is blocked through civil disobedience, that raises other questions.
“I know the tensions are high and this is a very divisive issue in the community but my hope is that they will allow the process to happen while respecting each other’s position,” said McNeil. “The rule of law will apply and we will let a decision be made based on science. That’s what my hope is.”
Fishermen haven’t appeared to be overly concerned with the premier’s hopes.
“We are great hunters in Pictou Harbour,” reads a quote attributed to Edwin Donald Shaw in a court affidavit filed by members of a survey boat contracted by Northern Pulp who claim to have been threatened and intimidated by local fishermen. “If you come back to Pictou Harbour you are going to be gone. We are real good shots.”
Northern Pulp sought and received a court injunction against seven community members from further hampering its survey work.
Mill spokeswoman Kathy Cloutier said in December that the mill is working on the logistics of completing its survey work.
Fishermen have told The Chronicle Herald they also don’t plan to back down.
For his part, McNeil’s government is also planning for the possibility of a future without Northern Pulp.
“How do we protect jobs?” said McNeil. “The impact of this mill will be felt far beyond Pictou County to every mill in the province.”
The other question — what we owe Paper Excellence — could end up in court.
In the meantime, faced with a convoluted and uncertain mess of liability and contracts to Northern Pulp, McNeil is standing by his deal with the Pictou Landing First Nation.
“It might have been seen as OK in the 60s to put (the effluent treatment plant) next to an aboriginal community, but it’s not in 2020,” said McNeil.
As for what happens next, whether for Northern Pulp, the economy, the environment or the taxpayer, no path appears certain.