February 11, 2009

Paper Mill Seizure Boosts Populist Premier

"Canada's Hugo Chavez" to be challenged under NAFTA

by Chris Arsenault

The Dominion - http://www.dominionpaper.ca

A broken 1905 covenant means AbitibiBowater will no longer "use and enjoy" Newfoundland's land and water resources "for its milling and logging business." Photo: Heather Meek

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VANCOUVER – Danny Williams, the Progressive Conservative Premier of sparsely populated Newfoundland and Labrador, recently expropriated the assets of a paper mill, AbitibiBowater, which had announced hundreds of layoffs in December. The mill had just received generous perks from the provincial government.

"In 100 years of operating in Canada we have never seen anything like this," said Seth Kursman, Vice-President of communications and government relations for Abitibi.

"We are working on filing [legal documents] as we speak," Kursman told this reporter. The mill is scheduled to close on March 28, 2009, and the government will assume control of its assets on March 31.

"For 100 years, Abitibi and its predecessors have enjoyed the privilege of Newfoundland and Labrador's natural resources," said Williams when he announced the expropriation on December 17. "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."

The threat of legal action because of the expropriation, in Canadian courts or before a tribunal convened as part of the North American Free Trade Agreement (NAFTA), doesn't worry Gary Healey, a tradesman who has worked at Abitibi's mill in Grand Falls, Newfoundland, for most of his adult life.

"Abitibi had a covenant with the government from 1905 to make paper at Grand Falls. If they no longer want to make paper here, that covenant has been broken," said Healey, who also serves as a spokesperson for the Canadian Energy and Paperworkers Union.

The 1905 agreement between the province of Newfoundland and the Anglo-Newfoundland Development Company Limited - the firm which preceded Abitibi in controlling the paper mill and connected hydroelectric power generators - said the paper company could "use and enjoy" the province's land and water resources "for its milling and logging business."

The assets, including forested land, the pulp mill itself and the valuable hydroelectric generating stations, are worth at least $200 million, according to articles in the business press. "We aren't talking about small-time dollars here," said Kursman.

Abitibi may be compensated for power-related infrastructure, according to the provincial government. No figures have been released and a spokesperson for Newfoundland's Department of Natural Resources refused to comment on the dispute.

With an international recession hindering the market for paper products, Abitibi exported power from the mill's hydroelectric station for a tidy profit. "They [Abitibi] invested money on their hydro assets, but they allowed their paper-making assets to deteriorate," said Healy.

"They were never a power company. The charter that they operated under was under the premise that they'd make paper," Healy emphasized.

An industry town built around the paper mill, Grand Falls will no doubt experience devastating economic impacts from the closure. The provincial government has not announced plans to re-open the mill as a public company or in partnership with another forestry firm.

"If Abitibi wanted to run the mill, we could have found a restructuring deal," said Healy, who believes the company wanted to exploit cheap hydropower to sell back to consumers.

While business commentators condemn the expropriation as a reckless threat to future investments, Williams and his take-no-prisoners attitude are wildly popular with average Newfoundlanders.

The historically marginalized province is currently experiencing an offshore oil boom and Williams, a multi-millionnaire cable TV magnate prior to entering politics, is credited with a knack for negotiating favourable deals with oil companies. This is where the "Danny Chavez" nickname originated.

"Williams has done well playing hardball with companies," said Steven Shrybman, an influential trade lawyer with Ottawa-based firm Sack Goldblatt Mitchell LLP.

"Canadians don't want to be just hewers of wood and drawers of water. The province gave water and timber rights to the company on the condition that they invest and produce paper," Shrybman told this reporter, adding that Abitibi's legal case is "anything but a slam-dunk if Canada vigorously defends its interests."

Other legal scholars dispute Shrybman's claim, arguing that the company will have the upper hand if the issue goes before a trade tribunal.

Abitibi plans to sue the federal government under NAFTA, Chapter 11, a controversial clause designed to mediate disputes between states and investors. Critics allege that corporations use Chapter 11 to target legislation that favours human health, workers' rights and the environment over private profit.

The federal government, rather than Newfoundland's provincial government, will have to fight the court battle because only national governments can sign foreign trade deals. Ironically, Canadian Prime Minister Stephen Harper, a political enemy of fellow conservative Williams, will be forced either to defend the expropriation, or to pay Abitibi hundreds of millions of dollars from federal coffers.

Along with preparing lawsuits, Abitibi is "lobbying the highest levels of government on both sides of the [Canada-US] border," according to Kursman. Political manoeuvring from the world's eighth largest integrated paper company has included meetings with US Secretary of Commerce Carlos Gutierrez, Canada's Minister of International Trade Stockwell Day, US Ambassador to Canada David Wilkins and other senior officials in the Prime Minister's office.

While Kursman says his company will do "everything possible to protect shareholders," lumber-worker Healy thinks the corporation should accept its fate.

"Just because a big company didn't have things go their way, doesn't mean [the seizure is] wrong," he said. "The Premier had to take some action to protect these assets; these assets belong to the people."

The original version of this article was published by Inter Press Service.

Chris Arsenault holds the Phil Lind Fellowship at University of British Columbia's Department of History. He is currently writing a history of sabotage and the Alberta oil patch. Anyone (nameless or not) who can provide information about this should contact him at arsenault_chris[at]hotmail.com. His first book, Blowback: A Canadian History of Agent Orange and the War at Home, will be released in March.

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