Atlantic Forestry March 2020

Closed by an Act of government

by David Palmer

The day after Nova Scotia Premier Stephen McNeil announced that there would be no extension for the Boat Harbour effluent treatment plant used by the Northern Pulp mill at Pictou, news headlines could have read “Premier honours promise to First Nations,” or “Premier kills forest industry.” Both would have been true. 

Over the decades, mills have closed for many reasons, most of them economic. Usually it’s because the mill is old, out-of-date, and high-cost compared to other mills, or the closure is part of a general restructuring of the industry. Sometimes a mill can be sidelined because the parent company went bankrupt. Governments often bend over backwards to keep these big economic linchpins operating, because in many cases they are the largest employer in a single-industry town. (Port Hawkesbury Paper and AV Nackawic come to mind.) But Northern Pulp was a different scenario. As one riled industry leader told me, “It’s insanity that that mill closed.” I cannot recall a single previous case where a mill has been shuttered by an Act of government.  

It’s such an incredible idea that almost nobody in the forest industry believed it was going to happen, even though the writing was on the wall and the clock was running out. The notion that a provincial government would sacrifice 339 direct mill jobs and up to 2,000 indirect jobs, take nearly half a billion dollars out of the provincial economy, and jeopardize the future of half a dozen sawmills – in return for keeping its promise to the 800-strong Pictou Landing First Nation (PLFN) – was beyond contemplation. Everybody thought there would be a last-minute deal that would extend the life of the mill and allow time for the new effluent treatment and disposal facilities to be put in place.  

Workers who face being uprooted from their community, now left to figure out what they are going to do with their lives, can be forgiven for having some animosity towards the PLFN, which has become a scapegoat for the closure. Perhaps some unemployed workers couldn’t care less about the long string of broken promises that the First Nation community has been dealt. Yet, the telling of the sad story of the pollution of Boat Harbour – over six decades, multiple provincial governments, and four mill owners – may allay some of the hard feelings towards the Indigenous people.

SEVEN PROMISES

It began in 1965 with Scott Paper. The company needed a place to dispose of the treated waste from the new kraft pulp mill it was building at Abercrombie Point, across from Pictou, N.S. The most convenient spot was an arm of Boat Harbour, territory of PLFN. A $60,000 lump sum payment to chief and council, in consideration of the permanent loss of fishing and hunting revenue, with a final settlement to come later, was enough to get PLFN on side.

The first unkept promise was made in 1966. Nova Scotia did nothing after agreeing to take corrective action if Boat Harbour became septic, which it did within a year. In 1970 the province signed a 25-year wastewater agreement with Scott.

The second promise was made in 1992 when Nova Scotia pledged to end discharge into Boat Harbour and clean up pollution when the agreement with Scott expired in 1995. This one was broken in 1995 when the province granted a 10-year extension to Scott.

The third promise was made in 1995, when the province committed to ending the discharge in 2005. That never happened, and in 1997 Nova Scotia transferred the lease to new mill owner Kimberly Clark (KC).

The fourth promise was made by KC in 2001; it was a proposal to pipe the effluent directly into the Northumberland Strait and clean up Boat Harbour, in return for PLFN signing an agreement to not oppose continued use of the system until after Dec. 31, 2030. No pipeline was ever built, but the province signed an extension agreement with KC until 2030. 

The fifth promise, made with new mill owners Neenah Paper and Nova Scotia in 2006, asked PLFN for an extension to 2008, in light of technical and environmental problems arising from running a pipeline directly into the Northumberland Strait. That promise was broken in 2008 when Nova Scotia agreed to extend the licence to the fourth and current owners, Northern Pulp, on a month-to-month basis. 

The sixth promise was made in December 2008 when Nova Scotia told the PLFN chief that $90 million would be spent to build a treatment plant at another location, and to clean up Boat Harbour. That one was broken when an election brought NDP Premier Darrel Dexter to power in 2009 – and he asked for more time, but took no action.

In the meantime, PLFN brought legal action, first suing the Department of Indian Affairs for failing to protect the community in 1985, which resulted in a $35 million settlement, and again in 2010 after learning that Nova Scotia had loaned Northern Pulp $75 million to purchase 475,000 acres from Neenah Pulp and then bought 55,000 acres back for $16.5 million.  

PIPELINE RUPTURE

The matter boiled to a head in June of 2014 when an effluent pipe ruptured, spewing waste into a wetland on PLFN land. The community, led by Chief Andrea Paul, blocked company workers from repairing the pipe and restarting the mill until Nova Scotia agreed to pass legislation with firm deadlines to close Boat Harbour. In May 2015, Nova Scotia passed the Boat Harbour Act, which committed to closure of the treatment lagoon by Jan. 30, 2020. A month before the deadline, with no alternative disposal system in place, Premier McNeil refused to implement an extension, thereby triggering the closure of the mill.  

Most people would think that five years is plenty of time to approve and build an effluent facility. Yet it was almost three years before Northern Pulp released a detailed plan that described a new treatment plant and a pipeline running out into Northumberland Strait to discharge the waste. The plan touched off a furor among the citizenry of Pictou, and strong opposition from lobster fishermen, who were backed by the Province of P.E.I. Momentum for the new waste disposal system sputtered. As recently as 2019, Northern Pulp was still working to provide the regulatory agencies with information.  

When Northern Pulp acquired the mill in 2008, they would have known the history of the operation and its controversial waste lagoon. A prudent, forward-looking company planning to put down long-lasting roots in the community would have got started right away on finding a durable solution to the waste problem, while building relations with the First Nations community. At the very least, they would have inspected the waste pipeline to make sure it was in good condition. Maybe they were soothed by having a lease agreement with the province until 2030.  

As for the province, you might expect they would have been all over this from the get-go, to make sure the new plant was built and commissioned in time. Now we’re left with contractors, truckers, and woodlot owners out of business; sawmills on the brink; a polluted lagoon that will cost $217 million to clean up; no jobs; a big hole in the economy; and hard feelings all around.   

WHO IS NORTHERN PULP?

Northern Pulp Nova Scotia, generally considered a profitable mill with a ready market for its products and a robust supply chain, is a division of Paper Excellence Canada, which has six mills in British Columbia, one in Saskatchewan, and two plants in France, producing a total of 2.7 million tonnes of paper and pulp products. The company, which acquired three pulp mills in coastal B.C. from Catalyst Paper in 2019, has been facing some headwinds there during a prolonged eight-month strike at Western Forest Products sawmills, which dried up raw material, forcing the company to harvest pulp wood to meet its needs. 

SAWMILLS THREATENED

Besides the employees and woods workers affected by the closure, next most at risk are a handful of Nova Scotia and New Brunswick sawmills that were selling chips and other residuals to Northern Pulp. Even if alternative markets can be found, none are anywhere near as lucrative as selling sawmill chips to pulp mills. The volumes and revenues are enormous, often paying for the operating expenses of a sawmill, excluding wood and power costs.  

As an example, Elmsdale Lumber, which produces 30 million board feet of lumber annually, requires approximately 120,000 tonnes of wood a year. Roughly 35 to 40 percent (42,000-48,000 tonnes) of that ends up as chips, and at a mill price of $60/tonne it will generate between $2.5 and $2.9 million in revenues. If that chip market is lost and the mill is forced to “dump” valuable chips into a biomass market, the mill price can drop to $16/tonne or lower, which represents a $2 million annual operating loss.

To get an idea of how significant that is, even if the price of lumber were to drop by $50/mfbm, it wouldn’t match the loss on chip revenues. No wonder, then, that mills in Nova Scotia have already cut prices for saw material by $5 to $18/tonne. The bigger question is this: Will they be able to find an alternative market for their chips?  

The answer, for now, is a qualified yes. We have heard that the larger mills have made arrangements – Elmsdale Lumber sending chips to the Shaw Resources pellet mill in Shubenacadie; Taylor Lumber burning theirs in their own co-gen plant; Scotsburn Lumber, a Northern Pulp subsidiary, selling chips to Port Hawkesbury Paper and Nova Scotia Power; Ledwidge Lumber also selling to Port Hawkesbury Paper; Sproule Lumber, an Irving sawmill, hauling their chips to the JDI pulp mill in Saint John; Harry Freeman and Son rumoured to have a contract with JDI; and Delco Forest Products, a New Brunswick sawmill that was highly dependent on Northern Pulp, now selling chips to the Twin Rivers mill in Edmundston.

SUPPLY CIRCLE CONSTRICTS

Besides the mill workers and the sawmills, woodlot owners and contractors are hugely affected – not just in Nova Scotia, but into New Brunswick as well. In particular, Northern Pulp has been a good pulpwood customer for wood producers in southeast New Brunswick, who sold 19,000 cords either directly to Northern or through a local sawmill, Delco, which chipped pulpwood at its chip plant. Neil Silliker, manager at the South Eastern New Brunswick Forest Products Marketing Board (SENB), said he’d seen a change in attitude, on account of this market. “There had been a renewed interest in forestry, and people had been going to work with a smile on their face – it was like they had hope all over again.”

From time to time, the supply circle for the two big Nova Scotia pulp mills expanded, pushing as far west as Moncton. In the winter of 2018-19, facing a pulpwood shortage, Port Hawkebury Paper established a yard at Berry Mills, just outside Moncton, and favourable pricing encouraged truckers to make the one-way, four-hour haul to Cape Breton. With Northern Pulp gone, pulpwood bonanzas like these will be a distant dream, and the hope that had been rekindled in the forestry sector may be snuffed out.

To make matters worse, a moderate winter has boosted wood production, and was starting to clog markets even before the final nail was driven in Northern Pulp’s coffin. JDI is respecting current contracts but has shut off “gatewood” deliveries at Sussex and Chipman, and is signalling to producers that it may be June before new contracts are signed.