The owners of the mothballed Northern Pulp mill have permission to spend $450,000 to prepare a lawsuit against the government of Nova Scotia, as relations between the sides sour amid accusations of bad faith.
The green light to pay for potential litigation came in a British Columbia court order last week extending creditor protection to the company until April 22, 2022.
"I didn't agree with that position," Nova Scotia Premier Tim Houston told reporters Tuesday. "It wasn't what I expected."
Northern Pulp signals legal action against N.S. government over mill closure
It comes as the mill edges closer to suing the Nova Scotia government over the forced shutdown of its waste effluent treatment facility at Boat Harbour.
Under a statute of limitations, Northern Pulp has until the end of January to launch a claim for losses associated with legislation that terminated the company's lease on Boat Harbour eleven years early. It has until the end of this month to file notice of a claim.
Already demanded $100 million
The notorious effluent treatment facility is owned by the province. Boat Harbour is now the largest toxic environmental site in Nova Scotia, with an estimated cleanup cost of $300 million.
The mill has already submitted a demand for $100 million in losses and estimates its overall losses at $450 million.
The British Columbia court order extending creditor protection gives Northern Pulp permission to borrow and spend $450,000 to prepare litigation against Nova Scotia.
Restructuring a guise to fund litigation: lawyers
The province — which is owed $85 million by Northern Pulp — objected.
It claims Northern Pulp has been dragging its feet on the environmental assessment process needed to approve a new waste treatment facility and restart the mill.
"The Province is concerned that the Applicants are using the Companies' Creditors Arrangement Act (CCAA) process to fund their litigation against the province under the guise of restructuring," lawyers Robert Grant and Maurice Chaisson wrote on behalf of the government.
Province continues to work toward approval for Boat Harbour cleanup
"Public relations material and PowerPoint presentations do not equate to the real work required if the Applicants are serious in pursuing regulatory approval for an alternative effluent treatment facility," the lawyers wrote.
They say the company has spent $15 million and taken 16 months to arrive at the beginning of the environmental assessment process.
"It is not lost on the Province that these costs could have been used by the applicants to meet some of the obligations to other creditors."
Company says it's been acting in good faith
In a press release issued last Friday, the company said it has been acting in good faith to restart the mill. It's a claim supported by Ernst & Young, the court-appointed monitor overseeing the proceedings.
Northern Pulp accused the province of rebuffing its "good faith desire and diligent efforts" to reach a settlement on various "controversies" between the sides.
"Northern Pulp has therefore been left with no option but to take steps to preserve and enforce its legal rights," it said in the release.
In late September, Deputy Minister of Public Works Peter Hackett said the company is "complicating matters by seeking to blend separate and independent causes of action related to the enactment of the Boat Harbour Act within the CCAA process."
"As noted earlier, the province will defend any attempt to formally blend these proceedings," said Hackett. "They are parallel legal proceedings which must remain separate and distinct processes."
In the creditor protection proceeding, Northern Pulp announced it intends to skip "special payments" to make up a shortfall in the employee pension plan.
In an affidavit, general manager Bruce Chapman told the court a lender to the company was not satisfied with progress on settlement discussions.
Chapman said the company does not anticipate making any special pension payments during the stay period.
Houston said he hoped the company "honours its commitments."
"Its former employees certainly honoured [their] commitment to the company. And now it's time for the company to do the same and I certainly hope that they do," the premier said.