Newfoundland Standing Up for the Rights of Its People, or Opening the Way to Trade Disputes?

Yesterday the Government of Newfoundland and Labrador created history when it introduced and passed Bill 75 (now S.N.L. 2008, c. A-1.01), Abitibi-Consolidated Rights and Assets Act. The legislation takes away land and water rights, including ownership of all hydroelectricity rights from the generating station at Star Lake, and timber rights to forests on Crown land, from the U.S.-based company AbitibiBowater as of the end of March 2009 given to the company’s predecessor in 1909. Media are characterizing this both as “expropriation” and “repatriation” of the lands.

AbitibiBowater is set to close its mill in Grand Falls-Windsor, Newfoundland. According to news reports, the company planned to sell its land and water rights to help with company finances.

According to a Ministerial Statement made yesterday by Danny Williams, Premier of Newfoundland and Labrador, when the legislation was introduced:

This company has been granted some very generous terms in the past, in order to ensure they continue operations in this province. Now, through their decision to close their operations, they have effectively told the province that they are no longer willing to stand by their commitments. 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.

Having said that, we cannot as a government allow a company that no longer operates in this province to maintain ownership of our resources. We will not give away our valuable timber and water resources to a company that does not honour its historic commitments on industrial development of our timber resources.

For 100 years, Abitibi and its predecessors have enjoyed the privilege of Newfoundland and Labrador’s natural resources. It simply makes sense that if Abitibi are not going to continue the operation of a pulp and paper mill and renege on their commitment to our province they will no longer have access to our natural resources.

We will, therefore, today introduce a bill to ensure these valuable natural resources are returned to their rightful owners – the people of Newfoundland and Labrador.

Premier Williams set the stage for at least some of the natural resources to be managed by government-owned Nalcor Energy with a press release last week from the Executive Council (Dec. 11/08) that states:

Positioning this energy producing province as an internationally-competitive player in the resource sector, the Honourable Danny Williams, Premier of Newfoundland and Labrador, today unveiled the new name and corporate identity of the province’s energy corporation: Nalcor Energy. The Premier was joined by the Honourable Kathy Dunderdale, Minister of Natural Resources, and Ed Martin, Chief Executive Officer (CEO) and President of Nalcor Energy.

“We have a tremendous wealth of energy resources in Newfoundland and Labrador and Nalcor Energy will enhance the value of the people’s assets, while growing an internationally-competitive corporation that will be a flagship for the province,” said Premier Williams. “No longer are we passive players in the development of our resources; rather we are now fully engaged partners, sitting at the table and actively involved in resource development for the benefit of our people. Nalcor Energy will represent the people of the province in developing and managing our energy developments, and we look forward to a bright future for this new provincial corporation.”

According to the the First Reading of Bill 75, Abitibi appears to still be responsible for environmental concerns regarding the lands:

13. Nothing in this Act affects the liability of Abitibi-Consolidated related to undertakings made by it in relation to environmental remediation.

Both the media and Premier Williams expect Abitibi to take legal action with regard to trade laws.

A news report and commentary from the Globe and Mail imply this will reduce the chances of another international company wanting to deal with the province. In contrast, a TV broadcaster on CBC Newsworld theorizes that this opens up the possibility for the government to create more industry and therefore more jobs in the province.

I’m curious to know how this move is seen by Slaw’s Newfoundland-based readers?

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Comments

  1. Great post, Connie. I was hoping someone would put up the link to the legislation.

  2. A final version isn’t out yet, but presumably it is the same as the version of Bill 75 that was introduced (link to PDF in the post above).

  3. As an expatriate living on The Mainland, I’m chagrined that the inescapable pattern of Newfoundland premiers — from innovative populist to unchecked demagogue to eventual pariah — is now well and truly into its second stage with Danny Williams. I’ve liked most of what Williams has done and have forgiven him his excesses; it’s going to be very hard to forgive him this one.

  4. So, I’m taking it you don’t see this as a positive move then, huh? The Globe & Mail were calling him “Danny Chavez” (after Venezuela’s Hugo Chavez).

  5. As an expat NFLDer myself, I was very happy to see Danny stand up to bring industry for the province once again. As has been highlighted elsewhere, there were many predictions that the sky was going to fall when Danny went toe-to-toe with big oil, and in the end he won that one for the province.

    I am curious about one thing. I have seen several comparisons to landlord/lessee relationships. What would someone with a much better understanding of the law say about this?

  6. Connie, the “Chavez” moniker was cute but misleading — till now. Williams blows a lot of smoke, but he’s also whip-smart, is an extremely tough negotiator, and has absolutely no fear. Shutting down the offshore development in order to obtain equity ownership was very effective — played great at home and made his point to the oil companies. (He benefited from great timing, though — pull that stunt with $40/barrel oil and watch your phone sit silent for a long time.) But walking away from the oil negotiations was one thing — he only damaged the energy companies’ pride and prospects. Nationalizing a foreign company’s assets and providing it with arbitrary compensation is a whole different story, and crosses the line between amusing fiery populist and recklessly cavalier demagogue. Williams is riding an incredible winning streak, and combined with a complete lack of local opposition and an adoring fan base, that’s a recipe for disaster. I have the highest regard for Williams’ character, but the fact remains that power corrupts. Smallwood, Peckford, Wells, Tobin — they were all giants in their day, but their days ended, and usually not well. Unless this is essentially a publicity stunt — and when it comes with its own legislation, it usually isn’t — this is a bad sign.

    I’ve liked almost everything Williams has done with Newfoundland, which was a mess when I moved away in 1990. He’s prioritized the right things (starting with education) parlayed the province’s resource boom into very good long-term financial security, ans best of all, restored an optimism and confidence to Newfoundlanders that I never thought I’d see. But he seems susceptible to Newfoundland’s oldest weakness, the insistence on looking back in anger and nursing resentments over past grievances. I’ve been saying for awhile that Newfoundland will make real progress once it finally lets the past rest in peace and occupies itself with its present and future — recognize past injustices for what they were, but then stop exhuming the dead and get on with living. Newfoundlanders are talented and hard-working enough that they — we — don’t need the crutch and distraction of victimhood. This Abitibi situation is on the wrong side of that ledger.

  7. D’Arcy and Jordan: Thanks so much for bringing your perspectives! I didn’t know a lot about the situation before it was in the news yesterday, and now I am intrigued to see where it will head after this.

  8. I’m curious – according to everything I can find, Abitibi-Bowater is a Canadian company, based in Montreal, with international operations in 6 countries worldwide. Why are we referring to them as a foreign company?

    I’d be more interested to hear some legal opinions on this. Who actually owns the timber and water rights? Were they sold to Abitibi or its parent company, or simply granted on a long term lease? Why would the Provincial Government of Newfoundland and Labrador *not* be in a legal position to expropriate the timber and water rights?

    I don’t think this constitutes demagoguery, or is an example of victim mentality. From the news coverage of this no one seems to be complaining about how the rights were granted in 1909, or that they were stolen or given away for a ridiculously unfair price or long term (like Churchill Falls, which I won’t get into here); the argument is that the rights should stay in the political entity (state, province, country) where the property is geographically located. I find it very hard to believe that in 2008 this would not be an accepted business practice around the world (I have no doubts that major corporations would move heaven and earth to get around it, mind you; I just can’t see how they would expect to have a legal leg to stand on.)

    Of course, I’m not a lawyer; just an interested onlooker.