Aug 25, 2008. /Lesprom.com/.B.C. Supreme Court upheld a fibre-supply agreement for the Mackenzie pulp mill and approved a purchase agreement with Edmonton-based Worthington Properties, clearing the way for a start-up of the mill in the economically troubled town, The Vancouver Sun reported. Worthington president Dan White is expected to arrive in Mackenzie Friday to meet with former managers and employees of the mothballed Pope & Talbot mill to discuss a start-up strategy, Worthington lawyer John Sandrelli said after the court ruling. The resource town of Mackenzie, population 4,700, has been hit hard by the forest sector downturn. Besides losing the pulp mill, the town has had a paper mill and three sawmills close within the past year. Upholding the fibre-supply agreement with Canfor Corp. was a crucial element in the deal to restart the pulp mill. A condition of the sale is that the agreement be transferred to the purchaser. Justice Donald Brenner's ruling does not completely close the issue, however. Canfor has the option of appealing, said Shelley Fitzpatrick, counsel for the forest giant. Details of the purchase agreement reveal that the fibre-supply agreement, which obligates Canfor to provide 200 thousand tonnes of wood chips a year to the pulp mill, is worth more than the pulp mill itself. If PricewaterhouseCoopers exercises an option not to transfer the licence, the $20-million purchase price for the pulp mill is reduced by $13.5 million to $6.5 million. If Worthington chooses an option not to accept it, the purchase price is reduced to $7.5 million, giving the fibre-supply agreement a value of $12.5 million. "The reality is: Without the fibre-supply agreement, the mill is not worth very much in the current environment," Worthington lawyer John Sandrelli said. Canfor owns a sawmill adjacent to the pulp mill and the two operations thrived from the symbiotic relationship during better times in the forest industry. A conveyor belt transferred the wood chips, residue from the sawmilling process, to the adjacent pulp mill. However, the collapse of lumber prices prompted Canfor to shut the sawmill down. It argued in court that its consent is required for the fibre-supply agreement to be transferred to a new owner. Justice Brenner rejected that argument, saying details in the agreement don't support Canfor's view. Sandrelli said the potential of an appeal by Canfor means there is still uncertainty surrounding the fibre-supply agreement. But there is no uncertainty about Worthington's commitment to complete the purchase and get the mill operating. Either option would add significantly to the mill's operating costs. Canfor currently receives about $17 million a year for its chips. Whole-log chipping would add about $13 million a year to fibre costs for a total cost to Worthington of $30 million a year to replace Canfor's wood chips. The pulp mill closed on June 11, throwing 270 people out of work, one month after Pope & Talbot went into receivership.