$50M cost overstated: Harmac

Robert Barron, The Daily News
March 13, 2009

Banks are hesitant to deal with business that want loans using properties that carry large environmental liabilities as collateral.

A Nanaimo banker who did not want to be identified said if Harmac was to default on a loan due to bankruptcy, preparing the property for resale for the bank to attempt to recover its investment would require an environmental cleanup that may exceed the initial loan.

"Ultimately, it's the responsibility of the companies that created these problems to deal with their impacts, but Pope & Talbot is gone, as are the previous owners of Harmac, so there's no one left with deep enough pockets to cover these costs and banks are understandably apprehensive about lending money," he said.

David Bramley, Harmac's environmental superintendent, thinks the $50 million cost that has been estimated for Harmac's environmental cleanup is "way out in left field."

He said a similar environmental cleanup at the Squamish pulp mill site, also estimated to be in the tens of millions of dollars, came in at just a fraction of that.

Bramley said environmental liabilities at Harmac include the mill's 600-metre-by-220-metre landfill site, which has been collecting waste since the mill opened 60 years ago.

"Most of the landfill consists of benign ash from unburned wood from the mill's operations but the calcium carbonate, or lime, waste could leach into the surrounding water and soil," he said. "However, that can be contained and capped fairly easily."

Bramley said environmental liabilities at Harmac also include chemicals and acids stored in tanks at the site that are used for the mill's operations.

He said the only way for the chemicals to cause significant environmental damage is if they ruptured, which has never happened. In the event of Harmac shutting down, the chemicals could easily be shipped to another facility.

Bramley said asbestos around the mill's boiler is included in the liability but 80% of that has been removed over the years and an underground fuel storage tank at the mill, which would be a huge environmental liability, was also removed decades ago.

"No matter what the costs of an environmental cleanup at Harmac, none of it would have to happen if the mill continues to operate and we have some really good projects, like the production of green energy, that will help Harmac move forward," he said. "I think it's unfortunate that the banks aren't comfortable lending us money to help make our operation more successful."

Bassett said that even though Charlestown Investments didn't do an environmental assessment of Harmac when it was considering buying the mill, the company's experience at the Port Alice mill and other similar projects has led him to conclude that cleanup costs of $56 million at Harmac may be conservative.

"It should also be pointed out that these numbers are under the Liberal regime and not the one that the NDP had in place that required remediation to a 'natural state'," he said. "If the NDP won the election and brought back this remediation standard, these numbers would probably be higher."

HISTORY OF UPGRADES
Harmac has spent almost $130 million on environmental projects since 1970.

1. Installation of spill collection systems (1970 to 1996): $16 million.
2. Dioxins and halogens in Harmac's effluent reduced 96% (1989 to 1992): $39 million.
3. Cut water use in half. (1992 to 1994): $20 million
4. Built a secondary treatment facility to prevent the discharge of toxic effluent. (1992-1994): $55 million.
5. The elimination of the use of chloride gas for bleaching in 1995: $3 million.