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VANCOUVER, British Columbia (Reuters) - The eastern Canadian province of Newfoundland and Labrador will expropriate AbitibiBowater Inc's timber rights and hydroelectric assets when the company closes its remaining newsprint mill there next year, Premier Danny Williams said on Tuesday.
The firm and its predecessor companies had "the privilege" of using the province's natural resources for the past century and now the government is returning them to their "rightful owners -- the people of Newfoundland and Labrador," Williams said.
"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," Williams said in a statement to the provincial legislature.
"Abitibi may be compensated for any power-related infrastructure assets which the provincial government takes control of," according to the statement that accompanied the introduction of legislation to take over the property.
AbitibiBowater, North America's largest newsprint maker, announced on December 4 it would permanently close its mill in Grand Falls-Windsor, Newfoundland, as part of a plan to cut costs and pare output due to declining demand. The company will also shut a mill in Tennessee and eliminate 1,100 jobs.
Abitibi was surprised by the province's action, saying it had already told the government it was willing to talk about the future of the assets. It also noted the Williams was not offering to take the mill property itself.
"What does that bring to the mill and the 750 workers?" asked spokesman Jean-Philippe Cote, saying Newfoundland's action would also discourage international investors from looking at the province to expand.
The company is considering possible legal action.
A 1905 lease agreement between a predecessor company to Abitibi and the then-British colony gave the firm access to timber and water rights for the purpose of producing paper, according to the government.
"We will not give away our valuable timber and water resources to a company that does not honor its historic commitments on industrial development of our timber resources," Williams said.
Abitibi closed its Stephenville, Newfoundland, mill in 2006 so the shutdown of the Grand Falls plant will leave it with no paper production operations in the province. Williams had fought to keep the Stephenville plant open.
Williams, a Conservative, is no stranger to tangling with the private sector or the federal government. In similarly tough dealings with the energy industry, he complained that Newfoundland was being shortchanged while oil companies and Ottawa reaped rewards from megaprojects off its coast.
He demanded the oil majors offer the province stakes in new projects, and pay higher royalties when oil prices rise, as a way for Newfoundland to gain more control over its natural resources.
Forestry workers had asked the province to give them access to Abitibi's timber rights. The hydroelectric facilities had also sold some power to the provincial grid, and management will be taken over by the province's Nalcor Energy utility.
Reporting Allan Dowd, Editing by Rob Wilson, Gary Hill