Judge extends creditor protection for Northern Pulp

A B.C. Supreme Court judge has extended creditor protection for Northern Pulp until the end of October.

Justice Shelley Fitzpatrick ruled in favour of the company following a hearing on Friday.

Fitzpatrick, who will provide her reasons at a later date, also approved the company's use of up to an additional $8 million from a designated fund as it pursues efforts to reopen its pulp mill in Pictou County, N.S., and advances legal action against the Nova Scotia government for the mill closing in the first place.

The judge acknowledged what has been a tense month of legal wrangling between the two sides as she concluded the hearing by encouraging them to "take a breath and communicate with each other and see if things can be calmed down a bit."

Arguments for and against extended creditor protection

Lawyers for the Nova Scotia government opposed the extension of creditor protection, which was scheduled to run out this month. They argued the company has shown little progress in the last year and spent a fraction of itsplanned budget to advance work related to its environmental assessment application.

Instead, the province argued, the company has focused on legal matters, including a $450-million lawsuit against the province and applying for a judicial review and ministerial appeal of the terms of reference set by the Environment Department for its proposed overhaul of the mill.

"The [creditor protection] proceedings are no longer being employed by the petitioners to advance the EA process the proceedings are exclusively being used to pursue litigation under the guise of restructuring," government lawyers wrote in their filing.

"There is no hope that a successful restructuring plan will be advanced. The environmental process will not be amended to convenience the petitioners."

Lawyers for Northern Pulp, meanwhile, said the company is preparing to begin work in May on a variety of studies required by the province, including a receiving water study for Pictou harbour, environmental baseline fieldwork, an initial fish habitat study and aquatic habitat mapping.

"The extension sought today is to preserve the status quo and provide the petitioners with the time, flexibility and breathing room to further advance their restructuring," Northern Pulp lawyer Lance Williams told the court.

The company argued that none of that work could begin until the terms of reference were set by the province.

More legal battles brewing

Friday was only the latest step in an ongoing legal back-and-forth between the two sides.

This week the province filed a notice of defence in Nova Scotia Supreme Court in response to Northern Pulp's lawsuit for damages as a result of the government ending the company's lease to use Boat Harbour to treat effluent 10 years early.

In that filing, the province says the Boat Harbour Act, which led to the closure of the former tidal estuary to effluent, provides complete defence and bars any claims, causes of action or damages. The government also says it believes the company's claim should be dismissed and it will seek asummary judgment as such.

Company seeks ruling on legislative amendments

But the Boat Harbour Act is also now the source of legal division.

Earlier this month, the government passed an amendment to the act to expand its protection against legal claims. The amendments specifically mention the action being advanced by the company. At the time, the government said it was just adding clarity to the act.

The company, meanwhile, argues the province is trying to legislate its way out of legal obligations.Williams indicated to Fitzpatrick on Friday that they intend to ask her to rule on whether the amendments are in bad faith and impede the creditor protection process. Lawyers for the company plan to argue that the amendments cannot be applied to Northern Pulp.

The introduction of the amendments came a week after Fitzpatrick granted a request from the company to order non-binding mediation between the two sides to try to resolve Northern Pulp's legal calm. The province opposed that move and has since filed for leave to appeal the decision.

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