POLITICS

Vancouver company backs out of bid to restart NewPage mill in Cape Breton

09/21/2012 08:55 EDT | Updated 11/21/2012 05:12 EST
HALIFAX - The Vancouver company that planned to buy an idle paper mill in Cape Breton stunned the province Friday by suddenly backing out of its bid, saying an unfavourable tax ruling from Ottawa effectively killed the deal.

Pacific West Commercial Corp. issued a statement saying the recent decision from the Canada Revenue Agency made it impossible to ensure economic viability of the former NewPage mill at Point Tupper, which was shut down a year ago, throwing 600 people out of work.

The company said that despite the provincial government's efforts to come up with a compromise to ease the tax burden, both parties decided the tax implications could not be overcome.

"It is extremely disappointing for everyone involved in the year-long effort to restart the mill to realize that we have been unable to achieve our collective goal," company president Ronald Stern said in the statement.

The province's NDP government had placed a premium on keeping the mill open. With a $25-billion federal shipbuilding contract secured for the largely urban Halifax region, Premier Darrell Dexter was keen to ensure some degree of economic success in rural Nova Scotia.

In recent weeks, critics suggested the province had gone too far with Pacific West, repeatedly pointing out that the company was prepared to pay $33 million for the mill while the province had set aside almost four times that amount.

On Friday, the premier said the province's efforts to restructure a $124-million aid package exposed the province to undue financial risk.

The government first announced the fund last month. At the time, it included $66.5 million in loans, $26.5 million of which would be forgiven if certain criteria including wage targets were met.

But the government said last Friday it would sweeten the fund after the Canada Revenue Agency rejected the tax break sought by Pacific West.

The request from the company involved a complicated business arrangement with Nova Scotia Power Inc., the province's privately owned utility. The deal would have given the utility a 30 per cent stake in the company.

At the time, the government said increases in tax revenue resulting from the tax agency's ruling would allow the province to grant the company greater financial forgiveness on some of the loans.

Earlier this week, Transportation Minister Maurice Smith suggested all of Nova Scotia would feel the economic fallout if the mill remained closed because it produced 2.5 per cent of the province's GDP.

Smith said the mill was "too big to fail."

Aside from the 600 jobs at the mill itself, the operation also supported about 400 forestry contractors. Pacific West had pledged to rehire about 300 workers and operate one of the mill's two paper machines. But the company had always said the deal hinged on the tax ruling and cheaper electricity rates.

Dexter said he was disappointed on behalf of the people and businesses in southern Cape Breton. He said the company's move will be devastating for the mill's workers and their families.

"The province fought as hard as it could for those jobs because this government knows good jobs are the lifeblood of rural communities," Dexter said, adding that he didn't regret going out on a limb for Cape Breton.

"There are some who would have been happy for us to turn our backs on those workers and their families the day it was announced that the mill would be idled. Even though we could not reach a deal in the end, I can proudly say that we did not abandon those people and we will not do so now either."

Dexter said he planned to meet with municipal officials to discuss "transitional support" for former workers and those in the forestry sector.