September 22, 2005
(Executive Council)
(Natural Resources)

Extensive negotiations with Abitibi unable to produce resolution

Despite several weeks of exhaustive and extensive negotiations between Abitibi Consolidated Inc. (ACI) and the Government of Newfoundland and Labrador, no resolution has been achieved to reverse the decision by Abitibi to close certain operations in the province. On July 27, the company announced that by November 2005, they would close the mill in Stephenville and shut down machine No. 7 at their operation in Grand Falls-Windsor.

�We are extremely disappointed to announce today that, despite extensive discussions and intense negotiations with Abitibi, we have reached an impasse,� said Premier Danny Williams. �The primary reason for this impasse is quite simple � the demands and position of the company were a moving target and, quite frankly, their demands are much more than any reasonable and responsible government could agree to. We understand all too well the consequences of the closure of these operations, especially in Stephenville. The ramifications will be significant for the entire Port au Port Peninsula and the Grand Falls-Windsor area. However, I can assure the people of those regions that we have done everything possible to achieve a resolution.�

The premier went on to say that it is important to recognize that the pulp and paper industry world-wide is facing challenges, including but not limited to declining prices, lack of energy supply, a weakening US dollar and international competition. One of the main challenges facing Abitibi is the lack of an energy supply in Stephenville. �While we recognize the challenges facing the company and the industry generally, our government was not willing to sit idly by and accept, without a fight, the closure of these operations,� added the premier.

�This is why ever since Abitibi announced these closures we, as a government, have been sitting at the table with Abitibi officials making every attempt to find solutions to the company�s problems. In fact, we had been working on resolving the company�s problems for more than a year. We promised that we would leave no stone unturned, and I can assure you that we have not. We have expended a tremendous amount of time, energy and resources on these negotiations; however, sometimes you just have to acknowledge that a deal simply is not there. Our final proposal to Abitibi remains on the table for their acceptance. However, we will now turn our attention to finding new opportunities for the affected regions.�

Ed Byrne, Minister of Natural Resources, explained that while government would not lay out all of the details of the negotiations with Abitibi, government has given an extremely fair and reasonable proposal which would have assisted Abitibi through a period of at least five years.

�After several weeks of negotiations, we honestly felt very optimistic that a resolution was within our reach,� said Minister Byrne. �Then the company came back to government with new demands, different positions and a fundamental shift in the negotiations. Essentially, after weeks of thoughtful and careful talks and discussions, the company came back with a proposal that was a back-door approach to the unreasonable and unfair demands they placed before the province back in July. These demands were completely unacceptable to this government, to consumers and other industrial customers.�

The fundamental elements of government�s proposal to the company included:
A sufficient level of protection and benefit to the company for a five-year period. In other words, the proposed deal would have seen the Stephenville mill remain in operation for at least five more years.
Continued operation of the No. 7 machine remain for a significantly longer period of time than the current planned closure in November of this year.
Government agreement to purchase Abitibi�s surface rights � again, a significant benefit to the company.
Government�s offer to work throughout the five-year period of the agreement with Abitibi to find long-term solutions to their energy requirements and power issues.
A willingness to assist the company with energy requirements throughout the five-year period in a manner that was reasonable and fair to other industrial customers and consumers; however, we could not justify large subsidies for this company. To do so is simply not possible.

�And, I want to assure the people of the affected regions, particularly the Port au Port Peninsula, that our government will be working tirelessly to help you through this very difficult time and we will work together with you to find solutions and new opportunities for your region,� said Premier Williams. �We will not turn back on this region of the province. That is a promise. Already this morning, we have established a Cabinet Committee which will convene immediately to begin the task of finding solutions and new opportunities for the affected regions.�

Media contact:
Elizabeth Matthews, Office of the Premier, (709) 729-3960, 690-5500
Carmel Turpin, Natural Resources, (709) 729-5282,685-4624

2005 09 22                                 1:50 p.m.

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