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Premier Darrell Dexter announces that the government of Nova Scotia has reached a new agreement to reopen the shuttered NewPage Port Hawkesbury paper mill in Cape Breton, in Halifax on Saturday, Sept. 22, 2012.Andrew Vaughan/The Canadian Press

When it looked like no deal was going to be reached to save the main industry in the Cape Breton town of Port Hawkesbury – a pulp and paper mill – and 300 jobs, parishioners at Saturday mass were despondent.

"And that was the feeling all over town," said Mayor Billy Joe MacLean of the community of 4,000.

How quickly that changed. After an 11th hour, all-night negotiation, the NDP government had figured out a way to save the former NewPage pulp and paper operation, but the news didn't reach the people until late Saturday evening.

Sunday morning parishioners were elated. "He [the priest] said 'just look at the smiles in church this morning.' Everybody is on a high," said Mr. MacLean.

The often outspoken Mr. MacLean even dialled in and interrupted Premier Darrell Dexter's news conference on the deal, inviting him to "come on down and party with me."

"He laughed like hell," said Mr. MacLean in an interview Sunday. Pacific West Commercial Corp., a British Columbia company, is the new owner of the mill. In the deal, it will pay $33-million and plans to have it producing paper by Oct. 1. What sealed it was a forgivable $40-million loan.

Cape Breton's unemployment rate is about 13 per cent and the highest in the province. The mill, which has been operating since 1962 and is the main industry in the area, was closed last year, putting about 600 people out of work.

Not everyone is laughing about the deal, however. The provincial opposition leaders are critical about the way in which they say the Dexter government is putting taxpayers' money at risk to keep one-industry towns afloat.

"This is not a time to take a deep sigh of relief and say, 'phew, we got by there,'" says Liberal Leader Stephen McNeil. "The only way that we as a province are going to move our economy forward is to make sure we stop looking at one employer in these towns and start looking at diversification. And the time to do it is now."

Like Mr. McNeil, Progressive Conservative Leader Jamie Baillie is concerned the NDP government simply gave away millions of taxpayers' dollars without extracting guarantees from the B.C. company about job security and how long the mill will be sustainable.

"We have a 50-year history of bailing out troubled industries and this will be one more example," said Mr. Baillie. "I believe what the government failed to do was to compare the massive costs of this bailout with the alternative of investing in ourselves – a better education system, lower taxes, affordable power rates so that we could build the economy from the ground up. That is the new way that we have to start looking at job creation in Nova Scotia."

Just this summer, Mr. Dexter was criticized when the Bowater Mersey Paper Co. mill on the south shore announced it was closing after it was given a $25-million loan. There has also been controversy over the $300-million the government has lent to Irving to help with upgrades to build the new combat ships – $260-million of that is forgivable. Irving won the huge $25-billion defence contract from the federal government.

Meanwhile, the Dexter government was determined to keep the NewPage mill open and had already spent $36.8-million to keep it in on "hot idle" in anticipation of a buyer. Last month, the Premier announced a $124.5-million funding package to help pave the way for the sale.

Pacific West's president, Ron Stern, had gone to the Canada Revenue Agency for a tax ruling that would help with the purchase. But the ruling went against his company and it announced Friday that it could not do the mill deal.

That prompted a press release from Mr. Dexter on Friday, saying the mill would not reopen. Mayor MacLean called it the "saddest day of my life."

Later that night, Mr. Stern contacted the Premier and negotiations were back on. In the early hours of Saturday morning a new deal was reached, which was taken to cabinet. Mr. Dexter later told reporters that the money provided by the government to help the mill reopen will be repaid in 12 years.

Victor David, the Warden of Richmond County where the mill is located, says he's happy with the results, especially for the county's residents. And Liberal MP Rodger Cuzner, who represents the area, says that everyone has made concessions with this deal, noting, too, that losing 300 jobs would be devastating to the economy.

"To try to gain back that number of jobs, five to 10 at a time, is a big mountain to climb," he said.