The mill's prospective buyer, Pacific West Commercial Corp., wants the Nova Scotia Supreme Court to terminate the original agreement between Richmond County and the plant's former owner, Stora Enso.
The May 2006 agreement, which was later enabled by provincial legislation, fixed municipal taxes paid by the NewPage Port Hawkesbury mill for a 10-year period.
During a hearing Monday in Halifax, the lawyer for the county argued that only the provincial legislature has the right to amend a tax arrangement that is spelled out in legislation.
"There is nothing NewPage can do to change that," Bruce Clarke told Judge John Murphy.
Clarke added he didn't believe the court had jurisdiction to change the legislature's tax decisions.
However, lawyers for NewPage and Pacific West said the court should rule on an agreement reached between the two parties before the legislation was enacted.
They said the agreement reached in a letter of intent provided the opportunity to opt out of the tax deal, especially if the mill were to switch ownership.
"We wouldn't be here (in court) otherwise," Pacific West's lawyer Gavin MacDonald told the court.
Murphy scheduled Tuesday's hearing for 2 p.m., during which time he is expected to decide whether the company's case can proceed to a hearing scheduled for Sept. 13.
Outside court, Richmond County officials said they believed legal proceedings were unnecessary.
"We are defending the best interests of our residents and at this time, we would rather be in the boardroom negotiating a deal going forward with Pacific West," said chief administrative officer Warren Olsen.
Pacific West contends it should pay about one-sixth of its current estimated tax bill of $2.5 million.
Deputy warden Victor David said the change sought by the company would amount to a "fantastic drop" in revenue for the county of about $1.9 million.
Marc Dube, who heads Pacific West's transition team, said a tax assessment should recognize that the mill's operation will change, with only one papermaking machine in operation and several buildings closed.
"The business is much different than it was in the past," Dube said in a telephone interview.
He said Pacific West has made three different tax offers to the county over the past several months and remains interested in settling the issue out of court if possible.
"We want to do that and it's in our best interest and I'm sure the county's also," said Dube.
Pacific West is planning to purchase the mill, which shut down last September, for $33 million.
Last week, the province announced a $124.5-million financial package to help bolster the mill's operations. The Utility and Review Board also approved a new discounted power rate considered crucial to its eventual restart.
The company has said about 300 employees could return to work in late September or early October.