Forestry giant AbitibiBowater was stunned and warned of a possible NAFTA challenge after Newfoundland and Labrador moved yesterday to take over its hydro assets and resource rights.
Premier Danny Williams announced legislation to enforce the change four days after the company says the provincial government sent it an e-mail demanding that it "surrender forthwith entitlement to [all]resources" in the province.
Company spokesman Jean-Philippe Côté said the message from Natural Resources Minister Kathy Dunderdale arrived after hours on Friday and demanded a response by midday on Monday.
Mr. Côté said AbitibiBowater sent a reply, suggesting that a working group be created to address issues related to the pending shutdown of a money-losing mill in central Newfoundland. Then came Mr. Williams's bombshell.
"Abitibi has reneged on the bargain struck between it and the province over the industrial development of the province's timber and water resources for the benefit of the residents of the province," the Premier told the legislature yesterday.
The legislation, which was rushed through the House after the Opposition raised no objections, would give the provincial government control of AbitibiBowater's timber rights, water rights and hydroelectric plants. The company will receive unspecified compensation for physical assets taken over.
The cash-strapped company had been hoping to sell the hydro assets, along with assets in Ontario and Quebec, to help make a crucial debt repayment in March. But any legal dispute with the province would likely drag on well past then.
Mr. Côté called yesterday's legislation a "destabilizing precedent [that]opens the door to some potential Canada-U.S. trade issues."
The company is legally a U.S. entity, which could make the province's move vulnerable to a challenge from Washington under the North American free-trade agreement.
The Premier quoted century-old documents to the legislature. He cited a 1903 letter from the president of the Anglo-Newfoundland Development Company Limited, a predecessor to AbitibiBowater, and a 1905 lease agreement to argue that the company's rights were dependent on operating a mill in the province.
He said that cabinet has the right to determine compensation.
"If there's no agreement, we will in fact impose an agreement," he said, according to The Canadian Press. "Under the legislation, cabinet will have the power to say, 'Here's the formula, here's what the compensation is, here's your cheque.' "
Other companies operating in Newfoundland shrugged off the legislation, including Petro-Canada, which has stakes in the offshore oil projects Hibernia, Terra Nova and White Rose and a piece of the proposed $7-billion Hebron operation.
"[It]is a different sector ... and Petro-Canada enjoys a good relationship with the government of Newfoundland," company spokeswoman Andrea Ranson said.
Husky Energy Inc., majority owner and operator of White Rose, said the Abitibi situation has no impact on its business. It is expanding in the province, and in September committed to spend $130-million exploring and drilling off Labrador.
The paper mill in Grand Falls-Windsor is to close in March after unionized workers twice rejected restructuring plans that involved some contracting out. Hundreds of jobs will be lost as a result.
There was no indication that yesterday's legislation would prevent those losses. But Gary Healey, a Communications, Energy & Paperworkers representative at the mill, called it "an early Christmas gift."
"If Abitibi's not interested in staying in the province, at least we have something to offer," he said. "But losing the big employer in central Newfoundland is not what we want. I'm sure if Abitibi wanted to reconsider their plans, they'd be listened to."
Grand Falls-Windsor Mayor Rex Barnes had a similar reaction.
"We would hope that Abitibi would reflect on what's just happened and come to a resolution with the unions to work this out," he said.
Less than two weeks ago, Mr. Healey was thinking about a possible move to Alberta. Yesterday's announcement isn't a cure-all, he said, but at least it shows the government is on the workers' side.
Without a mill, the local market for wood will be limited, giving the timber rights little immediate value. But the government's move is still logical, said Keta Kosman, publisher of Madison's Lumber Reporter.
"In the best-case scenario, where somebody comes along and is interested in the mill, the rights will be held by the government," she said. "If nothing happens and those trees are just left, then they're more valuable when this finally turns around."
AbitibiBowater's Newfoundland assets
Less than two weeks after AbitibiBowater Inc. announced it would close its century-old Grand Falls-Windsor newsprint mill, the Newfoundland and Labrador government has tabled legislation aiming to expropriate the company's other assets in the province.
Crown land administered by AbitibiBowater
Stephenville (Closed December 2005)
Annual capacity: 193,000 tonnes
Grand Falls-Windsor (Closing March 28, 2009)
Annual capacity: 213,000 tonnes
Capacity: 61 megawatts
Capacity: 18 megawatts
Capacity: 37 megawatts
DEAN TWEED/THE GLOBE AND MAIL
SOURCE: ABITIBIBOWATER INC.