A new frontrunner has emerged as a potential purchaser of the former Marathon Pulp mill in northwestern Ontario.
Reliance Developments Corporation has signed a letter of intent with Tembec to acquire the shuttered mill and its lakeside property.
Green Investment Group Inc. (GIGI), an American redeveloper that was in the final stages of purchasing the mill, has “thrown in the towel” claiming the Ontario Ministry of Environment (MOE) put financial conditions on the sale that were too onerous.
“We’re not there anymore,” said Gerry Philippe, GIGI’s vice-president of Canadian operations for Green Investment Group Inc. “It’s just been too difficult with the MOE because the securities that they wanted were very high. We had to do the (cleanup) work before we were able to get the securities back.
“We had to invest double the money for a good period of time, which did not make the project viable for us.”
Established in 2005, GIGI has acquired industrial properties across North America, including some former Smurfit Stone paper mills in New Brunswick and Quebec.
“We have seven other (brownfield) sites and we’ve proven ourselves to be pretty good at what we do,” said Philippe.
MOE spokeswoman Lisa Brygidyr said the ministry’s position is to hold any potential mill buyer to a standard of responsibility which includes providing financial assurance to cover any environmental work.
For now, those liabilities remain with Tembec, which operated the mill until bankruptcy forced its closure in 2009.
What still needs to be done by way of site cleanup was outlined in a 2011 settlement agreement negotiated between the MOE and Tembec.
Because the mill property on the shore of Lake Superior was heavily contaminated, the MOE had final say on any sale agreement.
As the property owner, Tembec was forced to post $4.8 million in financial assurance to the Crown for the site’s remediation.
The money will be returned to the company once the cleanup is finished to the ministry’s satisfaction.
Brygidyr said that’s to ensure Ontario taxpayers and the town of Marathon don’t get stuck with the cleanup bill should the company abandon the property.
The MOE required GIGI to do the same, plus post an additional $2 million for a total of $6.8 million.
Apparently, the MOE had some serious concerns about GIGI’s track record.
The ministry had received information from other places that GIGI had acquired brownfield properties on the East Coast and in the U.S., and then abandoned them without doing any environmental work.
Those jurisdictions didn’t impose any financial assurances, said Brygidyr.
GIGI never posted its security and missed several deadlines to do so, including a final one in late January. That effectively killed the deal.
“I’m not trying to put the onus (of blame) on the MOE,” said Philippe. “I think they encountered a few problems previously with other companies and they didn’t want to get stuck this time.”
He said the company’s plans were to demolish the mill buildings and revitalize the property by bringing in some new companies.
“That’s okay, but we felt we had to pay the price for other experiences that were not necessarily our fault.”
Reliance Developers and its president, Desmond Joseph, are the same company that has purchased the former Thunder Bay Fine Papers mill and are carrying out MOE-imposed cleanup orders there.
Brygidyr said the ministry is not privy to the negotiations between Tembec and any new suitors, but the MOE expects Reliance or other buyers to post financial assurances for Marathon.
Tembec, which declined comment, has hired a Toronto demolition crew which will arrive soon in town to start tearing down some of the buildings on the property.
Ball Packaging, which co-operated the mill with Tembec, paid the Crown $3 million for remediation work in Peninsula Harbour.
The whole matter isn’t sitting well with Marathon Mayor Rick Dumas.
His municipality’s economic development department has fielded queries from companies interested in buying portions of the mill property for new mining and forest-related business.
“In a true Northerner’s words, what a nightmare.”
Dumas isn’t happy that the MOE continues to want an additional $2 million from any potential buyers of the mill when Tembec is liable for any future environmental issues.
Dumas said the MOE’s conditions are holding back economic development on the site and more open dialogue between all the parties needs to happen.
“The promise that every government makes at election time is reducing bureaucratic red tape,” said Dumas. “I need government agencies that are working with us to make sure they’re fully on board in working with the municipalities and government’s best interests.”