Human resources minister Susan Sullivan appeared on local talk radio today responding publicly to a letter by Grand falls-Windsor lawyer Mark Griffin. In a letter to the Grand Falls-Windsor Advertiser, Griffin raised several questions about government’s expropriation of AbitibiBowater assets including hydroelectric generators.
Sullivan gave radio listeners three reasons for the expropriation. The first – and most important – is one that government used from the start: no one wanted to see the company walk away with “our resources”. The line doesn’t hold up any better now than it did before. The assets weren’t going to leave the province in any scenario and that’s especially true of the hydro generators which could only produce power in Newfoundland.
For many there has been a suspicion from the outset that there was more to the story than met the eye, much more than the nationalist chest-thumping and theatrics surrounding the expropriation bill.
New information points to an answer to the nagging question of why the provincial government expropriated the hydroelectric assets, including Star Lake which never supplied power to the Grand Falls paper operation. It’s an answer that harkens back to the failed Hebron negotiations in April 2006.
In a February 13 interview with Business News Network’s Howard Green, Abitibi chief executive David Paterson said the provincial government moved to expropriate AbitibiBowater’s assets in Newfoundland only after the provincial government lost out in the bidding for Abitibi’s interest in one of its hydro projects. [video link]
“We hadn’t said we were going to sell the assets,” said Paterson, “other than we had a deal on a joint venture power dam and our partner [in that project] was going to buy us out…”.
Paterson said the provincial government - presumably Newfoundland and Labrador Hydro - had bid for the AbitibiBowater interest in the joint venture but had been outbid by the partner. He said the provincial government had been “blocking the transfer” to what Paterson described as an existing investor in the province.
“and now they’ve expropriated them as well,” said Paterson.
Ironically, Newfoundland and Labrador Hydro is reportedly handling the compensation talks with all the companies whose assets were seized. Paterson told the Globe and Mail on 17 December: “[It] basically consists of Newfoundland telling us what they are going to do and we have to comply.”
The description of the partnership sounds like Star Lake, a joint venture between Abitibi and Enel North America. The Star Lake partnership came in response to a call for proposals in the early 1990s from Newfoundland and Labrador Hydro for a small hydro projects that would displace some of the generation at Holyrood. The project sold power directly to Newfoundland and Labrador Hydro.
Star Lake was expropriated in December 2008.
To date neither the provincial government nor the companies involved have answered any questions about the expropriation. Earlier this month, the province’s natural resources department refused to answer a series of questions on the expropriation posed by Bond Papers. The questions included ones that went directly to the issue of Star Lake:
- Why were all the hydro assets expropriated under Schedule C and the various licenses and permissions terminated (Schedule E)?
- Why was this done in December?
- Why was Star Lake included when it was a response to an NL Hydro RFP?
If Abitibi wasn’t planning to sell its other hydroelectric assets in the province, the company may have been looking to sell its power directly to the Vale Inco project at Long Harbour. All that stopped, as would the possibility of selling the hydro assets to Vale Inco, one the privately held generation was seized by the provincial government in December.
This also puts a different light on one of the curious lines in the provincial government’s news release on the Long Harbour project:
The company has also agreed that it will pay the island industrial rate for its power supply, surrendering its option to have a better rate should other industrial customers obtain a better rate for whatever reason.
Once government seized the Abitibi assets and all the company’s water rights, Vale Inco didn’t have a choice. The existing assets were gone as were three projects which together could have supplied Vale Inco’s power needs. There wasn’t any way to develop an alternative to NALCO’s government-enforced monopoly position.
The notion of seizing assets after a failed negotiation isn’t new, either. In 2006, the Premier public vilified the partners in the Hebron talks when negotiations collapsed. He talked openly about the need for legislation which would allow government to seize properties containing commercially viable oil finds if the finds were not developed within a certain period of time.
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