Tuesday, March 15, 2011

Not a Drop to Drink

Back on March 8th of this year the government settled with a corporation, AbitibiBowater, to buy back its water permit, as though it was a complete asset, since the company was restructuring, closing the Ontario factory, and effectively moving  its focus further south to Delaware, where it was incorporated (their head office is in Montreal). It is on these grounds that it is claiming to be an American corporation and may therefore file a grievance under the NAFTA, since the government 'pushed through' a legislation that prohibited the company from taking the water permit with them. The original agreement with the mill from 1905 stipulated the permit was contingent on the company operating a factory in the province, and so when the company moved, the province seized the permits (water, timber, etc.)

The reason for the restructuring, closing, and all this hub-bub is a court-ordered directive to prevent the company filing for bankruptcy; the fall in the newspaper industry hit the company hard.  Therefore, I am inclined to be gentle on them, since they aren't just closing the factory to be dicks (like previous companies I have worked for) - they are doing what they need to survive and we set the society that values a corporation's survival over its employees (not that I'm bitter), we can't fault them for playing the game we built. When the Newfoundland government expropriated the permit, the company sought reimbursement.

The Newfoundland government denied them, but the company appealed the process and the government ruled that they were entitled to reimbursement for the lost permits to the tune of $130 million. Many Canadians are upset about this ruling, saying that it is setting a precedent for companies to regard natural resources as private firm's property, even petitioning the government to indicate their displeasure. Many people are pointing out that water in its natural state is exempt from the NAFTA, but that this ruling ignores that.  It has been suggested another reason for the payout is to maintain good will with the company, since they are also in a case in Northern Ontario, where the company is attempting to sell a few hydroelectric dams that supply cheap power to another factory (owned by AbitbiBowater as well), the closure of which would seriously hamper the local economy. The most hilarious part of this situation is where the government asks the company to "ensure the public interest is protected". The sheepherder will look after his flock's "interest" until it is no longer profitable to shear them, then the menu calls for mutton.

I  am not sure I agree with the public's assessment that this is damaging to Canada's control of its natural resources; the ruling is more contingent on the value of the permit, rather than the ownership of the water. Selling the permit back does not give the company the right to sell the permit (and certainly not the water) to anyone, or any company, other than the government from which it originated. To be honest, ensuring the water permit does not travel outside the country when permit-holding companies cease operations in Canada helps us keep our water closer to home; I would rather have less water permits in circulation than more.


On the other hand, if companies realize that the permit can be considered an asset that can be returned for its value at the end of the business transaction, it will encourage greater sales of permits, but also greater foreign business, so that might be a zero sum deal.

The final say is that this sets the precedent that we can no longer rescind permits without offering fair compensation for them - this could become a liability in cases where it is in the public interest to do so. To which I respond "Good". So our government will have to think harder before issuing permits to use our water and possibly leave it in a ruined state - I like that. Anything that keeps our water more under our control, or jacks up the price of permits, considering the higher risk of permit selling - is a good thing.

We'll revisit this issue on September 14th, when the board evaluating AbitbiBowater's financial fitness rules whether it is fiscally viable or not. If they rule otherwise, we're off the hook for the $130 million, so cross your fingers!

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