Council legal opinion did not consider possible 2017 license audit: report

By Merna Emara
Staff Writer

A legal opinion provided to the Town of Fort Frances on wood allocation of the Crossroute Forest did not include a possible 2017 audit – that would have been the most recent audit which also referenced the mill being closed -– and suggested an uncertain, but possible, path for the town to legally challenge the renewal of the forest licence.

The 12-page opinion, provided to the Times by a source who requested anonymity because they are not authorized to speak to it, was a draft document produced by Gowling WLG (Canada) LLP on Jan. 28, 2019, and emailed to Tannis Drysdale, economic development officer.

The Crossroute Sustainable Forest License (SFL) was given to Resolute Forest Products in 1997, for the purpose of harvesting wood. The license then gets extended every five years, based on audits that assess the compliance of the license holder.

The opinion, prepared while Resolute still owned the mill property, was to answer four questions: whether Resolute Forest Products was harvesting and supplying forest resources from the Crossroute Forest management unit in a manner that complies with the terms and conditions of the SFL, whether the Ministry of Natural Resources and Forestry may act to amend or vary the terms and conditions of the Crossroute SFL, whether the Ontario province may be liable to a third party for failing to enforce the terms and conditions of the Crossroute SFL, and whether Ontario has jurisdiction over private transactions relating to Resolute’s Crossroute SFL.

The firm provided the opinion to council in January 2019 but stated at the time that a full legal opinion would not be possible without an Independent Forest Audit (IFA) that was reportedly conducted in 2017 – a fact which was pointed out several times in the document. Although the existence of an IFA was referenced in Resolute’s Annual Report, the firm was unable to locate it for the opinion. The Times has not been able to confirm that an IFA was conducted in 2017. Seth Kursman, senior spokesperson for Resolute, wrote in an email to the Times that an audit was done and submitted to the ministry January 2018.

The Times also reached out to Drysdale for comment, but she declined to provide one on grounds that the legal advice is considered privileged.

At the time the opinion was provided, an audit was not available on the ministry’s website, according to standard protocol. However, one was placed in the ministry’s archives on Oct. 7, 2019, about eight months after the opinion was rendered to the town. The audit was finally posted to the ministry website July 2021.

“For a more recent conclusion on wood supply condition compliance, we should obtain and review a copy of the 2017 IFA for the Crossroute SFL,” the report states.

IFAs are the process by which the minister is advised of non-compliance with a license. Under Section 26(4) of the Crown Forest Sustainability Act (CFSA), if the minister is not satisfied that Resolute has complied with the terms of the Crossroute SFL, the license will not be extended, according to a footnote in the legal opinion.

However, the firm concluded that Resolute had complied with the terms and conditions of the Crossroute SFL – based on the 2012 audit.

Fort Frances Mayor June Caul said the town has not requested a follow up opinion that includes any audit conducted in 2017.

“Sometimes I get really angry with myself, because we depend and trust the people who are working for the benefit of the town, because we don’t have the knowledge that sometimes I wish I had,” Caul said. “Council is made up of everyday people on the street who just want to help the town become a better place.”

Caul added that she wished she had known the significance of the possible 2017 audit before the mill started coming down. She said this puts a question in her mind.

“The [Rainy River Future Development Corporation] should have been saying that there should have been an audit done for 2017 right away,” Caul said. “That audit made a heck of a big difference because Fort Frances was taken out of the equation as far as wood supply. That’s what made me angry and that’s why I started questioning.”

After the last publicly available IFA, the Fort Frances paper mill shut down its operations in 2014. But based on the 2012 audit, Resolute has delivered forest resources under the Crossroute SFL to its facilities in Thunder Bay, Sapawe and Ignace.

However, the legal opinion states that it is not possible for them to confirm that Resolute is meeting volume allocation following the closure of their facility in Fort Frances.

Gowling also said that Ontario can amend the terms and conditions of the Crossroute SFL or create an overlay license, as stated in the CFSA.

According to the CFSA, a SFL should be cancelled and a new one is to be granted to a company that was formed for the purpose of carrying out forest management responsibilities in the unit that is not associated with any particular forest processing facility.”

The Crossroute SFL, numbered 542245, issued in 1997 to Resolute, was transferred to the Boundary Waters Forest Management Corporation (BWFMC) in 2020 under the same license number.

The legal report also did not reference the December 2017 Order in Council that extended the SFL license for 10 years. The last Order in Council also did not refer to a 2017 IFA.

Caul said the Crossroute SFL expired in 2017, and a new one should have been issued for the BWFMC. She added that experts hired by the town should have seen the red flags in the legal report.

“The people who have worked on the Boundary Waters management plan…have gone to all the meetings when the Crossroute Forest changed over to the BWFMC,” Caul said. “They should have made sure the legal counsel that they did ask had a report given in 2017. It makes you wonder why they would have moved further with that.”

Gowling stated in the opinion that wood supply agreement guarantees the availability of certain forest resources to commitment holders identified in an SFL. In the Crossroute SFL, Resolute was to supply certain volumes of timber products to the Fort Frances processing facility, Ainsworth GP Ltd., and other traditional operators.

However, only the minister is required to consider whether Resolute is complying with the Crossroute SFL term and conditions.

The opinion states that while there is no formal reporting mechanism under the CFSA, they did not see any barriers to the Town of Fort Frances writing to the minister asking them to exercise their power to cancel a license, provided there is evidence of noncompliance.

“The ball is in Greg Rickford’s court and for somebody from the ministry to finally step up and start investigating a little bit themselves,” Caul said. “I think they’ve been quite content to just sit in their offices and their excuse has always been that this is a private company. But there were people interested in getting wood supply to use. But Fort Frances was taken out and nobody stepped up to say this is not right.”

The Times also reached to Rickford for comment, but none was provided as of press time.