Pulp giant's purchase didn't go through a net benefit review, federal officials say

A billion-dollar deal that made foreign-owned Paper Excellence the largest wood pulp manufacturer in Canada passed a national security review but didn't go through a study of its net benefit to Canada, officials with Innovation, Science and Economic Development Canada told members of Parliament Friday.

Testifying before members of the Natural Resources committee, Deputy Director of Investments Mark Schaan said the deal that allowed Domtar, owned by Paper Excellence, to buy Resolute Forest Products for $2.7 billion USpassed a national security review but did not require a study of its benefit to Canada.

"There have been a number of investments by Paper Excellence in Canada over the past few years. These include the acquisition of Catalyst in 2019, of Domtar in 2021 and then of Resolute in 2023," Schaan told MPs. "While none of the Paper Excellence investments have qualified for net benefit review, all of its investments in Canada were reviewed under the national security provisions of the ICA."

While Paper Excellence's owner, Jackson Wijaya, is not Canadian, Schaan said the deal didn't trigger a study on its benefit to Canada because it was an indirect transaction that wasn't subject to review.

NDP natural resources critic Charlie Angus said he was surprised to learn that a study of the deal's net benefit to Canada was not conducted.

"I was absolutely astounded.I was gobsmacked," Angus said afterthe committee hearing. "Something as big as handing over Domtar, Resolute, 22 million hectares of Canadian forest to a foreign entity was not considered worthy of a net benefit test?"

The parliamentary committee hearings come in the wake of an investigation into Paper Excellence by CBC News in conjunction with other media outlets part of a wider look at the global forestry industry under the umbrella of the International Consortium of Investigative Journalists (ICIJ).

The investigation found that the people behind or associated with Paper Excellence appear to have a pattern of using thickets of corporations, including tax havens, effectively shielding transactions and assets from public and government scrutiny.

The company won't open up about its past financing, some of which was facilitated at one point by a $1.25 billion USdemand debenture with the China Development Bank. The bank is owned by the Chinese government.

CBC's investigation also found leaked records and insider accounts that show that, at least until a few years ago, Paper Excellence appeared to have been closely and quietly co-ordinating business and strategy decisions with Asia Pulp & Paper, one of the world's biggest pulp-and-paper players. Environmental groups have said Asia Pulp & Paper has a track record of environmental destruction.

The company maintains that Paper Excellence is completely independent from Asia Pulp & Paper and is owned solely by Jackson Wijaya, who is a member of the family that owns Asia Pulp & Paper and Indonesian giant Sinar Mas.

On Tuesday, John Williams, chairof the Paper Excellence Group,told CBC News that Wijaya is a Hong Kong resident with homes in Shanghai and Newport Beach, California.

On Friday, members of Parliament asked Schaan and DeNeige Dojack, director of operations for the federal government's investment review division, how deeply department officials dug into who controls Paper Excellence and what its ties it may have with Asia Pulp & Paper.

While they said Wijaya was the beneficial owner of the company, officials refused repeatedly to give any details about the company's ownership structure.

"Unfortunately, the details of the ownership structure are subject to the confidentiality provisions of the Investment Canada Act," said Dojack.

In response to a question from Conservative MP Dan Albas, officials did rattle off a list of assurances the company gave the government in return for the green light to acquire Resolute. Previously, the government had refused repeatedly to give details of those assurances, citing the Investment Canada Act.Schaan said the company has since agreed to make those details public.

The officials said the company committed to ensuringthat no less than two-thirds of its board of directors and three-quarters of its senior managers would be Canadian,to continuing to producekraft pulp at the mill in St. Flicien, Que., to maintaining annual maintenance levels and existing Canadian patents, to adhering to Canadian employment and environmental laws and tolearning from Resolute's environmental practices.

Angus questioned how closely the department looked into who controls the company, pointing to a 2017 Nova Scotia provincial government document that said that Paper Excellence was ultimately controlled by Asia Pulp and Paper.

Angus gave notice of a motion for government officials to provide the committee with a lengthy list of documents, including briefing notes and the company's filings to the government. The committee has not yet voted on an earlier motion from Angus to issue a summons for Wijaya to appear before the committee.

The committee is scheduled to continue its hearings into Paper Excellence on Tuesday.

Elizabeth Thompson can be reached atelizabeth.thompson@cbc.ca.