Is the Abitibi Fiasco on the agenda?

The Premier’s trip to Ottawa announced late Tuesday morning is only a surprise if you didn’t know about it in advance.

Regular readers of these scribblers had it yesterday:

When Danny heads off to Ottawa later this week for a round of meetings on a bunch of subjects, …

One item not mentioned on the agenda  - but surely to come up  - will be how the provincial government will repay the feds for the Abitibi expropriation fiasco the Premier will be leaving behind for his ministers to defend. Ministers are discovering the idea of collective responsibility, likely for the first time since the Tories took office in 2003. 

If the provincial government expropriated half the town of Grand Falls by mistake – you could not make up this kind of blunder - you can safely bet they don’t stand a snowball’s chance in hell of winning the claim for $500 million or more that Abitibi levelled against Canada under NAFTA.   The federal government may pay up front but, at some point they will likely come looking for reimbursement from the one who caused the mess in the first place.

What better time to discuss that than when Hisself is in town for meetings?

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The Abitibi Fiasco: a house divided

Premier Danny Williams  - House of Assembly, April 21, 2010 - on the costs associated with his disastrous expropriation bill:

What we are trying to do, and we have throughout this negotiation, is protect the interests of the people of Newfoundland and Labrador because Abitibi owes us anywhere from $200 million to $300 million in environmental liabilities for the mess that they left us, in addition to the severance for the workers that have paid, in addition to what we as a government have put into Grand Falls-Windsor and the Central Newfoundland region.

Provincial environment minister Charlene Johnson  - House of Assembly, April 22, 2010 - on the costs of Abitibi’s environmental liabilities:

Mr. Speaker, under the act the way that we - under the orders that we issued [November 2009]  we require Abitibi to submit to us a remediation plan. There were five orders: Botwood, Stephenville, Grand Falls-Windsor, Buchans and some logging camps. So, until they submit a remediation plan to us - and they had one year to submit this plan and they have done some work on it in the past. Until they submit that plan and until we are satisfied with the plan to ensure that the environmental liabilities will be dealt with, I cannot give you a firm, actual cost until that comes to us and we are satisfied with it.

 

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Epic Fail of The Week: prov gov loses to Abitibi… again

First, the provincial government’s Legal Genius(es) drafted the expropriation bill which seized - all, as it turned out -  AbitibiBowater assets in Newfoundland and Labrador.

They told the good burghers of Danny-ville that this meant only that the power plants and everything else belong to the people of Newfoundland and Labrador.

Everything, except that is for the mill itself, they said which would be used as leverage in negotiations over any compensation for the expropriation.

It would all be a wash, in the end.

Or so people were told publicly and in briefings before the expropriation bill turned up in public.

Then, people discovered that the same Legal Genius(es) didn’t actually exclude the mill as they’d originally claimed.

Nope.

They seized it all.

Big screw up.

Now, the people of Newfoundland and Labrador discover that trying to get some sort of court action forcing the former mill owners to foot the bill for environmental clean-up – as the legal genius(es) assured everyone – won’t work either.

Hands up anyone who is surprised at the latest failure by the provincial government?

Okay, well just stop and think for a minute: 

The Legal Genius(es) behind this latest string of expropriation epic fails would be exactly the same Legal Genius(es) who brought you the Ruelokke legal mess.

And they’d be the same Legal Genius(es) who are now betting massive chunks of the public purse on a law suit against Hydro-Quebec to try and settle a dispute over the 1969 contract.

Any bets on how good that one will turn out for taxpayers in the end?

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Medvale School for the Gifted Update:  Seems the Legal Genius(es) indeed have caught themselves in another bit of jurisprudential bother.  As Russell Wangersky astutely points out, the lovely Abitibi expropriation bill clearly gives no value to water rights and timber rights.  Yet, the scheme to funnel money to Corner Brook Pulp and Paper is based on timber rights having value.

The two things cannot live in the same space.

So either no cash will go to CBPP or, as your humble e-scribbler expects, the real legal geniuses who work for AbitibiBowater (they are 2-0 so far) will use the CBPP cash hand-over to put a much higher price on the expropriation now that they can legitimately claim cash for timber and water rights.

Not only that but AbitibiBowater can also claim – quite rightly – that the expropriation was unusual and punitive aimed specifically at one company and remains without any merit. Coupled with all the nasty words flicked by ministers toward Abitibi, they can likely show that the whole thing was prejudiced and that will only add to the poor beleaguered Newfoundland and Labrador Taxpayer’s legal misery in other places (NAFTA challenge anyone?)

Momentous Update:

Hypothetical Answer by Hard-done-by Citizen:  “Golly Gee Mr. Finance Minister, what will happen if they get more money?”

Not-so-hypothetical Answer by Finance Minister:  “The debt will go up.  We cannot stop the momentum.”

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.

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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

million.

 

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.

Taxpayers shafted

On February 2, Abitibi notified the provincial government that the company vacated the only properties the provincial government didn’t expropriate in December 2008.

As a result, the taxpayers of Newfoundland and Labrador are entirely responsible for cleaning up whatever environmental mess may be attached to the century old facility.

There is no word on how big the problems at the old paper mill are or how much it will cost taxpayers to clean it up.

The official government release on the development is a masterpiece of uncommunication from a department – natural resources – that has become legendary for its practice of the dark art of misinformation. 

There is even a complete contradiction in the claim at the front – namely that the provincial government is now responsible for the sit in every respect and a statement at the back that Abitibi is still liable.

This is the third financial shaft to be felt by taxpayers resulting from the 2008 expropriation.  The first is the yet-unresolved bill for the expropriation itself.  The second is the voluntary payment by the provincial government of money owed by the company.

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Goose and Gander, Quebec and Labrador

Let’s just imagine, dear friends, what might happen if another provincial government acted like the one in this province.

labradore does and the result would not be pretty.

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Fortis/ENEL Expropriation, one year later

Outside the legislature on Wednesday, Premier Danny Williams had this to say about the legal and financial problems that are still hanging around after last December’s seizure of assets by the government under a hastily compiled expropriation bill.

The expropriation will come with a purchase price, but Williams said he now plans to deduct the cost of severance and environmental cleanup from the final amount.

"So, if the possible environmental exposure and, or, the severance were X amount, and the amount that the assets were valued at were substantially less, well, then obviously there would be no payments of cash from the government," Williams said.

One of the great unreported facts of this expropriation – unreported by the conventional media, that is – is that the expropriation didn’t just affect AbitibiBowater.

Nope.

Included in the seizure were assets of Newfoundland and Labrador-based Fortis Inc and an Italian company called ENEL. 

The former was involved in a hydro project that supplied power to the former Abitibi mill at Grand Falls-Windsor and sold the rest to the provincial energy corporation.

The latter was involved in a hydro project at Star Lake that had absolutely nothing to do with supplying anything to the mill.  The Star Lake generating plant was built in response to a call for proposals by the province’s energy corporation about a decade ago. The plant supplied power to the grid to reduce emissions from the diesel plant at Holyrood.

Now if you take the Premier’s comments at face value you get a truly amazing thing and one that is unlikely to be swallowed that easily by the companies involved.

If there are any environmental liabilities related to the Abitibi mill, it would be quite a stretch to suggest that ENEL and Fortis somehow have any responsibility for them given that their operations were not for running the mill.  ENEL has got a real case in this respect, one would suppose.

By the Premier’s construction a company like ENEL could undertake legitimate business activities based on a government contract entered into in good faith by all parties only to find itself, in less than a decade, not only without the assets it paid for but without any compensation whatsoever for the government seizure.

And the excuse for stiffing them is that they somehow gained a liability for something they had no responsibility for in the first place.

This is one of those moments where you’d wonder if the Premier would be quite so calm about it all if someone were trying to pull the same stunt on him.

Meanwhile, one wonders if the rapprochement between the provincial Conservatives and their federal cousins might possibly have something to do with trying to get Ottawa to protect the Newfoundland and Labrador treasury from the fall-out of last year’s seizure.  The federal government has to deal with the international repercussions – like the NAFTA challenge Abitibi filed – but there doesn’t seem to be anything stopping the feds from recovering their costs once the international bits are settled.

Of course, all of this really makes a mockery of recent efforts by the provincial government to win sympathy for its case against Hydro-Quebec.

If the Americans really started to care about it all anyway, might those same New York financiers who supposedly listened sympathetically to the luncheon speech a couple of weeks ago feel quite so favourably disposed to the Premier’s cause if they got the full story on how Fortis and ENEL got screwed over by the Premier’s seizure?

This expropriation business is a long way from settled and the bills are a long way from being paid.  Something says some of the bills won’t be settled in cash, either. 

Payback will be a mother.

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The Twelve Days of Nothing

Unless Danny Williams plans to expropriate something or unilateral declare independence from Canada, this fall sitting of the House of Assembly will be one of the shortest and least productive in living memory.

That’s counting – it should be noted -  the short and very unproductive fall sittings of the legislature since Williams took power.

Overall, the House of Assembly now sits annually for fewer days than Tom Rideout was Premier.

That’s 43 for those who don’t recall.

That’s also about half the number of sitting days a decade and more ago.  There were plenty of days in the spring and the fall where members sat in the legislature and they had plenty of time to discuss and debate legislation.  Plus the legislation they debated was substantial stuff.

This fall sitting – delayed supposedly to allow for a couple of by-elections -promises to be even shorter and lighter than usual.

For starters, the House only sits for a few hours each afternoon from Monday to Thursday, anyway. It used to sit five days a week but under amendments brought in during Brian Tobin’s tenure, the house added enough hours so that members could shag off home or to sunnier climes for a long weekend.

Wednesday afternoons are still given over to debate opposition motions.  That leaves three debate days per week for government business.  And with about two hours per day, that adds up to a total of six hours a week in which the members of the legislature will discuss whatever happens to come forward from the government benches.

The House will likely sit for no more than three weeks so, all told, there will only be 12 days of the legislature this fall.

And that would be 18 hours of debate time.

Once that’s done, we won’t see them back until after Easter, most likely.

Meanwhile, don’t count on much happening.

Last fall,  the House debated 38 bills.  That included 15 amendment acts, mostly for minor changes to existing legislation.  Another 13 were one-clause wonders that repealed an obsolete statute or one that would be replaced in the spring sitting.  They could have been handled in a single bill or, more likely included as transitional clauses at the end of the new midwives act or whatever the new bill would be called when it came into effect.

The remainder were new statutes.

It’s pretty bad when 73% of the legislation in a sitting is either minor amendments or busy work.  That’s really all it was:  legislation to make it look like government was doing something when, in fact they had nothing at all.

But it’s not like there aren’t plenty of commitments – some dating back to 2003 – that still haven’t seen the light of day or are otherwise in some sort of political limbo.  Your humble e-scribbler has even gone so far as helping out by providing draft legislation on one of the government’s biggest commitments from 2007:  a whistleblower protection law. Still, they wind up resorting to busy work.

Now to be fair, a couple of the amendments last fall had serious implications.  Bills 63 and 64 created a new regime that further shields a whole new class of government records from scrutiny under the province’s open records laws.

For all the implications of the bill, though, it wound up getting only got cursory discussion.  New Democrat leader Lorraine Michael even breathlessly  endorsed the bill as if she was a Tory backbencher:

We have an excellent committee and this committee will be accountable to the minister. This committee will be the committee that will determine how the government records are managed. This committee will be the committee that will establish and revive schedules for the retention, disposal, destruction or transfer of records. They will make recommendations to the minister respecting government records to be forwarded to the Archives, will establish disposal and destruction standards and guidelines for the lawful disposal and destruction of government records and make recommendations to the minister regarding the removal, disposal and destruction of records.

The committee may well be excellent but Lorraine’s grasp of the legislation was evidently limited.

In any event both bills sped through the house over a few hours in December.

And that was it, except for the flurry on December 16 in which the government was able to ram a bill through the House seizing the hydro assets of at least three companies, quashing an active court case – find another such statute in the country – and generally creating as gigantic legal and financial battle which has not yet been settled.

We might only hope that something quite as entertaining come sup again.

But then again, maybe not.  The opposition parties went along with the seizure bill without so much as a question.

Let’s see if the 2009 fall sitting winds up being a productive time or, as past experience shows, winds up being a raft of busy work spread over 12 calendars days.

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No word on Fortis expropriation talks

While other power utilities in Atlantic Canada are up for grabs, there’s no word on the status of compensation talks between the Government of Newfoundland and Labrador and Fortis, Inc. resulting from the provincial government’s surprise seizure last winter of hydro-electricity assets in central Newfoundland.

Fortis-owned Newfoundland Properties  was one of three companies – including ENEL and Abitibi – generating capacity in the unexpected, and thus far unexplained, seizure.

Newfoundland and Labrador Premier Danny Williams announced the measures.  Williams introduced a bill in the provincial legislature in December 2008 that also quashed active court cases and stripped the companies of any legal recourse to the seizure.

The seizure of assets caused a loan default among other financial consequences.

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Will Danny expropriate this one too?

Kruger is talking cuts and concessions at the major private sector employer in the premier’s own district.

So far, not a peep from the provincial government.

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Meeker gets behind the ad that is driving ‘em bonkers on The Hill

Geoff Meeker is back from vacation and is lighting things up at his Telegram blog, “Meeker on Media”.

The latest post is the text of an interview with the people behind a series of ads that are keeping political controversy alive in central Newfoundland.

“The reaction from the area MHA's has been disappointing to say the least,” said the spokesperson. “Clearly there are larger influences at work here. Susan Sullivan, whose light was shining so brightly (new MHA, cabinet appointment) has probably dashed her re-election hopes due to her inaction and complicity. Clayton Forsey and Ray Hunter have also placed themselves in jeopardy. Many say that Ray Hunter has achieved his goal of a two-term pension, so does not care either way (his record clearly speaks to this). Municipal officials have been even more inept – Mayor Rex Barnes and his council have failed to grasp the magnitude of this, and have, in fact, been shameless in praising the scraps falling from the provincial government table.”

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Expropriation by the numbers

At long last the rest of us get to see some of the simple print ads that have been causing such political consternation in central Newfoundland among the supporters of the current administration.

There are a series of them, some of which connect the amount of money to specific things like number of magnetic resonance imaging machines you could buy with the cash.

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The story that won’t go away, banner version

Some smart bunny or bunnies is buying advertising in the Grand Falls-Windsor weekly to remind locals how much money is being made from hydro assets the provincial government seized last December.

Run bi-weekly in the local Grand Falls-Windsor Advertiser under a banner that reads "Expropriation by the Numbers," the sparsely worded ads suggest the province has so far earned $28 million from the hydro facilities.

The ads say that's $1,100 for every citizen in the Exploits Valley, and question why more of that money isn't being spent in the region.

There’s a move afoot in central Newfoundland to get the money from the hydro assets to offset the loss of the Abitibi paper mill.

Thus far, the requests have fallen on deaf ears.

But the expropriation story just won’t stop bleeding all over the political landscape.  Not only are the crowd in central looking for cash but there’s a good chance the provincial government will wind up paying big time for the expropriation itself. 

This central story has got to be causing some hard political damage to the careers of people like Susan Sullivan, one of the local members of the provincial legislature.  Even a quickie elevation to cabinet hasn’t silenced the cries for government cash.

Then again, it’s not like the provincial government doesn’t have bags and bags of cash it doesn’t want to talk about, either. 

Odd then that they are resisting any kind of substantive move in central Newfoundland to deal with the ongoing political damage done by the hasty and evidently ill considered seizure back in December. The way this whole mess is unfolding, you’d almost think the whole expropriation was done at the spur of the moment without even a hint of a plan, let alone a second thought for any of the consequences.

N’ah.  Couldn’t be.

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The story that won’t go away

The seizure of assets belonging to three companies last December may have been popular but it could wind up being very costly:

According to Prof. [Russell] Williams and Vancouver-based trade expert Henri Alvarez of Fasken Martineau, Abitibi has a strong case: NAFTA’s Chapter 11 was designed explicitly to prevent these kinds of scenarios. In Prof. Williams’s [sic] view, the suit, if filed, could hit Ottawa with a big legal bill that will likely get passed on to Newfoundland.

Financial costs aren’t the only issue at stake here; there’s also the small matter of how foreign investors are likely to react. For now, government officials aren’t keen to discuss it. Williams’ government would not comment; neither would Trade Minister Stockwell Day. Department of Foreign Affairs spokesperson Laura Dalby said the fact that a notice of intent has been filed “does not establish the merits of a challenge.”

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Chamber concerned seized central hydro assets gain for provincial government, loss for region

The Exploits Regional Chamber of Commerce is very concerned about the benefits from seized hydroelectric assets going somewhere other than the region of the province in which they are located, according to the Grand Falls-Windsor Advertiser.

The chamber estimates that based on electricity used by AbitibiBowater (54 megawatts), savings to Newfoundland and Labrador Hydro in excess of $70 million annually are being realized.

The chamber wrote the CEO of Nalcor in May to try and meet to discuss how the Exploits region could benefit from being adjacent to the source of the power. While the letter was copied to local MHAs and members of the provincial Ministerial Task Force set up to deal with the closure of the mill, Nalcor has not responded.

NALCOR is the provincial government energy company which took control of the assets earlier this year.  They were seized by the government from three companies:  AbitibiBowater, ENEL and St. John’s-based Fortis.

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One of these things…

is not like the others.

1. Hydro-electric generating plants belonging to three private sector companies.
2. Former employees of a defunct paper making operation in central Newfoundland.
3. Fish plant workers.
4. Fish plant operators and fish harvesters.

1.   Hydro-electric generating plants get seized and turned over to the government’s own energy company free of charge, regardless of the NAFTA implications, in one fell swoop and through a bill rammed through the legislature in a day.  The bill also gave government the power to set any compensation, quashed an outstanding lawsuit and decreed that no legal action could result from the expropriation.

2.  Former employees of the defunct paper plant get a shrug initially but then get $35 million.

When the cash is announced, government claims it was their intention all along to pony up.  Odd, then, that people who questioned government publicly on its intentions were savagely attacked.

Odder too that the provincial government called for the federal government to cough up the dough.  There was even one of those eerie coincidence things with the union involved.

3.  Fish plant workers in the province  - upwards of 10,000 people or more staring at no work and no income - are told they’ll get something if necessary, but it is going to take months to figure out what the whole thing will look like, if it becomes necessary.  Think make work and then employment insurance and you’ll probably be pretty much on the mark.

4.  Fish plant operators and fish harvesters  - looking at financial ruin in some cases  - are basically told to sod off given that any cash to them would be a subsidy and well, “international trade agreements”  - like NAFTA - would be affected.

Williams said the province can't get involved in price negotiations, because it could result in trade retaliation from the United States…

 

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Expropriation has financial impacts on NL-based Fortis

From Fortis Inc’s first quarter financial statements, issued Thursday comes an indication of the wider impact Bill 75 has had.

Bear in mind the bill expropriated the assets of several companies besides Abitibi, including the Exploits Partnership which was owned 51% by Fortis Properties.

From the Critical Accounting Estimates section:

Exploits Partnership

Following the announcement by Abitibi of its intention to close its Grand Falls-Windsor newsprint mill on March 31, 2009, the Government of Newfoundland and Labrador expropriated most of the Newfoundland-based assets of Abitibi. The expropriated assets included the hydroelectric generating facility assets of the Exploits Partnership. The Exploits Partnership is owned 51 per cent by Fortis Properties and 49 per cent by Abitibi.

The Exploits Partnership had previously incurred a term loan from several lenders to finance its assets. As at December 31, 2008, approximately $61 million remained outstanding under this term loan. The term loan is withoutrecourse to Fortis or Abitibi, as partners of the Exploits Partnership, and is secured by both the hydroelectric generating assets and related agreements regarding rights to operate and sell power to Newfoundland Hydro during the term of the loan. Although the expropriation has caused the Exploits Partnership to default on the term loan, to date the lenders have not demanded accelerated repayment of the term loan. The Exploits Partnership made the scheduled term loan payment for the quarter ended March 31, 2009. As at March 31, 2009, the balance outstanding under the term loan was approximately $60 million. [bold added]

The generation and sale of electricity by the Exploits Partnership continued in the normal course until the newsprint mill closed on February 12, 2009, up to which point Newfoundland Hydro paid the Exploits Partnership for the energy produced on the same basis as the pre-expropriation power purchase agreement. Payment for all energy delivered since February 13, 2009 is currently outstanding from the Government of Newfoundland and Labrador pending resolution of expropriation matters. The day-to-day operations of the hydroelectric generating facilities have been assumed by Nalcor Energy, a crown corporation, as the agent for the Government of Newfoundland and Labrador with respect to this matter.

On March 24, 2009, the Government of Newfoundland and Labrador announced that Abitibi had discontinued discussions with Nalcor Energy regarding compensation for the expropriated assets. Abitibi, which was incorporated in the US, has also indicated that it intends to challenge the expropriation of its assets and seek compensation through the North American Free Trade Agreement.

Historically, the financial statements of the Exploits Partnership were consolidated in the financial statements of Fortis. Pending resolution of the above matters, deferred financing costs of $2 million and utility capital assets of $61 million related to the Exploits Partnership were reclassified to other assets and the $61 million term loan was reclassified as current on the consolidated balance sheet of Fortis as at December 31, 2008.

During the quarter, the combination of uncertainty created by the expropriation and the loss of control over cash flows of the Exploits Partnership has required Fortis to commence reporting its investment in theExploits Partnership using the equity method of accounting, effective February 13, 2009. Consequently, the assets and liabilities of the Exploits Partnership are no longer consolidated in the accounts of Fortis. Equity earnings recognized during the first quarter of 2009 were equivalent to the amount that would have been recognized in the absence of the expropriation. This approach is consistent with the public statement of the Government of Newfoundland and Labrador that it is not its intention to adversely affect the business interests of lenders or independent partners of Abitibi.

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AbitibiBowater launches NAFTA challenge

The following was released today by AbitibiBowater (paragraphing changed for legibility):

US$
ABWTQ (OTC)
ABH (TSX)

MONTREAL, April 23 /CNW Telbec/ - AbitibiBowater today filed a Notice of Intent to Submit a Claim to Arbitration under the North American Free Trade Agreement ("NAFTA") with regards to the expropriation of its assets and rights in Newfoundland and Labrador, Canada. It is the Company's position that the passing of Bill 75, which expropriates the Company's provincial assets and contractual rights to natural resources, by the provincial government was arbitrary, discriminatory and illegal. AbitibiBowater is seeking in excess of CDN$300 million in direct compensation for the fair market value of the expropriated rights and assets, plus additional costs and further relief as the Arbitral Tribunal may deem just and appropriate.

In early December 2008, AbitibiBowater announced various capacity-reduction measures, including the permanent closure of its Grand Falls mill, as a result of the economic downturn and decline in product demand. In retaliation, the province hastily passed Bill 75, without any attempt to consult with the Company and without holding any public hearings.

The Company has asserted in the Notice of Intent that Bill 75 unquestionably breaches Canada's NAFTA obligations on a number of grounds, including among others:

- Basis of Expropriation: NAFTA explicitly details the grounds under which government expropriation can occur. The criteria for expropriation are not met in Bill 75.

- Fair Compensation: AbitibiBowater is entitled to immediate, full and fair compensation. Bill 75 does not ensure payment for the fair market value of the expropriated rights and assets.

- Denial of Justice: Bill 75 purports to strip AbitibiBowater of any rights to access the courts, which is independently a violation of NAFTA.

- Discrimination: AbitibiBowater should be afforded the same rights and privileges as all other domestic and foreign investors. Bill 75 is retaliatory in nature and discriminates against the Company.

"AbitibiBowater has been operating in Newfoundland and Labrador for more than a century, contributing significantly to the region's economic, social and sustainable development," stated David J. Paterson, President and Chief Executive Officer.

"The nationalization of our assets was unexpected and an unnecessary course of action. It came despite our proactive outreach to form a joint working group to address and resolve all issues related to our rights and assets in the province. The Company remains open to seeking a collaborative resolution with the federal and provincial governments."

The expropriation relates to a broad range of AbitibiBowater's rights in Newfoundland and Labrador, including land rights, timber rights, water use rights and various other related rights and business partnerships, and these rights can be traced back in part to grants by the provincial government and its predecessors, as well as to other third-party transactions. In addition to the substantial sums it expended to acquire these rights, the Company has invested hundreds of millions of dollars in the province over the last century, ranging from capital investments in mill operations to road projects that have helped build rural Newfoundland.

Since the Company is incorporated in the state of Delaware and carries out business activities in the United States, the expropriation of rights and assets represents a breach of Canada's obligations to a U.S. investor under Chapter Eleven of NAFTA.

The Company has filed this notice as part of the dispute resolution mechanism available under NAFTA and will submit the claim to arbitration in three months, pursuant to the relevant NAFTA provisions, should this matter not be resolved by that date.

"It is our obligation to defend the interests of our shareholders and ensure we receive compensation for the fair market value of the expropriated assets, plus additional damages. With this notice, we have taken the first step in pursuing legal actions," added David Paterson.

Media should take note that copies of the Notice of Intent under Chapter Eleven of NAFTA are available upon request. The following paragraphs may be of interest:

NAFTA Provisions Breached: Paragraphs 6-7
Underlying Facts: Paragraphs 8-11
About AbitibiBowater: Paragraphs 12-17
AbitibiBowater's History and Rights in the Province: Paragraphs 18-29
Additional Investments: Paragraphs 30-33
The Hydro Assets: Paragraphs 34-41
The Grand Falls Mill Closure Plan: Paragraphs 42-51
The Province's Ultimatum: Paragraphs 52-54
The Province's "Justifications": Paragraphs 55-58
Expropriation: Paragraphs 59-67
Denial of Justice: Paragraphs 68-69
Lack of Compensation: Paragraphs 70-71
NAFTA Violations: Paragraphs 72-86
Relief Sought: Paragraph 87

AbitibiBowater produces a wide range of newsprint, commercial printing papers, market pulp and wood products. It is the eighth largest publicly traded pulp and paper manufacturer in the world.

AbitibiBowater owns or operates 23 pulp and paper facilities and 30 wood products facilities located in the United States, Canada, the United Kingdom and South Korea.

Marketing its products in more than 90 countries, the Company is also among the world's largest recyclers of old newspapers and magazines, and has third-party certified 100% of its managed woodlands to sustainable forest management standards. AbitibiBowater's shares trade over-the-counter on the Pink Sheets under the stock symbol ABWTQ.

For further information: Investors: Duane Owens, Vice President, Finance, (864) 282-9488; Media and Others: Seth Kursman, Vice President, Communications and Government Affairs, (514) 394-2398, seth.kursman@abitibibowater.com

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Nothing could be further from the truth: Abitibi expropriation version

Natural resources minister Kathy Dunderdale answered a question yesterday on the offer the provincial government made for Star Lake.

Here’s her answer:

Mr. Speaker, some time ago Abitibi Bowater informed the Province that it was considering selling its Star Lake asset and invited the Province to make a bid. The Province through Nalcor did that, Mr. Speaker, and the bid was not accepted, in part due to an agreement they have with their shareholder on Star Lake who has the right of first refusal. It was certainly clear to us that Abitibi really was not interested in selling that asset to the Province. We made a fair bid, it was not accepted and we have moved on. It was not a matter of any great consequence, Mr. Speaker, and we were not trying to hide anything from anybody in terms of our discussions around the expropriation. It was completely new discussion at that point in time.

As a rule, when someone volunteers something that is not directly related to the question – especially if it is a denial -  then you can safely assume this is a sensitive issue.  Yu might even believe that the denial isn’t the truth, the whole truth and nothing but the truth.

You could even believe that, in fact, nothing could be further from the truth than the denial.

That’s why this bit of Dunderdale’s comments sand out.  They don’t fit.  They are unnecessary and they are a denial of something that hasn’t been said, at least in the House.

… have moved on. It was not a matter of any great consequence, Mr. Speaker, and we were not trying to hide anything from anybody in terms of our discussions around the expropriation. It was completely new discussion at that point in time.

Odd are that the expropriation had a whole big bunch to do with that experience. So big a bunch and such a gigantic portion that until February, Dunderdale and her boss hadn’t said boo about the whole affair. The rest of us learned of it about February 20.

And of course, the fact is that Dunderdale’s department was and is trying to hide everything about the expropriation. Bond Papers readers already know that.

In fact until yesterday, the department wouldn’t even confirm the expropriation process.  Even then it only got a one liner in a news release that also looks suspicious, suspiciously like an attempt to appear to be doing something in the midst of a local political crisis.

Yesterday, was also the first time Dunderdale gave any accounting whatsoever of her secret mission to Ottawa, an issue we pointed out when it happened, over a month ago.

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Compensation talks? We dun need no stinkin’ compensation talks

Apparently compensation talks between the provincial government and AbitibiBowater have broken off.

When they broke off no one knows since natural resources minister Kathy Dunderdale didn’t say and apparently no one asked. Talk about freedom from information.

But were they ever on in the first place?

According to AbitibiBowater chairman David Paterson, the only “talks” involved Abitibi and the provincial government’s energy company, NALCO.

Still, he said, the process is very one-sided. "[It] basically consists of Newfoundland telling us what they are going to do and we have to comply."

He said the expropriation legislation does not give the company any right to a judicial hearing. As a result, the determination of value "is at their whim."

Read the comments on the CBC story linked above though and you’ll see a bunch of people who don’t appear to have thought all this through.  Telling Abitibi to take nothing doesn’t real solve anything, especially if the company winds up in bankruptcy protection or  - worst of all – goes under entirely.  There are a bunch of pensioners in Newfoundland and Labrador with a financial interest in this. Then there are the loggers who have been looking for some sort of severance package even though their union contract didn’t provide anything of the sort.

These sorts of details make the last sentence of the CBC story a bit odd:

While AbitibiBowater has no legal obligation to pay any severance at all, the government has been pressuring the company to pay it anyway as it did when it closed its mill in Stephenville.

Since the company doesn’t have any interest left in the province and the provincial government seized all the company’s assets, exactly what sort of leverage the provincial government might have over AbitibiBowater is a bit hard to see. maybe the only people who will wind up with “nuddin” - to quote one person who commented on the CBC story – will be the mill’s former workers.

Environmental trade-offs update:  Just for those who haven’t been following along closely, the provincial government had intended from the outset to bargain based on a trade off between the environmental clean-up at the mill site and the hydro assets.  The Telegram version of the story makes reference to this without giving that bit of background:

She also said the discussions included severance packages for loggers and the companies environmental liability of its operation.

Basically, the idea is that the money paid by the provincial government would be reduced by any amounts forked over for clean-up and severance.  Now aside from the fact the provincial government has no leverage over AbitibiBowater on the severance, it surely must strike someone as odd the provincial government would tie these things together in this way.

After all, the company is liable for the clean-up any way.  They could also be pressed on a moral obligation to provide some severance package to loggers even if their union hadn’t been able to secure that benefit.

But linking those payments to compensation basically seems to make the provincial government out as the source of the cash.  The company won’t be paying any money for clean-up or severance under this scheme.  The cash will come out of public funds.

And if the company goes bankrupt, as some seem to wish for, the provincial government will essentially be left holding the entire bag.

So what exactly was this expropriation all about, again?

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