The Government of Newfoundland and Labrador not only expropriated a paper mill it didn’t intend to seize, but two major houses and land rights over half the town of Grand Falls.
The size of the expropriation fiasco grew in leaps and bounds Tuesday as the House of Assembly started to dissect the budget estimates. The morning’s revelations during committee meetings livened up Question Period in the afternoon.
Natural resources minister Kathy Dunderdale tried to bluster her way through the questions while her boss – the guy behind the mess – jetted off to Ottawa for what his office described as high level meetings.
D’uh!. Premiers don’t have other kinds of meetings.
Dunderdale denied accusations she and her colleagues had tried to hide the expropriation cock-up, claiming it had been revealed in a February 2010 news release. But, that release tried to make it sound as if Abitibi had vacated the property.
What’s worse, the full scope of the mess wasn’t revealed until this past week in the House of Assembly.
What’s more, the provincial government knew of the expropriation blunder in May, 2009, five months after the expropriation. Not a single minister said a peep about the situation. The major league legal foul-up was discovered, incidentally, by a company retained to conduct title searches on the lands after the bill was rammed through the legislature.
According to Dunderdale in the House of Assembly Tuesday, the provincial government originally intended to fix the problem by - wait for it - bringing in a second piece of legislation which gave back the accidentally expropriated bits of land to Abitibi.
You could not make this up if you tried.
Unfortunately for the hapless Williams administration, Abitibi’s bankruptcy made any amendment to expropriate the mill legally impossible. That’s no small irony given that the expropriation was predicated in part on the potential that Abitibi would declare bankruptcy and sell off all it assets. As Premier Danny Williams put it last week in the House of Assembly:
They would have sold them off to some other interest, and we would have been left high and dry and our workers and the environmental issues, none of those would have been resolved; or otherwise they would have gone bankrupt and they would have lost everything and we would not have had anything.
Interestingly, Dunderdale told reporters outside the legislature that the provincial government was “well into the fall” before they realised they wouldn’t be able to introduce the do-over legislation. While Dunderdale didn’t say exactly when she and her colleagues figured out their legislative option was closed, her admission it might have been in November suggests there is some overlap between the realisation their legislative options were closed and a series of events in a Quebec courthouse.
The provincial government launched a legal application in October 2009 just days after a surprise announcement in Buchans about possible contamination of the community from a long abandoned mine. The legal action was an effort to gain access to Abitibi’s private financial information through a data sharing arrangement between Abitibi and its creditors.
The court dismissed the application and with it the Williams administration’s claim to creditor status, finding, in part, that “…[t]he Motion has merely referred to several press articles in support of an alleged claim against Abitibi for the contamination arising from a closed mine in the town of Buchans. [59] These vague and unsubstantiated allegations are, at this point in time, barely supported.”
The court also dismissed the province’s claim to creditor standing through an arrangement with unions to pay severance and other payments to former Abitibi employees:
[54] On one hand, the Province alleges, without supporting evidence, that it has made payments to certain former employees of the Abitibi's Grand Falls mill. Yet, no evidence to establish the nature of the payments made or any lawful assignment of the related claims has been put forward.
[55] Indeed, when one reads paragraphs 7, 8 and 9 of the Motion, it appears obvious that if Abitibi's former employees in the Province claims have been assigned to anyone, it is to an organisation created by the various unions involved, not to the Province. Its role is simply to fund this organisation.
[56] In that regard, the Motion itself refers to claims that will ultimately be made in the restructuring by an "Assignee". According to the Motion, this "Assignee" is certainly not the Province.
Within three days of the failure of that application, the provincial government issued a series of nine environmental orders to Abitibi. They required, among other things, that Abitibi file environmental remediation plans with two months and complete all work within one year.
Aside from the apparently coincidental timing of these actions, it is interesting to see in a decision on whether the environmental claims were barred by a previous decision of the court overseeing the Abitibi creditor arrangements, the court noted:
[60] Although the Province publicly announced that the Abitibi Act did not include the Grand Falls mill then still in operation, a review of the Abitibi Act revealed that, whether deliberately or as a result of the haste in which the Act was drafted, the Grand Falls mill site was, in fact, included in the confiscated assets.
Of course that’s all just extra in a situation in which the provincial government’s strategy in seizing the assets went poof with that legal cock-up. From the briefings given before the bill was unveiled in December 2008 to the Premier’s own public comments as recently as December 2009, Danny Williams intended to leave the company with the environmental liabilities while seizing all the choice assets.
In the end, any compensation for the seized assets would be balanced by the environmental liabilities. The deal the provincial government hoped to strike would see no money change hands. The provincial government might wind up paying for the clean-ups, but it would escape any NAFTA penalties and other payments.
As Williams put it on the day the seizure bill raced through the legislature:
If that [the cost of environmental clean-up] 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.
That isn’t the way things turned out.
The provincial government now owns the mill outright and will wind up covering the costs of any clean-up on its own. In addition, it will still have to pay compensation for the seized assets. Even the Williams administration’s own expropriation legislation calls for it to pay compensation. If the provincial government reneged on its statutory obligation, presumably Abitibi could and would sue.
Then there is the NAFTA claim. Abitibi is pursuing a lawsuit that seeks a minimum of $500 million for what it says was an illegal seizure of assets.
And if Kathy Dunderdale wonders where people are getting the numbers involved, she can just look around. Her own colleagues have been putting costs on the environmental cost for the past year that come to around $200 to $300 million.
For the numerically challenged, or for those living in denial, that would wind up being $800 million: $500 million for NAFTA and another $300 million for the environmental work.
At least.
That’s a pretty hefty cost taxpayer’s will have to bear to clean-up someone else’s mess.
TARFU.
-srbp-