Shawn through the Looking Glass

Shawn Skinner is the latest Conservative cabinet minister to find himself swept through into the looking glass world of the province’s natural resources ministry.

This is the bizarro world, you may recall, where the complete cock-up by the provincial government – expropriating an environmental mess – turned magically into a world where AbitibiBowater appeared to abandon its responsibilities and the provincial government rode in to save the day.

There is the truth.

And then there is a natural resources news release and never the twain shall meet, so it seems.

Or to paraphrase a famous old, former politician:  nothing could be further from the truth.

On Tuesday, the newly minted minister issued a news release to tell the people of the province that a draft bill in front of the legislature is about denying compensation to AbitibiBowater for the expropriation in 2008.

The action we are taking through these amendments will ensure that Abitibi-Consolidated will receive no compensation from the Government of Newfoundland and Labrador.

And so in this looking glass world, Skinner tells us, a thing is not what it is;  it is what it ain’t.

Abitibi is already compensated to the tune of  $130 million federal tax dollars for the clusterfrack called the expropriation.  They do not need any further compensation, since they already have it.  Thus, in Skinner’s construction, the bill is not about what it is, but what it is most definitely not about.

Don’t worry if your head is spinning at this point.  Skinner’s is too.

His noggin must be twirling since Skinner then describes Fortis, Enel and a raft of other companies whose property was expressly seized and whose legal rights were brutally extinguished to have been mere “bystanders” to the whole affair. 

Once again, there is the truth of what the bill expresses says  - take Schedule E as the bit we are talking about - and there is what Skinner says. Those two things can only exist in the world inhabited by the average Dannystanni cabinet minister.  Here is Schedule E:

1.  The "Acknowledgement and Consent Agreement (Water Use Authorization)" dated 24 April 1997 between the Star Lake Hydro Partnership, the Mutual Life Assurance Company of Canada ; and the Crown, and all amendments including the Supplementary Acknowledgement - Crown Water Use Authorization dated 9 May 2001 and assignments of them.

2.  The "Acknowledgement and Consent Agreement (Crown Water Power Licence)" dated 24 April 1997 between the Star Lake Hydro Partnership, the Mutual Life Assurance Company of Canada ; and the Crown, and all amendments including the Supplementary Acknowledgement - Crown Water Power License dated 9 May 2001 and assignments of it.

3.  The "Hydro Consent and Acknowledgement Agreement" dated 31 July 2002 between the Exploits River Hydro Partnership, Clarica Life Insurance Company, and Newfoundland and Labrador Hydro and assignments of it.

4.  The "Agreement for the Purchase and Sale of Power and Energy" dated 18 September 2001 between Abitibi-Consolidated Inc. and Newfoundland and Labrador Hydro, and all amendments, including the Assignment dated 31 July 2002 between Exploits River Hydro Partnership, Abitibi-Consolidated Inc. and Newfoundland and Labrador Hydro, and assignments of them.

5.  The "Restated Agreement for Non-Utility Generated Power and Energy" dated 24 April 1997 between Abitibi-Price Inc. and Newfoundland and Labrador Hydro, and all amendments, including the Assignment dated 24 April 1997 between the Star Lake Hydro Partnership, Abitibi-Price Inc. and Newfoundland and Labrador Hydro, and assignments of them.

6.  The "Acknowledgement and Consent Agreement" dated 25 April 1997 between the Star Lake Hydro Partnership, the Mutual Life Assurance Company of Canada ; and Newfoundland and Labrador Hydro, and all amendments and assignments of it.

7.  The "Acknowledgement - Power Purchase Agreement" dated 24 April 1997 between the Mutual Life Assurance Company of Canada, in its own right and as agents for the Canada Life Assurance Company, the Maritime Life Assurance Company, Sun Life Assurance Company of Canada, the Standard Life Assurance Company and Industrial-Alliance Life Insurance Company, the Star Lake Hydro Partnership; and Newfoundland and Labrador Hydro, and all amendments and assignments of it.

So let us have no more of this nonsense, shall we?

Instead, let us talk of what this bill is.

It is a step toward settling the outstanding claims for companies who have a legitimate right to compensation for the brutal and unnecessary seizure of their property and for the cancellation of their rights gained by entering into good faith agreements with the provincial government and its Crown corporation Newfoundland and Labrador Hydro.

Fortis defaulted on a loan.  The provincial government has now assumed the payment of that bill.  Sunlife, Manulife and the others can likely produce comparable evidence of injury.

Neither politicians nor the media have bothered to talk about these companies.  The politicians did not speak of them because it was uncomfortable to talk about the facts of the expropriation. You can tell how uncomfortable it is since politicians never seem to want to talk about the facts of the matter. This release is confirmation of that, if nothing else.

As for the media, it remains a mystery as to what they report and what they don’t but that is another story entirely.

And let us not forget that the bondholders who suffered demonstrable financial loss as a result of the brutal and unnecessary seizure are also the sorts of people one would like to invest in a new hydro-electric project in the province.  They are much like the people who invested in another hydro-electric project oh so many years ago and who had to go to court to protect their investment from government’s ill-considered legal measures.

This bill is about calming them down as well, a point that is likely too close to what is really going on for any provincial cabinet minister to admit.  It is about trying to repair the considerable damage done to the province’s reputation as a result of the brutal and entirely unnecessary seizure bill. What actually happens, what compensation the government does wind up paying for the brutal and unnecessary expropriation will be the real test of whether or not the wounds to the province’s investment climate have started to heal.

As for the unnecessary expropriation bill itself, it would have been unnecessary only if one accepts the the claims made about it at the time.

But that too is another story for another day.

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Trash, Give-aways, and Conservative Policy #nlpoli

Friday is trash day in the world of political communications. It’s the day when you slip out stuff that is unpleasant in the hopes people will miss it.

If you can slide in another story, like say the completely unnecessary appointment of a finance minister who will have the job for a mere two weeks or so, it’s possible you can bury one load of trash under another.

That’s what happened last Friday in St. John’s.

The Expropriation Fiasco drags on

Danny Williams hasty, ill-considered and thus far unexplained expropriation of AbitibiBowater assets may well end up costing the people of Newfoundland and Labrador untold millions of dollars.

A healthy chunk of their loss will go to a raft of expensive Montreal lawyers Danny Williams is using to pursue legal action in Quebec courts.

Now that the Quebec appeal court refused to hear the government’s appeal of lower court decisions, the only place left is the Supreme Court of Canada.  Odds are against that court hearing the case simply because the provincial legal arguments are week and they have already been thoroughly demolished at the lower court level.

One must wonder why Williams persists.  His track record in court isn’t good.  Take Henley v. Cable Atlantic or Ruelokke v. Newfoundland and Labrador and the preposterous privative clause argument as good cases in point. 

You can then add the AbitibiBowater cases to the list. Anyone who takes the time to read the record of government’s actions in the whole bankruptcy can only shake their heads in disbelief at the amateurish actions.

Many of its actions has been as astonishingly lame as the government’s performance in that other Quebec legal action, the Regie appeals. One would scarcely believe that government’s lawyers did not call a single expert witness to support its case or refute Hydro-Quebec’s assertions but that is exactly what happened.

According to the Globe and Mail, [link above] the provincial government contends there are three issues that need the attention of the nine wise old owls in Ottawa.

Newfoundland said the case raises three specific issues: – ensuring consistency across the country by resolving a conflict between provincial environmental law and federal bankruptcy and insolvency law; – who should bear the cleanup costs when a company is attempting to restructure; – does the CCAA give a court power to remove all hurdles under provincial law that impair a company's ability to restructure.

Now your humble e-scribbler isn’t a lawyer but the answers to these questions seem fairly obvious.  They are obvious because AB is still on the hook.

The answers are in the Quebec court decisions: at no point has the company been relieved of any of its liabilities for clean-up of its properties in this province.  When AbitibiBowater set up the remaining properties in a holding company, the provincial government’s lawyers did not raise a single objection in court.  AB is still on the hook.  The liabilities have not been extinguished.

The Quebec court decisions are there in black and white.  The language is not complicated. One can only wonder why Williams persists in pursuing what is essentially a lost cause.

Perhaps, he carries on because of the intense embarrassment, the ignominy of such a massive mistake as the expropriation turned out to be.  As the Globe out it:

The province wants to force Abitibi to clean up five sites it ran between 1905 and 2008.

Unfortunately for Williams, he and his lawyers screwed up the expropriation. The provincial government now owns some of the most contaminated of the sites. His clever little scheme – seize the assets and leave the company with all the liabilities – blew up in his face.

And what must be especially galling is that Williams knows  the law is absolutely clear on this as well:  the liability flows to the new owners.  When Williams seized the property, he seized the pollution and the responsibility for cleaning it up.

If things go as they are likely to go, the SCC won’t waste time hearing the appeal. Unfortunately for the people of Newfoundland and Labrador, though, a quick end to the legal action only limits a small portion of the costs that will flow from Williams’ monumental shag-up. The final tally for that mess has yet to be calculated

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Making the people pay more for electricity

Take a gander at Hansard for Wednesday and you’ll see an interesting series of questions put to Shawn Skinner about the settlement in the Star Lake expropriation.

You can see pretty easily that the expropriation back in 2008 had nothing to do with getting back timber and water from an evil foreign company.

Nope.

The real story was about something else.

Shawn told the House, in all earnestness, that as a result of the 2008 expropriation of the Star Lake hydro-electric facility, the people of the Happy Province could now benefit from having 18 megawatts of electricity to meet their needs.

From that, Mr. Speaker, that generating station will put electricity into the system that will benefit the people in Newfoundland and Labrador.

We now have an asset that is a fairly new asset, about ten or twelve years old. It is an asset that for decades to come will be able to provide clean, renewable power for this Province that we will benefit from.

Skinner makes it sound like Star Lake will do something now that it wasn’t doing before.

Fact is that Enel and Abitibi developed Star Lake in the 1990s in response to a request for proposals issued by Newfoundland and Labrador Hydro. The provincial government’s electricity producer wanted to add some new renewable energy to its island supply that would help reduce the need for thermal generated stuff at Holyrood.

And that’s what Star Lake did.  It wasn’t supplying power to the Abitibi mill at Grand Falls-Windsor, as Abitibi’s other hydro generators did. Star Lake made the light bulbs glow in homes on the island.

Now, NL Hydro bought the power from Star Lake and turned around and sold it to Newfoundland Power who in urn retailed it to consumers.  Skinner put the annual cost of the power from Star Lake at $10 or $11 million annually.

Nalcor tried to buy Star Lake – as it turned out – before the expropriation but Abitibi apparently rebuffed the offer.  They preferred to sell the whole affair to Enel, their partner at the time.

In the end, Nalcor got Star Lake.  The cost came in at around $73 million on a facility that cost about $50 million to build.  Skinner says it was $60 million.  Okay.  Tomato.  Tomato.

What’s interesting here is not that the lovely people of the island now have electricity, it is the financials of the whole thing.  Follow that link right there  - LINK – and you will see a couple of curious things.

In early 2009, Danny Williams pretty well blew away any idea that the island needed power from some expensive project in Labrador as a result of the Vale smelter in Long Harbour.  As the Telegram reported:

Williams explained that the province didn't need the power from the Exploits River in order to accommodate the Long Harbour plant. He said 70 megawatts were freed up when the Stephenville paper mill closed, and an additional 54 megawatts of wind power has also been added to the grid.

Williams also said that:

the most important fact is that the province, through Nalcor Energy, a Crown corporation, will take full control of the power at the end of March. [emphasis added]

Why is that important, you ask?

Well, it has to do with those power purchase arrangements.  you see, Skinner mentioned those on Wednesday as a way of saying that the $73 million for Star Lake meant the provincial energy company wouldn’t have to pay that money out any longer.

True enough.

But how, asked Yvonne Jones, would Nalcor recover the cost of the settlement?

Why silly thing, by selling power to the lovely ratepayers of the island, sez Shawn:

We are going to be selling electricity into the provincial grid. That was the point I was trying to make. I apologize if I did not make it clearly enough for the Opposition House Leader. We are selling electricity into the provincial grid. The Public Utilities Board sets a price and the people who receive the electricity pay the price, Mr. Speaker.

Hands up anyone who has seen Nalcor head to the public utilities board to lower electricity rates now that they won’t have to shell out that $10 million annually.  Of course they haven’t and one would be exceedingly naive to expect them to do it.

By having a near total monopoly on electricity production in the province, Nalcor can now pocket the $10 million annually it used to pass along to Enel along with whatever margin it took on top.  Nice windfall.

In fact, if the loan is the only thing they are directly liable for and it is for a 25 year term, the actual annual cost to Nalcor is a trifling sum.  They are basically pocketing a gigantic profit on every megawatt from Star Lake they have generated since December 2008.

Not bad, eh?

Nalcor’s bottom line is that much fatter courtesy of the good people of the Happy province. People are already used to paying the higher rates so Nalcor can just keep on making them pay rather than pass any savings that Skinner was talking about on to consumers.  he was crowing about bigger profits for Nalcor, not a brighter future for the ratepayers of the island.

And when Muskrat does come along in 2017, well the same ratepayers keep on footing the bills for the government monopoly:  Nalcor’s entire plan for Muskrat Falls is based on profitability from provincial ratepayers alone.

Just like at Star Lake.

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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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Conservatives to give back seized hydro assets

Natural resources minister Shawn Skinner gave notice on Thursday of a bill that is part of the compensation for two companies caught in the crossfire of the Williams administration’s expropriation bill in 2008.

In giving notice of motion, Skinner only gave the title of the bill - An Act To Amend The Abitibi Consolidated Rights and Assets Act – but Bond Papers has learned that the bill will restore assets seized from Fortis and ENEL two years ago.

Last spring, then natural resources minister Kathy Dunderdale said that Fortis and Enel would have their power purchase agreements restored as part of the settlement. In August, Danny Williams said the companies would receive cash compensation, a long-term power purchase agreement or some other combination of arrangements as compensation for the government’s action.  The only reason to amend the expropriation bill would be to restore to the two companies the assets the provincial government seized under the December 2008 law. 

With the assets restored, the provincial government’s energy company – Nalcor - could then also make a new long-term power purchase agreement with ENEL and Fortis to supply power to the island grid.  There’s no indication at this time whether or not Nalcor will retain any interest in the hydro-electric generation operations or simply act as a customer for the power.

There’s also no word on what other compensation the companies might be receiving from taxpayers for Williams’ blunder.

The provincial government is already paying a $60 million loan for Fortis that the company defaulted on as a result of the seizure.

In December 2008, Danny Williams’ Conservative administration introduced legislation in the House of Assembly that seized hydro-electric assets from three companies -  AbitibiBowater, Fortis and ENEL – supposedly because AbitibiBowater reneged on a 1909 commitment.

The legislation also quashed a court case Abitibi brought against the provincial government over an earlier dispute and stripped the company any right to compensation.

The expropriation bill also set the provincial cabinet as sole arbiter of any compensation to be paid. 

While the bill was met with cheering at home, it met with condemnation across the country. Bond Papers was one of the few voices in the province that questioned the bills’ purpose, its motivation and its assault on the rule of law.

AbitibiBowater sued the Government Canada under the North American Free Trade Agreement.  The company reached a settlement with the federal government in August 2010.

Earlier this year, the people of Newfoundland and Labrador learned that the provincial government had accidentally expropriated  the former Abitibi paper mill at Grand Falls along with all the environmental liabilities associated with it.

Premier Kathy Dunderdale, the minister responsible for natural resources at the time, learned of the massive error several months after the expropriation but failed to disclose the mistake to the public.

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A bit late for crying now

Some people – evidently including the governing Provincial Conservatives, the Liberal Opposition and the New Democrats  - thought it would be better to shut the paper mill in Grand Falls-Windsor than to have it open and employing people if there were fewer people working than there were in 2008.

That’s a choice they made.

Union members in the town acknowledged when they twice rejected any restructuring deals from the company that they knew what might happen if they voted down the proposals.

So why exactly would Lorraine Michael, the province’s lone New Democratic Party member in the House of Assembly, be disappointed that less than a month after voting to shut the mill, the provincial government doesn’t have anything better for workers than instructions on how to collect employment insurance or retrain for other jobs?

“We now have a substantial workforce in limbo, people who are understandably anxious about their futures and those of their families,” she said.

Sure they are, Lorraine. 

But they aren’t in limbo.

They are unemployed, or soon will be.  They need to start looking for new jobs.  They need to start thinking about retraining for other work and maybe consider leaving Grand falls-Windsor and the surrounding communities if there isn’t any other work for them.

Maybe Lorraine  - and every other highly paid legislator who voted to ram through the expropriation bill – should have taken a second to think about what they were doing.  Rather than cheering, they might have considered the consequences of their actions.

Just a thought:  maybe Lorraine could have asked to see the government’s plan before she gave them carte blanche to close the mill.

Former mill manager David Kerr put it this way recently:

"You know what's so sad about all of this? A nanosecond after CEO David Paterson was told about the legislated expropriation, let alone what he thinks of the Newfoundland government, he totally wrote off the mill - lock, stock and barrel. That's the way these guys think. If any door was ajar for negotiations to restart the mill (and it always is no matter what anyone says) it's now slammed shut, bolted and bricked up for good.

I don't know who's advising Premier Williams on this but they have to give their head a shake and go back to timing school. Timing is everything in this business and the time to expropriate was not now - good heavens while the mill is running give negotiations a chance. Expropriate on the last day a roll is dispatched on number three winder, not a second before.

"Also the union is insane. They are going around lauding Premier Williams for doing this great thing while at the same time trying to send a veiled olive branch to the company about getting back to the table. What are they smoking? The company reads newspapers, too. I bet Abitibi pulls the plug before March 28.

"Who in their wildest dreams thought this was the right thing to do now? This is a little like peeing in your pants in a snow storm. It feels good when you do it but wait a while and see."

Kerr made a similar comment on a Bond Papers post before Christmas, particularly in his sentiment that before expropriation there was at least a slim chance some agreement could have been reached. Your humble e-scribbler had written the mill off and – in this case like in a number of others – it would have been absolutely wonderful to be as wrong as Mr. Kerr said I was at the time.

Anyway…

Danny and Yvonne and Lorraine and all the others rammed through the expropriation bill without a second of hesitation and even less time for thought.

There’s a bit too much milk splattered over the floor to be crying about it now.

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Tom Marshall’s Dead Muskrat Sketch #nlpoli

Tom Marshall used to be the finance minister. 

He’s the guy who consistently, year after year, spent more than the people of the province could afford. Tom didn’t do it by himself:  he had the support of all his colleagues in cabinet.

And since 2009, Tom and his colleagues have admitted that they mismanaged the provincial government accounts by overspending.

Deliberately.

Along the way, Tom has claimed some things that aren’t true.  Like saying that he and his colleagues lowered the provincial debt when they didn’t.

So now that he is natural resources minister, Tom Marshall is still telling people things that aren’t true.  This time it is about the glories of the 2008 expropriation.

What Tom says.

The truth.

Two different things.

Not with a bang, but a whimper #nlpoli

The longest filibuster in Newfoundland and Labrador legislative history ended quietly Saturday morning.

This was the second filibuster this year and the  Telegram’s legislative reported posed a simple question via Twitter before the House closed.

What does it say about current Newfoundland and Labrador political culture that we’ve had two such filibusters in a single year?

Normally a filibuster is an opposition tactic to hold up a government proposal the opposition doesn’t like.  That was the case with the Bill 29 filibuster in the spring.

As it turns out, the Muskrat Falls filibuster was different things for different parties.

Freedom from information: no comment on process because the process exists

On January 8, your humble e-scribbler sent an e-mail to the natural resources department seeking some clarification of issues related to the Abitibi expropriation in December.

One of the questions sought clarification of the expropriated hydro assets:

5.  The legislation is explicit in section 5 in that the water rights, land and assets of both Star Lake and Exploits River partnership are forfeit to the Crown. Section 7 voids all the agreements and licenses associated with those projects.

At the same time, the Premier indicated in the scrum outside the House that Fortis, for instance, would continue to "maintain ownership".

Those two things can't exist in the same space.  If the Crown has expropriated the assets of the projects, the former proponents can't still have ownership of those assets.

Are you able to clarify this for me: Who owns the expropriated assets - dams, generation equipment, transmission facilities etc?  A written statement is fine or if there is someone I could speak with, then I am at your disposal.

The response – received yesterday – was that the department would offer no comment beyond what was in the public domain already since compensation discussions are outstanding.

Nothing.

Zip.

Zilch.

So who is the government in compensation discussions with? went the reply.

No further comment beyond what is the public domain came the response.

Fascinating.

Confusion is preferable to information.

And…

Denying comment because of “outstanding” compensation talks isn’t comment – now we know there are outstanding talks – but actually telling the public if talks are underway, who is party to the talks and all the other stuff that logically flows from the fact that you just confirmed talks exist or are at least “outstanding” is comment…

and is therefore verboten.

Surely the parties to the talks know they are talking or going to talk.

So finding out that they are in talks wouldn’t come as a surprise to them nor would it materially affect the talks to say something even as ambiguous as “the companies subject to the expropriation” when asking who was talking or with whom talks were outstanding.

Surely the parties to the talks – whoever they might be – know the issues well enough such that clarifying the discrepancy noted in question five wouldn’t actually affect the compensation talks.  For instance, if Fortis, Sun Life and others actually still do own stuff supposedly expropriated – as the Premier himself said - then they wouldn’t be party to the compensation talks because there’d be nothing to compensate them for.

And just to give a sense of how straightforward the questions are, here are a couple of others the government won’t comment on because of the outstanding talks:

6.  Bill 75 does allow cabinet to enter into arrangements (permissions and licenses) for the use of the assets.  Has this taken place?  If yes, what are the arrangements, with whom etc, for what term etc?

7.  Under section 10(2), persons affected by the expropriation of Schedule C assets are entitled to compensation in  a manner determined by the LG in Council:

-  Has the provincial government received representation from any parties for compensation under this section?

-  If so, who are the parties?

-  Has the LG in C  determined a manner for compensating parties affected by the hydro expropriations?

Factual questions about the process can’t be answered because the process exists.

And a government that prides itself on being open, transparent and accountable prefers confusion to factual information about a major public issue.

You just can’t make this stuff up.

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Nottawa Repost: Legislative oversight in an era of "patriotic correctness" #nlpoli

The following originally appeared at nottawa on September 2, 2009 as a comment on the emergency session of the legislature to deal with changes to legislation about the Churchill River.

It includes a mention of an earlier political controversy, the December 2008 expropriation bill.  The two are linked and in light of Friday’s ruling by the Supreme Court of Canada in case related to the expropriation,  Mark Watton’s observations at the time are worth reading again.

Danny Williams, thee Premier at the time of both these incidents, may be gone from the political scene but the ministers who were integral parts of the policies remain in positions of power.  One of them - Kathy Dunderdale – is William’s hand-picked successor. 

The policies and the attitudes that bred them remain in place, as finance minister Tom Marshall  made plain on Friday.

Nothing has changed in Newfoundland and Labrador. And that is why these comments from three years ago still resonate:

Expropriation bill companies report financial results

Two of the companies affected by the expropriation bill last December reported dramatic financial turn-arounds last year.

Manulife reported a loss of $1.8 billion in the last quarter of 2008. Sun Life Financial reported an earnings drop from $2.2 billion in 2007 to $783 million in 2008.

Both companies either had original interests or acquired interests from other companies in hydroelectric developments, laid out in Schedule E of the expropriation bill:

1. The "Acknowledgement and Consent Agreement (Water Use Authorization)" dated 24 April 1997 between the Star Lake Hydro Partnership, the Mutual Life Assurance Company of Canada ; and the Crown, and all amendments including the Supplementary Acknowledgement - Crown Water Use Authorization dated 9 May 2001 and assignments of them.

2. The "Acknowledgement and Consent Agreement (Crown Water Power Licence)" dated 24 April 1997 between the Star Lake Hydro Partnership, the Mutual Life Assurance Company of Canada ; and the Crown, and all amendments including the Supplementary Acknowledgement - Crown Water Power License dated 9 May 2001 and assignments of it.

3. The "Hydro Consent and Acknowledgement Agreement" dated 31 July 2002 between the Exploits River Hydro Partnership, Clarica Life Insurance Company, and Newfoundland and Labrador Hydro and assignments of it.

4. The "Agreement for the Purchase and Sale of Power and Energy" dated 18 September 2001 between Abitibi-Consolidated Inc. and Newfoundland and Labrador Hydro, and all amendments, including the Assignment dated 31 July 2002 between Exploits River Hydro Partnership, Abitibi-Consolidated Inc. and Newfoundland and Labrador Hydro, and assignments of them.

5. The "Restated Agreement for Non-Utility Generated Power and Energy" dated 24 April 1997 between Abitibi-Price Inc. and Newfoundland and Labrador Hydro, and all amendments, including the Assignment dated 24 April 1997 between the Star Lake Hydro Partnership, Abitibi-Price Inc. and Newfoundland and Labrador Hydro, and assignments of them.

6. The "Acknowledgement and Consent Agreement" dated 25 April 1997 between the Star Lake Hydro Partnership, the Mutual Life Assurance Company of Canada ; and Newfoundland and Labrador Hydro, and all amendments and assignments of it.

7. The "Acknowledgement - Power Purchase Agreement" dated 24 April 1997 between the Mutual Life Assurance Company of Canada, in its own right and as agents for the Canada Life Assurance Company, the Maritime Life Assurance Company, Sun Life Assurance Company of Canada, the Standard Life Assurance Company and Industrial-Alliance Life Insurance Company, the Star Lake Hydro Partnership; and Newfoundland and Labrador Hydro, and all amendments and assignments of it.

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Uncomfortable words: AbitibiBowater version

Bill 75 – the AbitibiBowater expropriation bill – contains a clause which holds that no legal action may be taken against the Crown as a result of anything done in the bill or as a consequence of the bill.

It’s a privative clause, an idea from administrative law that shields an adjudication panel from judicial review of its decision.  In the expropriation bill, the cabinet is established as the administrative panel which will set compensation for assets expropriated under the bill.

Nice power if you can get it.

The Premier has a thing for privative clauses. 

He argued, for example, that such a clause existed in the 1985 Atlantic Accord.  In Ruelokke v. Government of Newfoundland and Labrador, the provincial Crown argued that a section of the agreement which said that the decision of a panel to appoint a chief executive officer was binding on both the provincial and federal governments (the parties to the agreement) really meant that no courts could review the matter.

The judge in the case rejected the argument flatly.

He can read plain English.

In that context, read what uncomfortable words the current Premier uttered on privative clauses when he was leader of the opposition, in debate on a bill regarding Fishery Products International. Under section 11 of Bill 65:

11.1 (1) An action or proceeding, including an action or proceeding for compensation or damages, shall not be instituted or continued against the Crown or a minister, employee or agent of the Crown based on a cause of action arising from or incidental to the enactment or application of a provision of this Act.

(2) A cause of action against the Crown or a minister, employee or agent of the Crown arising from, resulting from or incidental to anything mentioned in subsection (1) is extinguished.

Bill 75 – the AbitibiBowater expropriation  - contains the same sort of wording in section 11 of that measure.  There’s also a specific clause earlier on that quashes a specific court case arising from earlier legislation enacted by the Grimes administration in dealing with Abitibi Consolidated as it then was.

Back then – March 2002 -  this is what Danny Williams said about privative clauses:

It did not have to happen. We have a black eye now on the business reputation of this Province. People do not like heavy-handed intervention. They do not like it, and that is what happened in the business community. The national media are looking at it and they now see our intervention as heavy-handed. If it had happened back in April of last year, back in May of last year, there would have been no problem.

The hon. Member for Lewisporte talked about his concern about a privative clause. We all share that concern. There should be no need for a privative clause. There should be no need to hide behind your mistakes, so that people who have a right to sue you can rightfully sue you. We have done it; it is out there. You have this unique legislation that talks about privity, so you cannot sue us because we made mistakes. That is wrong. That could have been prevented. The legal opinion that you had last spring said that you could change that legislation for public policy reasons, and you did not do it.

How times change.

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Weekend reading: unilateral action edition

1.  Telegram editor Russell Wangersky’s Saturday column in which he suggests the court action over the government’s expropriation of assets belonging to AbitibiBowater, Fortis, CHI, Inc and Sun Life could get “tangly.”

Interpretation is always in the eye of the beholder, and in this case, the final beholder is likely to be a very senior judge.

If AbitibiBowater goes to court, it will be the nuanced interpretation - probably of the original lease document from 1905 and other similarly dated material - that will decide the day.

The province has already signalled it will argue that AbitibiBowater broke its lease by announcing the closure of the mill.

AbitibiBowater, if it fights, will argue that, if any leases have been broken, they've been broken by the province.

All in all, there's only one thing for certain: it's bound to be rich fodder for lawyers and more than enough paper for all.

Wangersky’s right.  AbitibiBowater was already suing the provincial government over another unilateral change to leases, this time from 2002/2003.  That lawsuit was settled – without costs –entirely arbitrarily by the provincial government.  It included a line in the expropriation bill which quashes the suit.

Period.

What exactly would stop the provincial government from doing that again, with respect to any other lawsuit it doesn’t like?

The are plenty of aspects to this expropriation bill which make it far more complex than the claim that it was merely about trees and water.

2.  Financial Post editor Terence Corcoran who highlights a few other issues worth pondering:

The union and the government appear to have misjudged the company’s intentions, or they are playing hard ball to force the company do what it does not want to do.

It’s a dangerous game for Mr. Williams. Newfoundland isn’t exactly a fiscal powerhouse. Its latest financial update shows that if the price of oil is at $60 a barrel, the province “could be facing a deficit of several hundred million dollars next year, and could potentially be facing deficits in the years to come.”

At the same time, the province is paying lavish wage increases to unionized civil servants of 20% over four years. This is a formula for fiscal disaster down the road. And if the province also has to pay out big dollars to settle a NAFTA case, along with suffering a hit to its reputation as the Venezuela of the North, the outlook is even bleaker.

3.  The Telegram editorial on another unilateral action, this time by the provincial cabinet to replace appointees to the Memorial University board of regents with a raft of new faces.  The one thing the new faces have in common:  they are all close partisan and personal associates of cabinet ministers. They join another batch of appointees, all of whom have impeccable Provincial Conservative credentials. They will follow orders.

One of the regents the government removed, Mary Broderick, was on her way to a Board of Regents meeting when her cellphone rang and she was dismissed.

Wonder of wonders, Broderick was vice-chair of the board, and also sat on an ad-hoc committee of the board that was examining the government’s last gerrymandering attempt. When in doubt, fire them out.

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The power for good or evil

As Daniel Veniez writes in the Globe, provincial government’s have all the power needed to sort out the country’s forest industry:

Mr. Williams says his government has full legislative authority to expropriate AbitibiBowater's assets in Newfoundland and Labrador. He's absolutely right about that.

In a 2007 dispute with the Quebec government, cutting rights attached to two sawmills derailed a $285-million deal to sell Domtar's lumber assets to Conifex Inc. This required the transfer of cutting rights for three sawmills. Quebec's natural resources minister threatened to deny the transfer if Conifex did not rehire 445 laid off sawmill workers, saying cutting rights revert to the province with an ownership change. He was right about that, too. The deal didn't happen.

In British Columbia, the former NDP government used its legislative authority to dictate where sawmills would be located as a job creation measure. It had very little to do with the economics of running a business. That led to uneconomic mills being forced to operate. And that meant that they were gradually run into the ground. Popular politics for sure, but devastating policy.

In the local case, the Abitibi expropriation pretty much gives the lie to claims that the provincial government doesn’t control it resources.  It also makes a mockery of the claim from the tinfoil hat brigade about Confederation.  Their high commander was on CBC Radio just the other week describing an elaborate conspiracy that never existed to do things that never happened.  Only in Canada would such stuff make the airwaves as a credible contribution to a discussion of a major turning point in our history.

But that’s just digression.

Closer to home, the Abitibi expropriation has attracted a whole bunch of wild cheering but, as is plainly evident, the staunchest of the Premier’s staunch supporters have no idea what has gone on or why it has gone on.

They don’t need to think, apparently, since that would be bad.

The sort of grandstanding exemplified by the expropriation bill – done with all the requisite high drama and the now typical lack of concrete information is all popular politics.

Popular politics, yes.

But devastating public policy.

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Foggy Bottom probing expropriation; other diplomatic inquiries to follow?

According to The Telegram, American diplomatic officials have inquired with the Government of Newfoundland and Labrador about Bill 75.  That’s the expropriation bill rammed through the legislature before Christmas with virtually no debate.

No details on the inquiries have been released.

While attention has focused on AbitibiBowater – the public target of the bill - Bill 75 also expropriated assets belonging to  Manulife, Standard Life, Industrial Alliance, Sun Life, Fortis Generation and Enel. 

Enel is an Italian energy company represented in the Star Lake project by its subsidiary CHI. No word on whether Italian diplomats have also inquired about the expropriation.

Standard Life Canada is the Canadian division of the Scottish international financial services group. No word on any diplomatic inquires from the United Kingdom High Commission.

Fortis Generation is a subsidiary of Fortis, Inc, the Newfoundland-based energy company with interests in Canada, the United States and Central America.

Manulife and Sun Life are Canadian financial services companies.

 

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Aylward questions Nalcor on choice of consultant

Liberal leader Kevin Aylward has sent a letter to Nalcor boss Ed Martin asking about Nalcor’s use of Navigant as the consultant the company chose for a review of the Muskrat Falls project.

The Liberals posted the letter to the party’s campaign website on Tuesday but apparently didn’t give it wide circulation.

In the letter, Aylward asks;

1. When was Navigant retained to produce a report on the Muskrat Falls power project?
2. What is their investigative mandate?
3. Who, outside of Nalcor direct employees and contractors, will be consulted?
4. When and where will Navigant be conducting public consultations, if any?
5. What is the contract price?
6. When is the report contracted to be received?
7. When will the report be issued to the public?
8. How many other “independent reports” hitherto unknown to the public have been  commissioned or are currently under way?

Aylward criticises Nalcor for keeping the name and mandate of the consultant public until after the release of the joint environmental review panel.

The provincial Tories have used Navigant before on politically-driven projects.

In 2006, then Premier Danny Williams used Navigant to try and audit the books on the Hibernia project as part of his war with the oil companies over the collapse of Hebron talks in April that year.

Two years later, Williams used Navigant in his war against AbitibiBowater that led to the botched expropriation of AbitibiBowater properties in the province. Then natural resources minister Kathy Dunderdale told the House of Assembly in early 2010:

Mr. Speaker, there was in fact approximately $8 million spent on professional services related to the expropriation of Abitibi by my department last year. We paid a substantial amount of that money to CRA, to Navigant Consulting, to Weirfolds, a legal firm, and Enda Searching, to do particular work around the expropriation itself, around land registry consolidation; CRA, particularly with regard to the remediation requirements in Grand Falls. That work informed our budget, Mr. Speaker, where we budgeted over $9 million to deal with the mess left behind by Abitibi in Buchans.

Dunderdale and Williams hid their mistake in expropriating the Grand Falls-Windsor mill and other environmental liabilities until early 2010 when they admitted to the shag up under questioning in the provincial legislature.

Dunderdale told the legislature in 2010 that when the government realised the cock-up they considered introducing legislation to retroactively un-expropriate the properties they’d seized as part of the screw up.

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Breaking: AB closes Grand Falls woods operations

CBC News is reporting that AbitibiBowater unexpectedly shut its woods operations in central Newfoundland this morning.

Undoubtedly this is related to the expropriation earlier this week by the provincial government of all hydroelectric assets accompanied by the cancellation of the mill’s timber licenses.

Some are characterising this as “retaliation” for the expropriation.

More likely, it is a refusal by the company to accept any temporary access to the woods which would – in itself – accept the expropriation and cancellation as legal.

Don’t be surprised if the mill closes this week with the company saying it has neither power or feedstock for the mill.

Update:  Canadian Press has a little bit of detail in front of a huge recitation of the story thus far.

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Déjà vue all over again

Just when everything was settling down, the brute force expropriation of AbitibiBowater assets has stirred everything up again.

Lord Haw Haw of Brownenvelope is back on the airwaves praising his former employer to the hilt and taking issue with anyone who suggests that maybe the Premier might be acting a little rashly.  Then at the end of the two hours of blindly praising his former employer, Lord Haw Haw proclaims that people shouldn't blindly praise leaders.

The man lampoons himself every day and seems blissfully unaware.

The airwaves of Lord Haw Haw's afternoon laugh-fest and the morning talk show were crammed with every manner of worshipper praising the expropriation.  Then again, most of those were just the usual suspects spouting the usual pap.

Meanwhile, outside Newfoundland and Labrador, people wonder what the heck is going down in Hooterville.

Again.

Well, here are a couple of points to ponder:

1.  No one should doubt what would have happened in 2006 if the provincial government had the legal power to expropriate offshore licenses.  That's the time the Premier fumed about expropriation.  Too many people laughed the whole episode off as a big bluff.

2.  Since the provincial government can't expropriate the offshore, the oil industry is resting easy. Hibernia, White Rose and Terra Nova are salted away.  The companies wrestled huge concessions from the government on Hebron.  There's nothing for them to worry about.

3. Other companies on the other hand are probably not sitting quite so pretty.  Kruger, Vale Inco, Wabush mines, IOCC.  They all are likely checking their legal agreements with the provincial government. Some of them might even start discussions to secure whatever guarantees they can against precipitous actions by the provincial Crown. If the provincial government is prepared to use the extreme solution up front to strip the carcass of a dead project, no one would blame those companies for wondering what might happen to a troubled one.

4.  IOCC and Wabush Mines might want to take another look at their power contract and the whole Twin Falls Company.  The last time this issued was raised - in 2006 -  the Premier raised the completely false idea of sweetheart power deals and resource giveaways to bludgeon to death any suggestion the companies could avoid paying commercial rates the next time the deal came up for renewal.

Here's an extract from the post on that issue back in early 2007:

In early October, the feisty Premier warned Iron Ore Company of Canada - owners of the other mine in Labrador West - that they could expect to pay commercial rates for electricity once the current agreement ended. Williams likened the IOC/Wabush Mines power purchase deal to the Hydro Quebec giveaway on the Upper Churchill presumably knowing full-well that his comparison and the truth were two completely different things.

Presumably the same thing applied to Wabush Mines. You can imagine the talk: Forget the low cost power, boys, sez Danny. No more give aways. Maximum benefits to the province or take a hike.

And since Williams had flatly rejected a power deal in public, there was no way he would back down.

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Williams admits taxpayers stuck with bill for his expropriation mess

While his embattled environment minister blustered and stuck to the old line during Question Period, outside the legislature Premier Danny Williams admitted to reporters today that the taxpayers of the province will be stuck paying for the environmental cleanup from his expropriation mess.

CBC.ca/nl has a version of the story that’s worth checking out.

The cost of the clean-up, legal fees, any NAFTA penalties for the expropriation and the cost of compensation for seized assets belonging to three companies could reach $500 million or more based on the provincial government’s own estimates.

More to follow.

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