25 February 2010

Epic Fail on seizure looms

Back when the provincial government managed to ram an unprecedented bill through the legislature seizing private assets and crushing active legislation without compensation, one argument used to justify the seizure was novel.

Apparently the environmental clean-up costs and the potential penalty under the free trade deal for the seizure would be so close that the whole thing would wind up being a wash after a negotiated settlement.  No money would wind up changing hands but ultimately the mill – carefully excluded from the initial seizure – would come to the provincial government and Abitibi would just walk away.

Officially, the Premier described the idea this way:

So, if, in fact, there is contamination which is located with operations in Botwood or around the mill in Grand Falls or the logging operations or any other rivers or whatever happens to be where they have constructed bridges or have had a presence in Newfoundland and Labrador, then there may be environmental fallout from that and that has to be quantified. If that is quantified, then that would be offset against any responsibility for compensation. If there is an excess of value over liability, then that would be the amount that would be paid.

And if there was any discrepancy, then they’d add in the amount the provincial government paid out voluntarily to settle issues with some of Abitibi’s former employees.

Nice, tidy and wonderfully convenient.

Things haven’t quite worked out that way.

First the provincial government wound up getting the mill unceremoniously dumped in their laps.

Then Ernst and Young valued the environmental remediation at around $50 million and maybe as much as $100 million.

Now Abitibi has filed its NAFTA claim seeking damages of at least $500 million, reputedly a record amount if it is awarded.

It’s also not far off another old record, the cost of the Come by Chance bankruptcy back in the 1970s which was up to that time the largest bankruptcy in Canadian history.

So now having paid out the workers cash and assumed full liability for the environmental clean-up, the provincial government is now facing a history-making lawsuit for damages.


Dunderdate;  Some choice words from natural resources minister Kathy Dunderdale that reinforce the notion of the whole thing being a wash, at the end of the day on a go forward basis.  From the Telly, 25 Mar 09:

The company has publicly put the price tag for those assets at $300



Dunderdale says the government's figure is lower than that, but would

not say just how far apart the two sides are.


She said the province has a clear idea of how much it thinks the

assets are worth and has determined a range of value it would be

willing to pay Abitibi.

But Dunderdale said the province wouldn't go beyond that range just to settle up with the company.


Mark said...

The province isn't facing much liability at all.

If Abitibi-Bowater is successful, NAFTA allows it to claim compensation from the federal government, not the province. And to my knowledge there is no mechanism in place for Ottawa to claim those damages against Newfoundland subsequently in the event that the expropriatio is found to violate the trade deal.

Aside from its reputation as a place to do business, or a place where the rule of law exists, Newfoundland and Labrador has very little to lose in this NAFTA challenge.

Ed Hollett said...

So then it becomes a matter for the federal government to recover from the province.

There may be no mechanism right now but one should be easy enough to find.

That should be fun, especially given that DW sent a letter to Steve looking for cash supposedly owed to the province.

Incidentally, it might be interesting to see what assurances the provincial government gave the oil companies that it would take no precipitous action against their assets in NL.

Or what other companies might be looking for to avoid such action in the future.

Mark said...

The province didn't sign NAFTA, the feds did. The more interesting policy and legal debate here isn't whether the province will lose, it's what happens consitutionally between levels of government after it (almost certainly) does.

The federal government has, to my knowledge, no legal grounds with which to exact a pound of flesh out of Newfoundland and Labrador in the event of a NAFTA award of damages.

Ed Hollett said...

So just casting my mind back to all the international agreements that included or involved entirely provincial areas of jurisidction...

In all the time those agreements have been around, there has been no agreement or court action to establish how costs are borne?

Peter said...

Do you think Danny is in danger of breaking Clyde Wells' record for failed court cases?

Ed Hollett said...

On this one epic failure, Peter, he'd beat every other first minister in Newfoundland history put together.