Many Nova Scotians imagine the mill owner’s profits are pretty good, since it is assumed the maker of supercalendered paper can remain profitable and still pay millions of dollars in trade penalties to the United States government.
The U.S. Department of Commerce has ruled Port Hawkesbury Paper’s exports into that country have an unfair price advantage over American competitors due to the aid it receives from the Nova Scotia government.
The department imposed a tariff because it is estimated Port Hawkesbury Paper is saving at least $24 million per year in electricity costs, compared with what the previous owner of the mill was paying.
NewPage filed for bankruptcy in 2011. After the province spent about $30 million to keep the mill maintained for a year, ready for a quick restart, the NDP provincial government of the day found a buyer for the plant.
Pacific West Commercial Corp., a subsidiary of Stern Partners Inc. of Vancouver, paid a reported $33 million for the mill in October 2012.
The government of then-premier Darrell Dexter made no secret it was providing Pacific West with loans and incentives worth more than $120 million. That amount and the money spent to keep the plant ready for a quick restart brought the total to more than $150 million.
If the countervailing tariff of 20.18 per cent is upheld, it has been estimated Port Hawkesbury Paper will be forced to pay nearly $50 million in added export duties next year alone.
The Nova Scotia government seems confident the U.S. department made a mistake in imposing the trade penalties, and the province indicated the decision should be overturned once all things are considered.
The department defines unfair trade subsidies as “financial assistance from foreign governments that benefit the production of goods from foreign companies and are limited to specific enterprises or industries.”
There is no doubt Port Hawkesbury Paper receives a discounted power rate, the result of a decision by the Nova Scotia Utility and Review Board, which Nova Scotia describes as an arm’s-length agency.
Since the discount comes as a decision rendered by a provincial review board, the Nova Scotia government, the paper company and others argue the cheaper power rate from Nova Scotia Power Inc. — a privately owned utility — fails to constitute a subsidy because it does not come from government entities.
The Commerce Department, however, maintains the review board operates under provincial rules and its members are appointed by government, therefore the power agreement giving preferential treatment to Port Hawkesbury Paper is a public subsidy.
It may be easy for some people in authority in Nova Scotia to turn a blind eye to the facts, but there is little doubt the review board was helping the paper maker and, in doing so, was following the wishes of government.
Nova Scotia naturally wants to keep the mill open because of what it means to the provincial economy and, more than anything, because of jobs.
But the cost of doing business in the United States, where most of Port Hawkesbury Paper’s customers are located, may make it difficult for the company to remain competitive.
So what is the contingency plan, just in case the countervailing tariff is not overturned?
I’ve asked that question before, but there is time now to come up with an alternative strategy for saving the paper mill — perhaps something better than the previous plan to keep it open — instead of simply hoping Nova Scotia will win the case on appeal.