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Lost Northern Pulp profits could be province’s problem

Fishing boats pass the Northern Pulp mill Friday as concerned residents, fishermen and Indigenous groups protest the mill’s plan to dump millions of litres of effluent daily into the Northumberland Strait in Pictou. (ANDREW VAUGHAN / CP)

If the Department of Environment doesn’t give the green light to Northern Pulp’s proposed new effluent treatment plant, taxpayers may be on the hook for the lost profits of an idled mill.

That would be on top of the cost of Boat Harbour’s cleanup (the province has already set aside $133 million for remediation) and part or all of the more than $100 million estimated cost of a replacement facility.

Local municipal governments, including the town and county of Pictou and the Pictou Landing First Nation, have all called for a Class 2 federal environmental assessment instead of one conducted by the Department of Environment.

“This kind of arrangement is really unfortunate,” said Sara Seck, associate professor in the Schulich School of Law’s Marine and Environmental Law Institute, after reading the indemnity agreement.

“If the starting point of these negotiations is that the government is going to be indemnifying industry for the environmental harm, well, they shouldn’t do that.”

It also, she said, creates bad optics for a government whose various departments are working on one hand as the owner and the other as regulator of an industrial facility.

The province built Boat Harbour for the previous owners of Northern Pulp in 1972.

A 1995 indemnity agreement signed by then-supply services minister Gerald O’Malley puts taxpayers on the hook for, among other things, any “liabilities, losses, claims, demands, actions, causes of action, damages (including without limitation lost profits, consequential damages, interest penalties, fines and monetary sanctions) . . . as a direct or indirect result of the construction, location or existence of the facility or reconfigured facility.”

It’s the indemnity for “lost profits” as a result of the “location or existence” of the effluent treatment facility that is relevant to the consequences for provincial government coffers if the Department of Environment were to refuse to grant an environmental approval for Northern Pulp’s planned replacement for Boat Harbour.

To end a blockade of a broken effluent pipe by the Pictou Landing First Nation in 2014 and allow the mill to restart, the province passed a piece of legislation requiring Boat Harbour to cease operations by Jan. 31, 2020.

The legislation does not allow for extensions.

So the replacement facility has to be operating before Jan. 31, 2020 or the mill will have to be idle.

Asked whether the indemnity agreement means the province would have to pay those “lost profits” associated with an idle, Seck first qualified her statement by saying she is not an expert in contractual law, before saying “it doesn’t look good.”

That’s the same view Jill Graham-Scanlan, a Pictou-based lawyer and president of the Friends of the Northumberland Strait, has of the indemnity agreement.

Calling the agreement “ironclad,” she said “the province is too close to this to make an objective decision. That’s why there must be a federal environmental assessment.”

The Department of Transportation and Infrastructure Renewal did not directly answer The Chronicle Herald’s question as to whether it believes the province would have to pay lost profits to Northern Pulp’s parent company, Paper Excellence, in the event its proposed new treatment facility were to be refused on environmental grounds.

“We know there will be a responsibility to the Province of Nova Scotia with regard to Northern Pulp and moving up the date on Boat Harbour,” said Marla MacInnis, spokeswoman for the department in a written response.

“We are in ongoing discussions with Northern Pulp.”

A request for an interview with Environment Minister Margaret Miller received a written response on Tuesday.

“The department’s role is to review the project once it is registered for environmental assessment,” reads the statement from department spokeswoman Rachel Boomer.

“Any decision must be based on science and the best available evidence. The Environment Department is not involved in the indemnity agreement, and it plays no role in our environmental assessment process.”

While the Department of Environment does not consider itself hampered as a regulator to deals inked by other government departments, Northern Pulp has shown that it does.

When the Department of Environment attempted to put onerous conditions on the renewal of the mill’s industrial approval to operate in 2015, the mill responded harshly.

“Government cannot arbitrarily revoke Northern Pulp’s contractual rights under the (indemnity and lease) agreements with the province by way of an administrative approval process,” wrote Terri Fraser, technical manager for Northern Pulp, in an April 9, 2015 letter to then-environment minister Randy Delorey.

“. . . Any provision in the (Industrial Approval) that is inconsistent with the (indemnity and lease) agreements must be removed or revised so that the (Industrial Approval) is consistent with the agreements.”

Neither the province nor Northern Pulp have publicly estimated the cost of the proposed activated sludge treatment facility that will end in a 36-inch-diameter pipe dispersing upwards of 60 million litres of treated effluent into the Northumberland Strait daily.

However, in her 2015 letter Fraser estimated the costs to be “in excess of $100 million.”

Who would then own the new facility (the province or Northern Pulp) and its associated environmental liability also hasn’t been hammered out yet.

“Northern Pulp and owner Paper Excellence fully expects the Government of Nova Scotia to honour its contractual obligations through to December 2030 — be it monetary or a facility — regarding effluent treatment,” said Kathy Cloutier, director of corporate communications for parent company Paper Excellence, in a written response to Chronicle Herald questions on Tuesday.

Northern Pulp plans on registering its environmental assessment with the province later this year.

Seck said ultimately what is required is public accountability for the costs and benefits associated with effluent treatment.

“The key point is if we are trying to encourage economic activity but at the same time the province is paying all the environmental costs, then they need to be incorporating those costs into the understanding of the benefit of these projects,” said Seck.

“And that has to be done up front and in public.”

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