The hard and the easy: Abitibi and government subsidies

In dealing with Abitibi Consolidated, the Williams administration faced a Hobbesian choice. Had it followed through with Premier Danny Williams' pledge from July, mills in Grand Falls-Windsor and Stephenville would now be shutting down with the loss of more than 700 jobs and the loss of over $500 million in newsprint sales from the local economy.


With the choice it made, the Williams administration is committed to subsidizing a particular company at a rate which exceeds or almost exceeds the government revenue generated by the company.

ACI gets government subsidies for Stephenville

The Government of Newfoundland and Labrador today released some details of an agreement with Abitibi Consolidated [ACI] that will see the mill continue in operation for 15 years.

Under the framework agreement, ACI will commit to maintaining the Stephenville mill at current operating levels (194, 000 metrics tonnes of newsprint per year) for a total of 15 years. The company will also install a new boiler at Stephenville by the end of 2006, at an estimated cost of up to $13 million.

The provincial government will $10 million in subsidies to ACI for Stephenville, either directly or through Newfoundland and Labrador Hydro. The subsidies will total $150 million.

ACI's original proposal, as released by the provincial government in July, was for a 30 year subsidy agreement of between $7.0 ands $14.0 million per year, with an estimated total of between $210 and $420 million. The framework agreement represents an intermediate figure between the extremes for half the term of the original proposal. If the new agreement were extended to the full term of the original proposal, the cost would be $300 million, the estimated high cost option for constructing new hydro generating capacity for Stephenville.

The new framework agreement also commits both ACI and the provincial government to work on a long-term solution to the Stephenville mills power cost problem. That likely means that ACI and the province's hydro corporation will negotiate construction of new power generation facilities on ACI's watershed holdings to feed the Stephenville mill.

Missing from the announcement is any reference to ACI's Number Seven machine at Grand Falls-Windsor which was slated to close. Expect to see the machine shut down with ACI's associated fibre holdings being transferred to address the fibre supply problem at Stephenville.

This agreement is one possible version of a solution suggested in the Bond Papers in July. At that time, we identified the problem as power rates, an issue created under the Grimes administration.

As we put it at the time: "[a]ll things considered, it is possible the provincial government is not as angry at Abitibi as it might seem. Abitibi may be pushing back at a government which was already playing hard ball at the negotiating table. Read between the lines of government's news release, add in a few other considerations and you get the sense the provincial government will be putting some new cash into Abitibi through reduced power rates."

Today's announcement is exactly that: The provincial government will provide ACI with power subsidies amounting to $150 million over the life of the current agreement.

The announcement also contradicts the Premier's suggestion in September that ACI's divestiture of its PanAsia holdings would allow the company to reinvest in Newfoundland and Labrador. As ACI stated at the time and repeated today, its divestiture will provide $600 million which will be used solely to reduce its current corporate debt load. The divestiture is part of a long term corporate plan to reduce debt and improve its financial position. The investment of $13 million for a new boiler represents a marginal amount and can easily be categorized as routine replacement of equipment. It's a normal capital expenditure or capex as opposed to a dramatic change in the Stephenville operation.

No interest, indeed

There is something oddly appropriate about the headline on a release from natural resources minister Kathy Dunderdale advising that the Stephenville Mill will be scrapped but assuring us that she and her colleagues are still working dilligently on a "strategy".

The headline: "No interest expressed in Stephenville mill".

The confirmation of government's position is in a quote from Joan Burke, education minister and the member of the legislature representing Stephenville: "Perhaps now that this matter is settled, we can all fully concentrate our efforts on diversifying and strengthening our economy..."

The only problem with Burke's position is that it is exactly the opposite of what she and the Premier told the people of Stephenville repeatedly over the past couple of years. From Williams election pledge that the mill would not close right down to the prospect of expropriating the property, Williams and his minister made great promises.

They talked of having a fall-back position, a so-called Plan B.

Turns out there was no Plan B, except perhaps as expressed in the quote from Burke, above.

With this news release, the Williams administration is accepting Abitibi's proposal to demolish the entire Stephenville mill structure and restore the site as near as possible to its original state before the mill was built in the 1970s.

What this means is that government is unwilling to purchase or otherwise acquire the building and have it available for alternative uses besides papermaking. Government has deemed it better to obliterate completely any sign of the mill than to look at any form of industrial development in place of the Abitibi mill.

So what are we to make of the talk over the past few years?

Not much, apparently.

In the release, we are not even given the courtesy of some hard, factual information. We are not told that a thorough engineering and financial assessment have shown it is actually better to let Abitibi clean up the site and let someone start from scratch.

We are not told very much of anything actually.

Nope.

All we get in the news release are hoary cliches about diversification and a commitment to doing something. Accountability, transparency, openness - genuine communication - all are missing.

The one thing we can be thankful for is that Stephenville is not being handled like Harbour Breton, at least at this point. There, people have been kept hanging for two years with glowing promises and commitments, none of which have come true. At least in Stephenville, people know the thing is over and those that have not already gotten on with their lives can do so now.

It is oddly appropriate, therefore, that the release title mentions a lack of interest. The headline refers to the lack of intereest of other parties in operating the plant as a papermaking mill.

Given the content of the release, though, it would seem the headline also refers to a certain lack of interest on the part of the current administration in any of a number of things. Not the least of these would be any role the mill site itself might play in the future "economic diversification" of the area supposedly being developed by the committee of ministers that leads a task force of officials - that lives in the house that Jack built? - as they set about "exploring a number of value-added options that have been identified for the region, with technical support being provided by staff of the Department of Natural Resources."

No interest, we are told.

No interest, indeed.

For sale: one tiny mental box

"If an interested buyer for the mill does come forward, government will do what it can to facilitate a negotiation with Abitibi," said [natural resources minister Kathy] Dunderdale.

"At this point, however, no one has expressed an interest given the state of the pulp and paper industry globally."

That's a section from a CBC news story on reaction to the application by Abitibi Consolidated to tear down the former papermaking mill at Stephenville.

Now a minister might be forgiven for such a statement if it wasn't for the fact that Dunderdale just finished up a tour in a department supposedly devoted to eceonomic development in the province and for the past year or so she has been part of a committee looking to diversify the Stephenville economy in the wake of the mill closure.

For all Dunderdale's love of vapid business-school cliches like "doing the due diligence piece", here's one that isn't meaningless: paradigm shift.

In plain English it means getting your head out of the same rut you've been stuck in. Or, as seems to be the case here, getting one's head out of one's posterior.

The reason the Abitibi mill closed in the first place was because of the very reasons the twenty or so companies government approached gave for not wanting the mill.

So why in the name of merciful heaven, would Dunderdale and her colleagues think they could find a papermaking company interested in taking over the Stephenville mill?

Let's not even mention the business un-friendly climate her boss has created with pointless row after needless racket with people who do nothing other than refuse to bow to his latest demand.

Dunderdale and her colleagues need to show they can see some future for the former Stephenville mill other than papermaking. (They really need to show they actually read and understand the briefing books their long-suffering officials keep handing them.)

Rather than giving permission to demolish the Abitibi mill, maybe Dunderdale can assess the impact of demolishing the exceedingly small mental box in which she and her colleagues apparently keep their collective imagination.

Until Dunderdale starts thinking outside the box, there's precious hope for anything new economically to happen in Stephenville - much less the province as a whole - any time soon .

Phoning it in

Education minister Joan Burke turned up this morning as the first caller on Open Line with Randy Simms.

She was calling from Stephenville, or "from the district" as Simms put it.

He made it sound like Burke was just back in her district for a visit.

After all, that's likely what you'd expect given that the department she runs is headquartered in St. John's. Being a minister is usually a busy life, even in the summer, what with the meetings related to cabinet and the meetings in the department and just being available to sign all those letters that have to be signed even in an age of computers and e-mail.

Thing is, Burke likely wasn't just stopping in for a visit.

And she likely isn't the only minister who tends to head back to the district during the times the House isn't in session.

Something keeps coming back to your humble e-scribbler about a comment Burke made having to do with ministerial expenses. There was a document establishing her primary residence, which, if memory serves, government officials expected would be in St. John's while she held Her Majesty's commission. The declaration was part of determining what set of expense rules from treasury board would apply.

Burke's comment stood out as she found that form a bit problematic, given her primary residence was in Stephenville. There was some mumbling criticism about the whole arrangement reflecting the "old boys club" of politics.

Now memories can be faulty, not the least of which being the one between the ears of your humble e-scribbler, so it's possible that wasn't exactly what was said.

The old boys club crack just stood out, though, because it was from straight out of left field. Why would it be surprising that an employer would expect you to live within easy commuting distance of the place where your job was located? There's something sexist in that?

Anyway, Tom Marshall is another minister not originally from the capital city who seems to spend a whack of time working from somewhere other than the Confederation Building.

Sit and think for a second and you could probably come up with a bunch of ministers who have offices and work responsibilities in the capital city but who seem to spend a huge amount of time not in the office.

Well, not in the main office. Marshall likely has a suite in the provincial government building in Corner Brook. Burke too, could likely scare up a bit of space in Stephenville.

John Hickey? Patty Pottle? Trevor Taylor? Tom Rideout when he was still a minister? Charlene Johnson? Kevin O'Brien?

These are just tossed out as possible examples because their districts are not within typical daily commuting distance of the metropolitan region.

Any of them keep two offices and work from home, home being somewhere other than within an easy commute of Sin Jawns?

This is not just a matter of some mouldy old rule after all. The cost of maintaining duplicate offices can be steep. Add to that the cost of having to grab a quickie flight at full fare from Stephenville - for argument sake - and then hopping back the same day just to do a media scrum.

Then there are the regular cabinet meetings and the committee meetings and all the rest.

Pretty soon, the cost of commuting like this would get to be a tidy sum.

Then there are the intangible costs. It would be much easier to meet and discuss some business face to face rather than do it by e-mail or over-the-phone. Ministers living in St. John's - where their main office is located - also have the chance to be more accessible to news media in a slow period during the summer. It gives all sorts of opportunities to increase the amount of information government provides to the public on its activities.

Well, that assumes government wants to give more information or that ministers are capable of doing more than parroting prepared lines, but let's just work on the assumption the current situation is an aberration in the great scheme of things.

Still it seemed a little odd that Burke was in St. John's for a 2:45 newser on Tuesday and then bright and early on Wednesday morning was safe on the west coast again.

Maybe it's just a misperception but then again, there have been too many references to some sort of dual office arrangement over the past couple of years to make it a case of being completely mistaken.

There's a subject for a little bit of investigative reporting.

In the meantime, it might be worthwhile to keep track of the number of cabinet ministers who are phoning in their media hits during times when the House is not in session.

-srbp-

The federal government is out to kill you

If you want an example of the sorts of irresponsible, partisan rhetoric that usually gets wound up in some types of issues in this province check out a post at a local blog.

It’s titled in an appropriately hysterical way, given the subsequent comments:

“They will not be happy until we are as extinct as Northern Cod.”

Yes folks, the local Quisling hunter is back with his claim that the federal government is on a campaign of genocide against the people of Newfoundland and Labrador.

Normally your humble e-scribbler would ignore this sort of garbage but it is such a fine example of the sort of political myths that Tim Powers complained about recently that it’s worth singling out.  And what’s more, both Tim and the Quisling Hunter share a common political hero who, not surprisingly, also loved political fairy tales.

These days in Newfoundland and Labrador, it’s par for the course:  no facts to make the case?  Make ‘em up, instead.

According to the post,

The decision to close regional sub-bases and consolidate has been in the works for nearly twenty years, just as the federal government has been automating and decommissioning light houses for the past thirty years.

He then cites a 1996 crash at Stephenville airport as evidence:

In it's findings, the Transportation Safety Board found that the St. John's FSS operator did not have the actual Stephenville wind direction and speed. The wind velocity he passed to the crew was from the latest Stephenville observation and was 040° at 17 knots, within the tailwind landing limitations of the aircraft. The actual Stephenville wind of 040° magnetic at 20 knots with gusts to 22 knots exceeded the aircraft's maximum allowable tailwind component for landing.

Had there been local air radio and weather staff, those pilots would have had accurate up to date information.

They might very well be alive today.

My point is that abandoning regional facilities like St. John's can, and in fact, has cost lives in the past.

And then the finish:

Emotional, partisan rhetoric is not going to force Ottawa mandarins to change their minds.  The reality of the dangerous conditions that our men and women toil in to retrieve fish, deliver and pump oil, and transport goods is as foreign to the bureaucrats on Wellington Street as our dialects and unique phrases.

This closure is just the latest evidence of a  continued lack of understanding and sensitivity in official Ottawa towards the economic, social, and safety needs of this province.

They will not be happy until each and every one of us are as extinct as the Northern Cod.

Big problem? 

Well aside from the oxymoronic appeal to emotional, partisan rhetoric right after acknowledging that it won’t work on bureaucrats, that is.

The big problem is that Transportation Safety Board report on that crash investigation didn’t finger local air, weather and radio staff.  Nor did it give any basis for getting to that conclusion.

You can find the report on line at the Transportation Safety Board website.  It is easy to read;  TSB reports are in plain English.

Notice that there is no link to the report in the post.  That should be your first clue that something is amiss. take a look at the description of the tailwind information, though and that’s where things go off.  The TSB found that the tailwind given by the St. John’s air controller worked out to 10 knots.  That’s the actual recommended limit for that aircraft type.  The observed conditions on the ground at the time – according to the TSB  - worked out to 12 knots. 

That’s still 20% beyond the maximum tailwind for the type but at no point does the TSB connect the difference in weather conditions – reported versus actual – as being a factor in the crash. The claim the pilots might have been alive had someone been in the tower is pure fiction.

You’d see that by reading the whole report.  Investigators found the aircraft in the middle of the airfield, upside down and with its landing gear retracted.  It appears the aircraft struck the runway while the pilot tried to abort the landing and go around for another try.  The TSB notes there was no explanation why the pilot tried to land with a tailwind at the aircraft’s limits while he could have approached with a modest headwind.

What you have here is someone taking a case and bending it to fit the desired outcome.  Aside from the date, the aircraft type and the fact it crashed, pretty well everything else the post author claims about the mishap is just wrong.  The conclusions are equally out-to-lunch.

The post fits, though, with all the wild claims made about the shifting of the jobs from this particular centre to Halifax where the Joint Rescue Co-ordination Centre has been running for years.  It also sits alongside the host of other mistaken beliefs, whether it is about incomprehensible dialects, bizarre place names,  the supposed closure of coast guard operations in the province full stop or that federal bureaucrats are out to commit genocide in Newfoundland and Labrador.

That’s the thing about political myths:  rationality has nothing to do with it.  In fact, rationality is the enemy of a political argument built on fables, fantasy and fairy tales.

But that’s what you get in Newfoundland and Labrador these days.

That and the myth mongers wondering why no one outside the province takes them seriously when they make all these improbably claims.

- srbp -

Danny's Gang or the Friday Five O'Clock Follies

It's late on the Friday before a holiday weekend.

What better time for the provincial government to release some major announcements. Heck, a complete waste of time - like the new Danny-logo, hailed as the most stupendous event in the province's history, or words to that effect - can get huge amounts of government dollars.

But what warrants government sliding it out late in the week?

Try this stuff:

1. "Stephenville? Where's Stephenville?" said the Premier. The environment minister releases the Abitibi mill closure from environment assessment review. Only a few short years ago, Danny Williams was promising the mill would not close on his watch. It didn't. He meant the watch on his arm and there was never a plant on his watch. It couldn't. The mill it Stephenville is inanimate. There was no way it could close in on Danny's watch as long as he stayed out of the building.

2. Subsidizing industry, without saying it. The announcement - actually on Thursday - that government will be handing $10 million to Newfoundland and Labrador Hydro to pay for electricity that normally would have been used by the above-mentioned Abitibi mill.

The provincial government is effectively subsidizing the electricity rates to Kruger and to Abitibi's Grand Falls operation. He previously rejected an industrial energy subsidy to Fishery Products International.

Presumably, this subsidy will only be paid until the INCO smelter is built at Long Harbour. That is, when the Premier stops trying to hold up the construction.

During talks with Abitibi about the Stephenville mill, Williams committed to pay the company an energy subsidy up to a maximum of $12 million a year if the mill stayed open. That amount was actually larger than the tax revenue government gained from the mill's operation.

Expect that one of the natural resources minister's talking points notes that the $10 million subsidy is actually lower than the previous commitment to Abitibi and is being shared with the mill at Corner Brook run by Kruger.

A large double-double to the reporter who puts that to the minister an doesn't hear back the talking point given here or a close variation.

3. Fewer ferries operated by a private sector, not-for-profit. Transportation minister John Hickey released a long-awaited study into the province's ferry system.

The consultant recommended reducing the size of the fleet from 14 vessels to 12. It also recommended having the system run by a not-for-profit but privately incorporated entity like BC Ferries.

The vessel replacement portion of the plan is estimated at $80 - $90 million spread out over time.

The minister's new release contains very little factual information, incidentally, but it does have tons of partisan rhetoric. That's what you have to resort to when either:

a. You didn't read the study before you wrote the release; and/or,

b. You are politically afraid of the increased ferry rates resulting from the decision.

Expect the departmental talking points, drafted by Krysta Rudofsky's former sidekick, will play up the millions in new work for the Marystown Shipyard.

This way of spinning the message would be a political salve for the considerably more Marystown lost in the Premier's failed Hebron deal. People in Marystown will recall that they could have been doing Hebron and the ferries.

4. "You'd make more with FPI's wage cut offer." Not long after Danny Williams suggested workers at Fishery Products International go back to work for the wage cut being offered by the company, comes an announcement from fish minister Tom "Tovarisch" Rideout of a make-work project for former fishplant workers at Marystown. (Left: Our man in Moscow)

Rideout spent an unusually long-time last week gathering market intelligence by hanging out around fishmonger stalls in Moscow. Unusual, because while Rideout was on this hastily organized junket, his cabinet colleagues were approving the sale of the former FPI plant at Harbour Breton to Barry Group. Rideout had condemned the sale as illegal.

Rideout slags FPI in this release, but by now we all know that when the going gets tough, Tom will probably be on a flight to Moscow or Tahiti or God knows where. Anywhere but in cabinet as it decides to do the opposite of what Tom said.

This mill will not close!

"Expropriation is still an option for the provincial government if it finds another operator for Abitibi-Consolidated's soon-to-be-shuttered paper mill in Stephenville, Premier Danny Williams says."

That was the lede for a Rob Antle story in Telegram last December.

Here's the latest plan for the Stephenville mill, as announced today in the environmental assessment bulletin issued by the provincial government:

(2) Stephenville Paper Mill Site Decommissioning (Reg. 1281)
Proponent: Abitibi-Consolidated Company of Canada

The proponent proposes to decommission and rehabilitate the pulp and paper mill site in Stephenville. The infrastructure and physical features to be decommissioned include: the main pulp and paper mill building including steam plant, maintenance shops and administration offices; paper storage sheds; effluent treatment facilities and pipelines; wood yard; industrial landfill systems on the east side of Route 490; hydrocarbon bulk fuel storage facilities; fuel and process storage tanks; water and sewage systems; transformers and other electrical equipment, etc. A summary of the Environmental Site Assessment (ESA) Phase I work is also included. The decommissioning of the site is scheduled to commence in 2006 and is tentatively scheduled to be completed by 2008. The undertaking was registered on August 7, 2006; public comments are due by September 12, 2006: and, the minister's decision is due by September 21, 2006.

The minister encourages all interested parties to become involved and to make comments known. Comments on submitted documents are invited from the public, addressed in writing to the minister, and are welcome prior to the deadline date shown.

How quickly they forget.

Stephenville Limbo

Abitibi Consolidated [ACI] announced today that its mill at Stephenville has been idled as opposed to permanently closed. The CBC story linked above also links to the ACI release, carried by Canada Newswire.

The changed status is a result of an offer from the provincial government that ACI regards as holding the potential to change the financial position of the Stephenville mill.

In substance, though, Stephenville is still closed indefinitely and will only be reopened when and if a successful agreement can be reached.

Workers at the mill are now in limbo, at least until some final decision can be made on government's recent offer.

There was no mention today of the status of the Number Seven machine at Grand Falls which was already scheduled to be phased out.

Shockwaves #nlpoli

The day after the by-election in St. George’s-Stephenville East,  federal New Democratic Party member of parliament Ryan Cleary showed an interest in provincial politics some might find curious.

“The question is not how to stop NL Liberals,” Cleary tweeted, “but how to boost provincial New Democrats. Status quo not working.”

Status quo means Lorraine Michael’s leadership, of course.

Cleary’s right.  Lorraine’s leadership has proven to be a dismal failure.  Not only did she and her supporters fail to capitalise on the strong showing in 2011,  they’ve obviously failed to gain any ground as the support for the province’s Conservatives has collapsed.  The by-election on the west coast confirmed that the New Democrats under Lorraine are staying firmly where they were.  They aren’t losing ground, but they also aren’t growing, either.

AbitibiBowater moves Stephenville and Botwood properties to subsidiary

As part of its re-organization plan, AbitibiBowater sold its two properties in Newfoundland and Labrador (Stephenville and Botwood) to a subsidiary company on April 27, 2010.

The company is in receivership with Ernst & Young acting as receivers.

The Government of Newfoundland and Labrador did not object to the arrangements.  The provincial government was represented by Weirfoulds LLP. The arrangements do not alter the environmental orders or the appeal of Judge Clement Gascon’s March 31 decision.

However, the move appears to limit the number of orders affecting AbitibiBowater from ones affecting five sites in the province to only the two that the expropriation act left with the company. 

The cost of clean-up  at Botwood and Stephenville is listed in a report for the court by Ernst & Young as being potentially in the “tens of millions of dollars.” 

The provincial government did not release the cost estimate prepared by its consultants for all five sites, including the Grand Falls mill.  A document filed with the court by Ernst & Young dated February 19 did not establish a clear estimate of the costs involved.  It put the base case estimate as being in the mid to high eight figures and the worst case as being several times that.

The receivers have the power to sell the properties or to make an arrangement to deal with the environmental issues.

-srbp-

August is Money Month #nlpoli

August is polling month for Corporate Research Associates.

In the first 15 days of the month,  the provincial government announcement machinery has been running in overdrive.  Realistically, though, there have only been 10 working days if you pluck out weekends and Regatta Day,when the provincial government head office in St. John’s shuts down.

Abitibi cuts; Danny pays subsidies

Abitibi Consolidated announced on Tuesday that the company was closing lumber mills and laying off 700 workers in order to staunch the bleeding to its bottom line caused by slackening demand, a higher Canadian dollar and rising energy costs.

The cuts, to Abitibi's Quebec lumbering operations, will see four mills close. The American news organization Bloomberg attributes the Abitibi cuts to slowdowns in the American home construction and renovation market.

Last week, natural resources minister Kathy Dunderdale announced the provincial government would subsidize power rates to the major industrial power users on the island portion of the province. Dunderdale described the CDN$10 million subsidy as a payment representing the portion of the Rate Stabilization Plan owed by the now-defunct Abitibi mill at Stephenville.

Curiously, the amount of the annual subsidy is the same as the total amount Danny Williams previously offered to Abitibi in order to keep the Stephenville mill open. Bond Papers previously established that Williams' original subsidy represented up to $3.0 million more than the Stepehenville mill generated in tax revenue for the provincial government.

The current subsidy represents a complete loss to the treasury since the remaining mills have not increased output to replace the production at the Stephenville mill.

The new subsidy effectively reduces power costs to the two remaining paper mills, one at Grand Falls-Windsor and the other at Corner Brook. The province's news release did not clearly indicate the duration of the subsidy.

Kruger's Corner Brook Pulp and Paper employs 1300 people in its harvesting, papermaking and power generation facilities. Abitibi's Grand Falls-Windsor plant employs 490. The government subsidy amounts to $5, 586.60 per employee.

Abitibi Stephenville to close?

Talks between Abitibi Consolidated and its workers at Stephenville have broken off, with likely little chance of resumption before the first severance cheques are cut this week.

The issue which once dominated news in the province virtually slipped off the news room monitors in recent weeks.

CBC news is reporting the story somewhat differently, noting that efforts to re-start talks are expected this morning.

Earlier this year, the Government of Newfoundland and Labrador agreed to subsidize Abitibi operations at Stephenville in an amount beyond what the province collects in taxes from the mill operations.

Scrum = bad news

Premier Danny Williams and natural resources minister Ed Byrne held a scrum in the Confederation Building this morning to call on Abitibi Consolidated [ACI] to decide what the company plans to do about the government's latest offer on Stephenville and Grand Falls-Windsor.

Two things:

1. ACI has made no public comment on anything since talks broke off almost a month ago. The recent re-start of talks has gone by without any comment from the company but lots of "hope" and "optimism" from government. This smells like a case of monkey-tossing.

2. ACI announced on 20 October 2005 that it would hold a news conference tomorrow to...release third quarter results for the company just as it has done for each quarter for the past year or more. And just as the company has done faithfully, that will almost inevitably include a further statement on the company's plans to shut down Stephenville and one machine at Grand Falls-Windsor.

Taken all together, that makes today's comments by the Premier a case of calling for the sun to rise. He knows full well there is an announcement coming.

Here's the part he didn't say: Stephenville will close and Grand Falls-Windsor will lose one of its two machines. The Premier has known it for some time, at least back as far as the time ACI announced the closures.

How do I know? If anything else were going to happen, there would be a giant news conference involving the company and the provincial government.

In a case like this, a scrum means there's bad news coming.

Playing the numbers

[This is the first of a three part series looking at public opinion polling and provincial government media relations. In the first installment, we'll take a look at the broad issue of news releases output and content. In the second - The media and the message - we'll look at the other media relations activity for the provincial government. In the last installment, we'll pull the whole thing together and take a look at why government does what it does.]

Over the past decade, political watchers in Newfoundland and Labrador have come to accept the idea that the government party will adjust its media activity to coincide with polling periods.

The theory behind it is simple. Since there is only one pollster who collects data at regular, known and predictable periods, a flood of "good news" issued at the right time can reinforce positive feelings toward government or, at least, neutralize or counteract negative feelings.

Marketing researchers will do this routinely. In the wake of a flurry of advertising, they will conduct a short research program to see if the advertising had an impact on a randomly selected sample of the target audience. While marketers may have to establish a baseline - a survey or other research done before the advertising hits - political parties have the advantage of having a rolling baseline of regular polling done either privately for the party itself or publicly.

In Newfoundland and Labrador, only Corporate Research Associates (CRA) conducts quarterly polling. CRA's omnibus poll puts questions to random samples of the provincial population, on behalf of paying clients - including the provincial government - and includes a series of three standard questions on political attitudes.

Lately, CRA has taken to conducting two separate omnibus polls within the span of two to three weeks. The three political questions are CRA's own and are released shortly after the data is collected and analyzed. For them it is a simple marketing device to keep CRA's polling profile high. CRA's news releases are invariably picked up by media outlets in the province and Don Mills, CRA's president is readily available to provide some commentary and analysis.

There's absolutely nothing unusual about CRA's actions: it's just good business. Their questions are standard and, all other things being equal, they should pick up attitudes reliably.

The idea of politicians trying to influence polls got a special highlight during the most recent CRA data collection period (started 12 Aug, for about two weeks). The Liberal opposition issued a news release alleging the Progressive Conservatives were trying to goose the numbers. The Liberals should know since the practice of playing to the polls started under Brian Tobin.

For their part, the Progressive Conservatives dutifully denied any such activity. CBC reported that the Premier's Office stated that "the number of news releases issued recently is consistent with general distribution."

Don Mills defended his research work to CBC:

"It would be, in any case, a very difficult task, because people form impressions over a course or length of time on many issues," Mills said.

"[That's] not to say they couldn't be influenced by a string of good news announcements but, frankly, I doubt it."

Peaks match polling periods 11 out of 12 times

In order to examine the idea of government trying to issue a string of well-timed, "good news" releases, let's first take a look at the volume of releases coming from the provincial government.

If the volume was consistent with general distribution - whatever that is - we'd expect to see a fairly constant number of releases issued. There might be some identifiable peaks and troughs like at budget time, around Christmas and during the summer. Alternatively, we might see some random peaks and troughs driven solely by the operation of government itself. Again, we might see some identifiable peaks at times when there is a lot of news - budget time - or valleys when people are off for Christmas holidays.

CRA polls at predictable times each quarter of the year, usually varying the start and end times of its data collection by a day or two year to year. Government subscribes to CRA's omnibus so it would know well in advance when Don Mills' people will be hitting the phones. Therefore, if we have regular polling and random peaks and troughs of news release volume, we wouldn't expect to see much of a correlation between the polling periods and the news release output.

Figure 1, below, shows the number of news releases issued each week beginning in the fourth quarter of 2003 and continuing to the first part of August 2006 before recent polling started. It includes all types of news releases and media advisories on the provincial government's website.

Fig. 1. Government news releases, total by week
4th quarter 2003 to current. Green lines mark CRA polling periods.

In 11 of the 12 polling periods since the last quarter of 2003, government news release output peaks either immediately before or during the polling. In the one exception, the volume increases steadily during the period and peaks immediately after polling ended.

On the face of it, this suggests that government news releases are not being issued at random. They are not "consistent with general distribution". Rather, there is a fairly obvious connection between output and polling. Even more interesting is the fact that more often than not the peak output is immediately before polling starts.

If someone was trying to influence polling, the best time to peak "good news" would be immediately before data collection started. That way, there is the greatest likelihood that the good news will be fresh in public minds when the telephone calls start.

A little good news

Volume of news releases alone isn't proof of an effort to influence polling results, though. The results we've found so far just give ius a clue something is up that isn't random.

The next task is a content analysis - taking a look at what the releases say. The past three weeks are instructive. For the period 31 July to 06 August, government issued 27 news releases, followed by 34 the next week. During the two weeks when CRA was actively collecting data, government issued 27 releases each week.

August is normally a time when people take vacations. Yet, in the first week of the month, the provincial government announced $1.5 million in funding for the College of the North Atlantic; an expansion of family law services; changes to social assistance funding to give clients more money; almost $75, 00 in funding for the Association for New Canadians; $200,000 for silviculture projects; and, upgrading of a health care clinic in Baie d'Espoir, among other positive initiatives.

In the week immediately before polling started, the provincial government announced progress on funding for the Trans-Labrador highway; $7.0 million for a new school in Torbay; $78, 000 in violence prevention for aboriginal communities; $7500 and a speech from a cabinet to support a conference on rural development; $82 million in federal money for municipalities; $137, 000 for renovations to public housing; and, a $6.3 million sports centre in St. John's.

The provincial government also issued a news release on the proposed dismantling of the Stephenville mill. This story broke in a routine public advisory of projects needing environmental review.

Curiously, the very first release of the following week announced a successful resolution to a problem in Stephenville where used tires have been piling up as part of a problem-plagued provincial government program dating back to the Liberals. Even though government won't know until October if the solution even exists, they issued the release anyway.

Finance minister Loyola Sullivan issued a news release announcing that the provincial government's finances were in even better shape than previously announced. One of the many odd things about this release was that it contained information normally released in November once it had been reviewed by the Auditor General. Sullivan claimed he was announcing the news early, unauditted and to the general public so that government officials could have the latest information in managing their budgets.

The general pattern continued throughout the week, with the first release on Friday announcing $1.45 million for economic development in Stephenville. In the next week, the general trend continued, but this time included $5.5 million in funding for College of the North Atlantic in Goose Bay; increased fees for dentists (framed as improved dental care for children); and, new police officers in the crime intelligence field.

Conclusion

The provincial government news release output coincides with Corporate Research Associates' polling periods too frequently for it to be accidental.

The news release content tends toward "good news" moreso than one would expect to find if release content was random or than one would expect in a period like August when most people tend to be on vacation.

Even when bad news does appear - such as the routine Stephenville environmental notice - it was quickly counteracted with not one but two positive announcements.

There's no question it happens.

In the next installment, we'll look at why.

Brute force of law: Williams administration revokes Abitibi rights and expropriates assets

In a move Premier Danny Williams described as unprecedented, the Government of Newfoundland and Labrador introduced legislation in the House of Assembly Tuesday that canceled timber, land, mineral and water rights and expropriated title and rights to other lands and assets held by AbitibiBowater in Newfoundland and Labrador.

The bill moved through all three stages of debate and received royal assent in a single afternoon, thereby coming into immediate effect.

The move was explained as the "repatriation" of provincial resources from a company based on, in the Premier's words during Question Period, "the fact that the bargain was broken which had been established over a century ago." The bargain, as he described it, was the use of timber, land and hydroelectricity to produce pulp and paper.  AbitibiBowater announced two weeks ago that it would close its mill at Grand Falls-Windsor in the first quarter of 2009.

The bill provides no compensation and absolves the Crown from any legal action arising from the expropriation, except for the hydroelectric assets.  However, the manner and amount of that compensation is to be determined by the cabinet alone.

In Question Period, the Premier said that the government wrote the company last Friday seeking transfer of all assets to the Crown without any charge.  The company replied on Monday that it would not do so but wished to enter into discussions on transfer and compensation.

"At that point, of course, we felt that this was certainly an urgent matter that should be dealt with forthwith. As the House is moving towards the Christmas period, it is a closer time, a tighter time, and we felt the matter was of such importance that we should deal with it as soon as possible."

According to the Premier, the company as well as the company's partners and creditors in two hydro-electric developers, were notified 30 minutes before the House of Assembly opened for the afternoon sitting.

The move is in stark contrast to the orderly dismantling of Abitibi's Stephenville operation.  That closure included - for some unexplained reason - removing a paper machine from the province that had been originally destined for Grand Falls before a deal was struck between Abitibi and the Peckford administration to open a paper mill at Stephenville.

Included in the expropriation are two joint ventures between Abitibi and private sector companies to generate hydroelectricity.  One of them, at Star Lake, was developed entirely in response to a request for proposals from Newfoundland and Labrador Hydro to replace some of the power generated by Hydro's diesel generator at Holyrood.  It did not supply power to the mill.

As Bond Papers noted last week, "[e]xpect NL Hydro to purchase these assets from the private sector partners, one of which is Fortis, with the power being sold to Vale Inco."   That's pretty much what will happen except that cabinet will dictate the terms and conditions of the deal. The hydro assets will now be operated by Hydro directly or through another subsidiary of NALCO Reborn.

This whole move is not without some context and foreshadowing.

The most immediate context may be the prospect of AbitibiBowater declaring bankruptcy, a point raised in series of questions by the opposition.  That issue was raised in the the House of Assembly, interestingly enough at the time the Premier and natural resources minister Kathy Dunderdale were outside the legislature announcing Nalco Reborn.

Innovation minister Shawn Skinner fielded the questions on behalf of government that day:

We are aware of the challenges that AbitibiBowater as a company are facing. We are looking at the options and the alternatives that may come from the situation they find themselves in. They may be in a situation of bankruptcy or receivership, they may bounce back and maybe become a very profitable and productive company, but as it is right now, Mr. Speaker, they are a company that is open. It is operating. It has many operations throughout the world. They are still operating and we will monitor the situation as we have done to ensure that our rights as a government and the rights of the people who work with Abitibi, who are residents of this Province, are protected.

As it turned out, that was a day before the government issued its demand for transfer of the assets free of compensation.

The Premier dealt with similar questions on Tuesday, responding at one point:

Of course, the core reason for this particular action is because, in fact, there was, as I said before, back in 1905, a Charter Lease which was executed which very clearly tied the milling and logging operations to the waterways and the water power and the hydro power. So, as a result of their announcement that this particular mill in Newfoundland and Labrador is closing down, we feel, obviously, we have the right then to repatriate those assets and, in fact, expropriate the power assets, but we have no information before us right now that indicates that this company is going bankrupt. If it did go bankrupt, then there are other consequences.

The curious thing about that response is the reliance on the initial charter which established the mill in 1905during the administration of Sir Robert Bond.  Many of the timber, land and hydroelectric assets expropriated on Tuesday were acquired subsequent to the original charter.  The government also didn't expropriate the mill itself, perhaps due to potential environmental remediation costs associated with that asset.

The Premier told the legislature on December 8th that the government had been considering legal options with respect to the Grand Falls-Windsor operation for several years.  He said:

I can quite honestly say that this government has looked at the legal issues surrounding that mill for a considerable period of time - over several years since we have actually been in office - with regard to demands that Abitibi were making, based on previous agreements and previous rights that they assumed that we have. So we have been constantly reviewing this from a legal perspective and made sure that we protected the interests of the people of Newfoundland and Labrador.

From our own perspective, on an ongoing basis, we obviously are obtaining legal opinions. I think it is in the best interests of everybody involved that we not share those legal opinions because, obviously, we have a preferred advantage there and some leverage with the company and that is something that we would prefer to continue on with.

The first option is the best option. The company does the right thing, does the right thing for the people of Newfoundland and Labrador, and particularly Grand Falls and surrounding areas, after 100 years is that they pass these assets back over. That would be the timber assets - which actually, a month ago, we were actually prepared to pay for on the basis that we wanted that x number of dollars to go back into the mill and allow the mill to have some longevity, which is what the workers indicated.

The other remedy would be a court action, the other remedy would be an expropriation, and the other remedy would be an act of this Legislature which deals with the entire problem. [Emphasis added]

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Big changes coming at Grand Falls paper mill

Changing global economic circumstances for the paper industry have been pressing on the industry in Newfoundland and Labrador for years.

The future of the AbitibiBowater mill at Grand Falls-Windsor, established in 1905, may be known as early as next week, according to CBC News.  This follows an extensive review within the newly merged paper company of all its assets.

There are a few things to bear in mind:

1. If the AbitibiBowater announcement comes next week either right before or right after the Hebron announcement it will likely be swamped by Hebron.  Stephenville wasn't a political crisis in the province because it happened out of easy camera range of the St. John's-based local media.  The story just won't register, especially if Hebron is a bright shiny object waved around to distract attention.
2. "AbitibiBowater manager Brad Pelley said that inside a year, the company has to turn the mill into an operation that's not losing money."  Now there's a quote that doesn't even come close to telling the story.  Despite whatever changes have been made at the GFW mill, surely to mercy, the mill is suddenly in better financial shape because of the heavy provincial government subsidies that flowed in the wake of the Stephenville closure.  Like $30 million of flow over two years to Corner Brook and GFW.
3. Will the provincial government be as combative and feisty about downsizing or machine closings at GFW as it has been in the past?  Here's another policy carryover from the Grimes crowd to Williams' crew: threaten legal action (like stripping all the company's timber licenses) if one of the two machines at GFW is closed, regardless of the economic costs. 

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The issue behind the Abitibi upset

Human resources minister Susan Sullivan responded to Mark Griffin’s letter about Abitibi printed in last week’s Grand Falls-Windsor Advertiser.

The root of this whole issue is really the upset in central Newfoundland among people who believed that somehow magic would occur and the mill wouldn’t close. They expected the ministerial committee to do things that were likely never even discussed. 

That’s what happens in these cases. 

Some people just imagine magical results. Like they did in Harbour Breton or Stephenville.  The difference in this case is that there isn’t any place to sop up all the laid-off workers.  As a result people are edgy. They  want to point fingers.

You can tell this is part of the local political dynamic by the line Sullivan uses that essentially sits the whole thing in the hands of the union.  You’ll hear that a lot:  “We only did what the union/workers wanted.” As Sullivan describes it:

"At two specific meetings I was present with Minister Dunderdale when she said clearly to the unions when she said 'Do you understand if you vote in this manner these are the repercussions, these are the consequences; this could happen and this could happen, and ultimately the mill could close. Do you understand that? 'We want to make it clear you understand what the repercussions of your vote might be.' We made that abundantly clear to them and they told us, yes, they were clear, but they had their own decisions to make. We said that was fine."

In short hand:  Hey don’t blame us.  Those guys knew what they were doing when they turned down the last offer.

You can see that real issue too in the portion of the article in which Griffin responds:

"What I would have thought would have been an appropriate approach would be an attempt on the part of government to broker a deal, to mediate deal if they could," Mr. Griffin told the Advertiser.

"If they attempted that and the end result was there was no deal, so be it, but it seems that the government's approach was 'we are not getting involved in the relationship between the union and the company', as if to say that is government policy. There are many examples in our history of government getting involved in these private relationships."

Government getting involved in private relationships.  Like say Stephenville where the government laid millions on the table to subsidize the mill.  You can find plenty of references to that power subsidy coming up online and elsewhere in discussions about the Grand Falls-Windsor mill.  For those who want some discussion of it, you can find references at this old post from 2006 and 2005.

You can see the political upset this is causing in certain quarters by the attacks being mounted against Griffin personally by the Premier – his usual smear that someone has a “political agenda” or “political aspirations” – and some of his staunchest supporters.

We are in polling goosing season after all.  Surely it doesn’t help the partisan illusion of invincibility derived from overwhelming popularity if people actually start voicing concerns about government policy and actions. As one wag put it, the issue doesn’t have to be correct, true or even remotely plausible to capture the popular imagination.  After all, said the wag, the current administration has thrived on things that aren’t true.  They are afraid of this issue because they know too well the power of a highly emotional issue and the political damage it can cause.

All that’s as maybe.  The Abitibi issue has legs and it is causing political problems in central Newfoundland for an administration that has been remarkably able to make these issues disappear.

Let’s see if they can work their magic again.

So far their efforts haven’t been working.

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Comment update:  You can find additional detail in a series of columns by Roger Pike in the Advertiser.

Dunderdale on Abitibi/Fortis/ENEL expropriation: Oops!

An obviously stressed natural resources minister Kathy Dunderdale admitted to the House of Assembly yesterday that there were problems with the provincial government’s hasty seizure of  assets belong to AbitibiBowater, Fortis and ENEL.

The paper mill itself – originally supposed to be left out of the deal – wound up being left in.  As a result, taxpayers are stuck with a potentially major environmental liability.

CBC puts the Premier’s reaction to the shag-up this way:

Outside the legislature, Premier Danny Williams told reporters he's embarrassed by the turn of events, but he can live with them.

"It was something I wasn't happy with when it happened, but it was an innocent mistake that was made by an official in the department," Williams said. "As simple as that."

That’s bad enough, except adding the mill when you explicitly wanted to leave it out isn’t the only shag up in the whole confiscation.

According to a court decision in Quebec where Abitibi is working through a bankruptcy protection proceeding with its creditors, the Williams administration also forgot to pick up a few of the Abitibi assets in the province that should have been seized as well in the Chavez-esque sweep.

The Legal Genius(es) behind the whole fiasco left out the port facilities at Botwood and the former mill site in Stephenville.

Abitibi closed the mill at Stephenville closed in 2005 after a prolonged battle with the provincial government that included threats by the Premier to expropriate Abitibi’s assets:

"If there's an interested party that can have that mill up and running, we'd be interested in talking to them," Williams said Monday.

"If that requires expropriation, then that's something we'd certainly consider."

In the end no other buyers emerged and the mill closed despite the Premier’s 2003 election commitment that the mill would not shut down on his watch.

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