Knock on wood

With the breakdown public, Dexter had to defend his government from what he knew would be inevitable criticism over his government’s failure to strike a deal. He was on the telephone, in fact, explaining his version of what had happened to the Halifax Herald’s editorial board when Paul Black slid a cell phone in front of him. There was a message on it from one of Pacific West’s key negotiators. “Is the patient dead?” it asked simply.

Pacific West had blinked.

Within the hour, the two sides were back at the table. Within 12 hours they had a deal. It was complicated—using the taxes Pacific would have had to pay the province after the CRA ruling to honey the company pot—but it was, Dexter insisted to reporters, “a win-win for the province and Pacific West… By as early as Year 12,” he bragged, “Nova Scotia’s full investment should be repaid and the province will have earned about $150 million in tax revenue.”

Not that Dexter would get much political credit for any of it. A friend, Dexter tells me, later framed the front pages of the Herald from Saturday, September 22 and Sunday, September 23, and gave it to him as a joke-gift. “On Saturday,” Dexter says, “the paper’s front page was full of recriminations for failing to get a deal. On Sunday, the paper was replete with recriminations for us having given the company too much.”

Regardless, the government had a deal. The mill and its jobs—not to mention the rural communities that depended on them—would survive into the foreseeable future.

One down. One to go.

“This is the new reality,” Ron Smith told the eager-to-get-downto- business crowd of 200 Liverpool area residents who’d gathered in the local Best Western Hotel for the first public meeting of the province’s new Bowater Transition Advisory Team

It was September 23, 2012, just one day after Pacific West and the province had announced they’d struck a deal to reopen the Port Hawkesbury mill, and Smith— the former chief financial officer of Aliant, past vice-president and CFO of Emera, chairman of the Nova Scotia Jobs Fund board and member of the board of Nova Scotia Business Inc.—was trying to set the tone as head of Dexter’s transition team for Bowater. “There’s been a permanent change in the economic landscape of this area and we need to deal with it head on,” he said. “Tonight, our purpose is to look forward.”

When Resolute officially announced in June it was closing Bowater, Dexter had coupled that worst-case blow by appointing a transition team and promising the community he would “meet immediate needs and plan for long-term opportunities.”

His amoeba-like public servant mills committee quickly subdivided again into new sub-committees.

Smith’s transition advisory committee of local community leaders, bolstered by civil servants, would stage a series of public input sessions like the one in Liverpool. Audience members, who sat at 14 round tables, spent half an hour debating key questions about the community’s future among themselves before rejoining the full group to discuss the larger question of how to create “a more diverse and sustainable business climate.” (The Bowater transition advisory committee approach worked so well in engaging the community, Dexter says today, he wishes he’d tried something similar in his first year in office after his government cut subsidies for the Yarmouth-Portland, Maine, ferry service. That decision is still controversial.)

Meanwhile, the mills committee’s community adjustment team—with more seconded members from the labour and advanced education departments— focused on career transition training and developing alternate employment opportunities.

And the deal transition team—with senior officials from natural resources, treasury, Nova Scotia lands and energy— kept its eyes on the prize: the Bowater assets.

While it was clear the mill, as it had operated, could never be profitable, Bowater also owned 220,000 hectares of prime provincial forest land. If those were to be sold to a foreign buyer—as Resolute had hinted—chances were the new company would come in and strip the forests bare, shipping wood overseas where it could be processed more cheaply, thus eliminating Nova Scotia jobs and any value-added benefits.

“We heard presentations from experts,” Montgomerie recalls, “and their advice was, ‘hold on to your [wood] fibre. It’s a valuable asset.'”

It turned out there were many new and exciting potential uses for those woody assets—from controversial biofuels to new-frontier biochemicals. Wood fibre, it turns out, can be used in the manufacture of everything from car parts to makeup.

By December, the deal transition group had cobbled together a new and even more complicated deal, not to save Bowater this time but to reinvent it.

The province bought Bowater’s remaining 220,000 hectares of forest (independently valued at a $117.7 million), its mill site ($5 million) and its Brooklyn Power biomass generating facility ($25 million)… for one dollar.

Well, not quite. The province also agreed to pay off $18 million Bowater owed to its parent company and assume $100 million in liabilities to cover employee pension and related costs.

But then it quickly flipped the power plant to Emera, owners of Nova Scotia Power, for what it had paid.

When the accountants were done adding and subtracting, the province claimed a net gain of $14 million on the deal itself.

But that, in the end, could turn out to be far less important than what the purchase could mean to the future of the province’s forestry industry, whose export value has fallen from over one billion dollars a year in 2004 to just $710 million in 2011.

The government got control of what had been the largest block of privately-owned woodland in the province, enabling it to try everything from innovative, communitymanaged forests to a collaborative forestry initiative with first nations groups.

At the same time, the province began to transform the former paper mill site—with its ready access to lowcost, renewable electricity, an excellent wharf, salvaged mill equipment, in-place treatment systems and proper zoning for industry—into an incubator for research and development in forestry innovation and bioenergy. By the time the deal was formally announced, the centre already had its first tenants: Emera, which has committed to invest up to $1 million over the next five years; and CelluFuel, a Nova Scotia company attempting to commercialize technology to turn “woody biomass into renewable diesel fuel.”

While there were quibbles—Liberal Opposition leader Stephen McNeil argued the NDP should have stood up to the company as Newfoundland had done with Bowater Abitibi and “expropriated these valuable lands,” while Conservative leader Jamie Baillie claimed “the NDP have let Resolute Forest Products off the hook by acquiring all of their debts themselves instead of looking at other options that would have saved taxpayers money”— most experts agreed that, on balance, the deal made sense.

Although it might not ultimately—in Dexter’s own boastful words—”secure the future for southwest Nova Scotia for generations to come,” there is no question Nova Scotia’s forestry future now seems better and brighter than it did in Darrell Dexter’s board room on that August day in 2011 when the words “Permanent Closure” flashed up on the screen.

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