Did Prime Minister Stephen Harper come down with sunstroke while touring Canada’s Far North in late August? Or maybe Newfoundland and Labrador Premier Danny Williams has perfected some form of mind control over the prime minister?

How else could one explain Harper’s decision not to invoice St. John’s after Ottawa opted to pay $130 million in compensation to AbitibiBowater Inc. after the company’s assets in central Newfoundland were expropriated by the province?

On Dec. 16, 2008, in response to AbitibiBowater’s decision to close its Grand Falls-Windsor paper mill, Williams rushed the expropriation legislation through the provincial legislature in a single afternoon.

In justifying the expropriation of AbitibiBowater’s timber and hydroelectric assets, Williams claimed he was preventing the company from selling them at a profit, leaving 800 workers high and dry.

Predictably, at home, Williams was received like a hero for the action — particularly because many feared that the company was heading for bankruptcy and would be unable to pay retirement benefits or compensation to its workforce.

But support for the move sagged after the revelation in May that, in the province’s haste to snap up the timber and water rights, it had accidentally expropriated something it certainly did not want — the mill itself.

This blunder will have far-reaching consequences for the province’s taxpayers, because the cost of removing 100 years of toxic chemicals from the mill site is estimated at $200 million. This is roughly equivalent to the value placed on the timber and water rights that were so hastily snatched from AbitibiBowater.

So, perhaps Williams has done the company a service, if only by accident. Thanks to the province, a financially strapped AbitibiBowater is no longer responsible for long-term environmental remediation of the mill’s site, the cost of which could far exceed current estimates.

In addition, Ottawa apparently felt compelled to compensate the paper-producing firm quickly rather than face a lengthy fight before a NAFTA arbitration panel. For a company in such dire financial straits, an immediate cash infusion of $130 million is likely worth the loss of something it may never have been able to sell. Evidence to date bolsters this argument, as Newfoundland and Labrador has not yet found a buyer for the seized assets.

Exactly why Ottawa settled with AbitibiBowater without demanding compensation from Newfoundland and Labrador remains an open question. Certainly, the decision could have long-term consequences for Canada’s reputation as a reliable nation for international investment.

That’s because Harper’s assertion that other provinces will not receive such generous bailouts should they run afoul of NAFTA in such a manner as Newfoundland and Labrador is hardly credible when a precedent of this magnitude appears to have been set.

Instead, perhaps other provincial premiers will look to Williams as an example to emulate. The lesson plan goes like this: when demands for federal largesse go unanswered, respond by demonizing the governing party, even if it’s your own. Claim victory when the federal government craps out in the next election; rain hellfire on a major employer when it runs into financial trouble during a recession. Take its property; leave Ottawa to pay the bill when the aggrieved company seeks redress.

And don’t worry about clawbacks in federal transfer payments — the federal government will make nice in hopes that it can win back a seat or two in the next election.

Despite what may be lasting damage to Canada’s international reputation for fair dealing and the fact that Newfoundland and Labrador has gained nothing from the debacle, Williams had this to say after Harper let him off the hook: “When I look back, of the many things that I’ve done … this is probably one of the actions that I’m most proud of.”
IE