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NEWS: The AbitibiBowater NAFTA ‘win’ and water rights

In December 2008, after AbitibiBowater announced that it would close its mill in central Newfoundland, the province’s premier Danny Williams stated in the legislature that, “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 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.

His government then introduced legislation that gave the provincial government control of AbitibiBowater’s timber rights, water rights and hydroelectric plants, highlighting that the company would receive unspecified compensation for physical assets taken over. The CBC reported in February that, “Williams said AbitibiBowater will be compensated for its physical assets, but not the timber and water rights – and the company should expect to get less than $300 million.”

AbitibiBowater responded to all of this by filing a $500 million NAFTA Chapter 11 challenge. Earlier this week, the Department of Foreign Affairs and International Trade stated that, “The Government of Canada has agreed to make a payment of $130 million to AbitibiBowater upon the company’s restructuring. This payment represents the fair market value of the company’s expropriated assets.”

What remains unclear is whether or not the settlement – perhaps the largest payout resulting from a NAFTA challenge – includes a precedent-setting payment for water rights. The federal government has only said its $130-million payment represents the “fair market value of the company’s expropriated assets.” But AbitibiBowater’s media release says, “The Government of Canada will pay AbitibiBowater C$130 million, representing not more than the fair market value of those rights and assets…”

If the payment included water rights, the concern is that it transforms every water taking permit a government issues into a proprietary right that cannot be recovered without compensation to the corporation. This then is also significant in terms of the water permits that are issued to transnational corporations for their operations in the tar sands. What if those permits needed to be rescinded due to water shortages or because it was in the public interest to do so?

In a recent Council of Canadians media release on this issue, Maude Barlow says, “If AbitibiBowater has in any way been compensated for the loss of water and timber rights, as the company is suggesting, the Harper government’s hundred million dollar buyout would turn water into private property. Imagine the consequences of handing oil and gas companies operating in the tar sands this same right to draw water or else be compensated.”

It may also relate to a developing situation in northern Ontario again involving AbitibiBowater. The Timmins Daily Press reports today that, “Local politicians are striving to convince the provincial government not to allow the sale of power dams on the Abitibi River by AbitibiBowater. Both MP Charlie Angus and MPP Gilles Bisson (NDP – Timmins-James Bay) have written Ontario Minister of Natural Resources Linda Jeffrey asking her not to ‘rubber stamp’ the company’s attempt to sell off the dams. …Angus and Bisson fear the dam selloff would eliminate the feed of low-cost electricity to AbitibiBowater’s mill in Iroquois Falls, ultimately leading to the closure of the plant.” MPP Bisson writes in the letter to the minister that, “Over 100 years ago, the province of Ontario leased water rights to Abitibi in order to further a public good – creating industry and jobs for the region of Northeastern Ontario. This covenant remains in effect. We are calling on you to ensure the public interest is protected.”

The Montreal Gazette reports today that, “The payment (to AbitibiBowater) will be made when the company emerges from court protection – pending a coming creditors’ vote in a couple of weeks. Confirmation of the payment is a definite assurance of a little more liquidity as the company works on what is called exit financing.” The Canadian Press has reported that, “The settlement must be court-approved and will be discussed at a hearing Sept. 14 in U.S. Bankruptcy Court in Delaware, where the company is incorporated.”