Bidding process for Fort Frances mill gets nasty
This article appeared in Northern Ontario Business. |
A prospective buyer of the closed Fort Frances paper mill will have “zero” chance of acquiring the property unless it signs a non-disclosure agreement with Resolute Forest Products, said a company spokesman.
Seth Kursman, Resolute’s vice-president of corporate communications, called the actions of Repap Resources Group “downright cruel” in unnecessarily raising expectations in the former pulp and paper mill town of the operation reopening.
Any simmering hard feelings in the northwestern Ontario community since Resolute closed the mill in 2014 bubbled to the surface in early February when town officials got word from the company that an agreement was in place to transfer the property to a site redevelopment company that would demolish the mill buildings.
Resolute is running a two-track bidding process for the mill property by taking offers from interested parties – with a March 15 submission deadline – while also signing a “backstop agreement” with an undisclosed “restorative development company” that would remediate the brownfield site. That agreement is expected to close by May, at the earliest.
It’s been alarming news for the Town of Fort Frances, which regards the mill as an “irreplaceable” economic asset.
A draft resolution crafted for the Feb. 11 council meeting called on the province to step in and assist any potential new mill operator by freeing up a nearby Crown wood supply that the town claims Resolute has locked up.
Discussion on the resolution was cut short after Resolute threatened legal action against the municipality, claiming the document contained “false, misleading and defamatory statements.”
The resolution will surface again at a Feb. 19 meeting with the town looking to rally regional support.
Just before Christmas, hopes were raised in Fort Frances when Repap, a private consortium of Canadian and U.S. investors, announced its intentions to enter into negotiations with Resolute to acquire the mill and restart it in 2019.
Their proposal involves producing a mix of packaging paper grades and creating 263 mill jobs.
Kursman said Repap Resources Group has “stirred up a lot of trouble” by going to senior government officials, unions, and media, and making local presentations ahead of entering formal negotiations with Resolute.
Kursman said Repap representatives were given a tour of the mill and Resolute management met with them for an hour. But with Repap refusing to sign a non-disclosure agreement, they are ruled out of any property sale process.
“I will tell you, it is not the professional way that we deal with things,” said Kursman.
“We are a principled company, we have managed the closure in the years following that in a very responsible way and we are not going to deviate from what is normal course of business in how you conduct these kinds of processes.”
He declined to elaborate on what was in the municipal resolution that was factually wrong or potentially libelous, but called the document “disheartening and shocking.”
Kursman said he was “triggered” that anyone would question Resolute’s commitment to Fort Frances after spending $35 million over two years to keep the mill heated while it searched for a buyer, on top of its $250-million investment in its northwestern Ontario operations.
“There’s no forest company that has a bigger footprint in the entire province than us.”
One town councillor openly questioned Resolute’s efforts to secure a buyer for the mill, especially one that might draw locally sourced Crown fibre.
In a statement, Douglas Judson expressed “little confidence” that the company’s bidding process “is intended to result in a sale to an operator of a facility who would want access to wood fibre in the local Crossroute Forest.
The Sustainable Forest Licence (SFL) agreement for the Crossroute stipulates that resources are to be made available to the Fort Frances mill.
The town argues that Resolute – as the SFL licence holder – has control of that supply and has been feeding Crossroute wood to its other mills in northwestern Ontario, contrary to the SFL agreement.
They also insist that the unit is under-harvested and could support multiple operations in the area.
A Ministry of Natural Resources and Forestry spokeswoman declined comment if Resolute ever obtained an amendment to the licence agreement, or received ministerial approval, to ship Crossroute fibre out of the area.
“Negotiations regarding the future of the mill are between Resolute, Repap, and the community of Fort Frances and we do not want to comment further at this time,” replied Jolanta Kowalski by email.
Kursman wouldn’t speak to the town’s wood supply concerns or Repap’s proposal, saying repeatedly in an interview that Resolute’s only concern is its ongoing access to cost-effective fibre to supply its regional operations.
“If you have fibre that’s redirected away from Resolute and others (operations) in northwestern Ontario, it will have a domino effect.”
When asked if Resolute would entertain selling the property to a manufacturer that would draw wood from the Crossroute, Kursman responded: “Certainly, we can’t have someone who is competing directly against us.”
Fort Frances Mayor June Caul wasn’t available for comment, but in a Feb.13 statement, she accused Resolute of using heavy-handed tactics to stifle debate with the threat of litigation.
She’s inviting community, labour and Indigenous stakeholders to join with them in taking a stand.
“With the future of the mill now clearly at stake, there are legitimate concerns that Resolute’s intention is to use the disposition of the mill to consolidate its control over local forests by eliminating its Fort Frances facility.
“If so, we believe that is an abuse of the rights conferred under the SFL, and that the province must intervene to ensure that the public’s interest in our forest is not eroded.”
During the same week, Fort Frances officials headed up to Kenora to meet with Natural Resources and Forestry Minister John Yakabuski to table their concerns.
Kursman argued Resolute's position on the mill “evolved” over the past year based on calls he received from residents complaining about its decaying state and the queries from parties asking about parcels of the property or looking to preserve specific buildings for repurposed uses.
Kursman said that informed Resolute’s decision to find a redeveloper, specializing in distressed industrial properties to clean and repurpose it for community use.
“We consider a return to manufacturing operations highly unlikely," he said.
"People came and kicked tires and in the end it didn’t work for anyone. That’s the reason why we refocused and turned to a potential redevelopment project to reposition the site with emphasis on environmental stewardship and community benefit.”
Kursman said the redeveloper has the ability to leverage public and private dollars to repurpose large-scale industrial projects in North America.
“This isn’t someone who’s coming in with a goal of just scrapping and leaving a hole in the ground and walking away.”