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Restructuring agent Peter Wedlake said the spending deal is the result of seven days of negotiations (CBC)

Richmond County has lost the first round in its tax fight against the prospective buyer of the idled paper mill in Point Tupper. Nova Scotia Supreme Court Justice John Murphy ruled Pacific West can go forward with its legal argument to back out of the 10-year deal setting out annual property taxes.

The judge ruled provincial legislation enacting the 2006 deal merely authorized an agreement between the mill's former owner, NewPage and Richmond County. The county argued the deal could not be altered because it is enshrined in provincial legislation.

Pacific West and the county will be back in court on Sept. 13 to present their cases.

Warren Olsen, CAO of Richmond County, downplayed the importance of Tuesday's court ruling, calling it a "procedural" motion. 

"We will be back in court for the real fight which will start Sept. 13 on the merits of this. They maintain they have made offers but they are not fair and equitable. They are certainly not fair to the residents of Richmond County," Olsen said. 

Victor David, deputy warden of Richmond County, said Pacific West's three offers on a new tax deal were "going backwards" and amounted to an 86 per cent reduction in the mill's taxes. 

"It means we will have to raise taxes by approximately 20 per cent if want to keep programs in place now. We have physician recruitment — that could suffer. We have an arena we took over a year and a half ago — that could close. We have grants to volunteer groups. It's a devastating blow," David said in Halifax.  

Marc Dube of Pacific West said the ruling confirmed legal opinion received by the company. 

"We're happy the judge saw things the same way, but it's what we anticipated," he told CBC News. 

"The cost of it is much too high for the asset we are purchasing. We had an appraisal completed. We did our homework on this subject, that appraisal told us the tax rate would be significantly less than what was under the current arrangement."   

Justice rejects $2 million in spending

Also Tuesday, Justice Murphy refused to approve $2-million in spending to restart the paper mill.

The spending request was filed after business hours Monday and did not give all stakeholders enough time to respond, Murphy said Tuesday at a scheduled hearing.

"I'm not satisfied the circumstances justify the extent of the exemption (of required notice)," he ruled.

The paper mill closed a year ago and is under court protection from creditors.

The hearing on the application to spend from restructuring funds will be heard Thursday.

In court Tuesday, the lawyer for Pacific West said the company needs the money to restart the mill as soon as possible.

"It is in the interest of multiple stakeholders to get this ramp-up done and get the mill ready to make paper by the end of the year," Pacific West lawyer Gavin MacDonald told the court.

Under the arrangement, Pacific West will put up $500,000. Around $1.5 million would come from provincial funds set aside to keep the mill operating.

Outside court, restructuring agent Peter Wedlake said the spending deal is the result of seven days of negotiations.

"What we're trying to do is get the mill ready to start producing paper as soon as the deal is closed and to that end there needs to be maintenance done on machinery, there needs to be inspections done because the mill has been closed for a year... some limited supplies just so the mill is in perfect shape, so the mill is ready to roll the day the deal can close and they can start rolling and making paper," Wedlake said.

"The issue is the fall season. They want to be able to take those orders and to confirm with their customers they will be up and operating, so they need to get started in September so they get the fall season for customer orders," he said.

On Tuesday Justice Murphy did authorize a one-month extension of creditor protection for the mill.

The extension is needed because the Canada Revenue Agency has not yet provided an advanced tax ruling sought by Pacific West and Nova Scotia Power.