In a move Premier Danny Williams described as unprecedented, the Government of Newfoundland and Labrador introduced legislation in the House of Assembly Tuesday that canceled timber, land, mineral and water rights and expropriated title and rights to other lands and assets held by AbitibiBowater in Newfoundland and Labrador.
The bill moved through all three stages of debate and received royal assent in a single afternoon, thereby coming into immediate effect.
The move was explained as the "repatriation" of provincial resources from a company based on, in the Premier's words during Question Period, "the fact that the bargain was broken which had been established over a century ago." The bargain, as he described it, was the use of timber, land and hydroelectricity to produce pulp and paper. AbitibiBowater announced two weeks ago that it would close its mill at Grand Falls-Windsor in the first quarter of 2009.
The bill provides no compensation and absolves the Crown from any legal action arising from the expropriation, except for the hydroelectric assets. However, the manner and amount of that compensation is to be determined by the cabinet alone.
In Question Period, the Premier said that the government wrote the company last Friday seeking transfer of all assets to the Crown without any charge. The company replied on Monday that it would not do so but wished to enter into discussions on transfer and compensation.
"At that point, of course, we felt that this was certainly an urgent matter that should be dealt with forthwith. As the House is moving towards the Christmas period, it is a closer time, a tighter time, and we felt the matter was of such importance that we should deal with it as soon as possible."
According to the Premier, the company as well as the company's partners and creditors in two hydro-electric developers, were notified 30 minutes before the House of Assembly opened for the afternoon sitting.
The move is in stark contrast to the orderly dismantling of Abitibi's Stephenville operation. That closure included - for some unexplained reason - removing a paper machine from the province that had been originally destined for Grand Falls before a deal was struck between Abitibi and the Peckford administration to open a paper mill at Stephenville.
Included in the expropriation are two joint ventures between Abitibi and private sector companies to generate hydroelectricity. One of them, at Star Lake, was developed entirely in response to a request for proposals from Newfoundland and Labrador Hydro to replace some of the power generated by Hydro's diesel generator at Holyrood. It did not supply power to the mill.
As Bond Papers noted last week, "[e]xpect NL Hydro to purchase these assets from the private sector partners, one of which is Fortis, with the power being sold to Vale Inco." That's pretty much what will happen except that cabinet will dictate the terms and conditions of the deal. The hydro assets will now be operated by Hydro directly or through another subsidiary of NALCO Reborn.
This whole move is not without some context and foreshadowing.
The most immediate context may be the prospect of AbitibiBowater declaring bankruptcy, a point raised in series of questions by the opposition. That issue was raised in the the House of Assembly, interestingly enough at the time the Premier and natural resources minister Kathy Dunderdale were outside the legislature announcing Nalco Reborn.
Innovation minister Shawn Skinner fielded the questions on behalf of government that day:
We are aware of the challenges that AbitibiBowater as a company are facing. We are looking at the options and the alternatives that may come from the situation they find themselves in. They may be in a situation of bankruptcy or receivership, they may bounce back and maybe become a very profitable and productive company, but as it is right now, Mr. Speaker, they are a company that is open. It is operating. It has many operations throughout the world. They are still operating and we will monitor the situation as we have done to ensure that our rights as a government and the rights of the people who work with Abitibi, who are residents of this Province, are protected.
As it turned out, that was a day before the government issued its demand for transfer of the assets free of compensation.
The Premier dealt with similar questions on Tuesday, responding at one point:
Of course, the core reason for this particular action is because, in fact, there was, as I said before, back in 1905, a Charter Lease which was executed which very clearly tied the milling and logging operations to the waterways and the water power and the hydro power. So, as a result of their announcement that this particular mill in Newfoundland and Labrador is closing down, we feel, obviously, we have the right then to repatriate those assets and, in fact, expropriate the power assets, but we have no information before us right now that indicates that this company is going bankrupt. If it did go bankrupt, then there are other consequences.
The curious thing about that response is the reliance on the initial charter which established the mill in 1905during the administration of Sir Robert Bond. Many of the timber, land and hydroelectric assets expropriated on Tuesday were acquired subsequent to the original charter. The government also didn't expropriate the mill itself, perhaps due to potential environmental remediation costs associated with that asset.
The Premier told the legislature on December 8th that the government had been considering legal options with respect to the Grand Falls-Windsor operation for several years. He said:
I can quite honestly say that this government has looked at the legal issues surrounding that mill for a considerable period of time - over several years since we have actually been in office - with regard to demands that Abitibi were making, based on previous agreements and previous rights that they assumed that we have. So we have been constantly reviewing this from a legal perspective and made sure that we protected the interests of the people of Newfoundland and Labrador.
From our own perspective, on an ongoing basis, we obviously are obtaining legal opinions. I think it is in the best interests of everybody involved that we not share those legal opinions because, obviously, we have a preferred advantage there and some leverage with the company and that is something that we would prefer to continue on with.
The first option is the best option. The company does the right thing, does the right thing for the people of Newfoundland and Labrador, and particularly Grand Falls and surrounding areas, after 100 years is that they pass these assets back over. That would be the timber assets - which actually, a month ago, we were actually prepared to pay for on the basis that we wanted that x number of dollars to go back into the mill and allow the mill to have some longevity, which is what the workers indicated.
The other remedy would be a court action, the other remedy would be an expropriation, and the other remedy would be an act of this Legislature which deals with the entire problem. [Emphasis added]
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