Danny Williams says he is not losing sleep over a 'blowhard' legal threat from AbitibiBowater. (CBC)

Newfoundland and Labrador Premier Danny Williams is brushing off a strongly worded letter from newsprint producer AbitibiBowater that threatens legal action over the government's seizure of the company's resource assets.

The house of assembly passed a law this month enabling the government to seize the company's timber and water resources once its mill in Grand Falls-Windsor shuts down within the next three months.

David Paterson, Abitibi's president and chief executive officer, in a stinging letter to Williams last week, called Newfoundland and Labrador's move illegal and subject to retaliation.

In an interview Monday with CBC News, Williams said he's not worried.

"You know I'm a lawyer of over 30 years, so blowhard, five-page letters that get sent to everybody in the country mean nothing to me. I know the law," said Williams.

AbitibiBowater has said it is consulting with officials in Canada and in the U.S. over a possible challenge using the North American Free Trade Agreement.

Again, Williams said he is unfazed.

"We're acting within our rights here. If there's going to be a NAFTA challenge, so be it," he said.

"It appears that Abitibi are trying to adopt that similar type of jargon and to try and impress probably political leaders or people with political influence, but, you know, that doesn't work with me," he said.

"I've heard it all, and sticks and stones may break my bones but names will never hurt me."

The Newfoundland and Labrador's expropriation does not include the mill itself, although the government will take over a hydroelectric power plant at Star Lake, which sells power to the provincial grid. The government has said it will compensate AbitibiBowater for the Star Lake plant.

Within rights to lay off workers: premier

On Saturday, woods workers with AbitibiBowater were told to go home. Some have said they feel the move, which came a day after Paterson's letter was made public, is a retaliation against the government's action.

Williams said AbitibiBowater has every right to lay off its forest workers, but it also has an obligation to ensure they are fully compensated.

"If they're going to start to early terminate these workers now, they have a right to do that, but there's a moral and ethical side to this," said Williams.

"We'll have to make sure these workers are properly compensated in one form or another."

Meanwhile, Williams picked up support Monday from New Democratic Party Leader Jack Layton, who was visiting St. John's.

"I think the premier has made a very bold move on behalf of the people of Newfoundland and Labrador, and I congratulated him for having the foresight to take such a step," Layton told reporters.

"Our NDP members of Parliament have been meeting with the communities to talk about whether or not we can somehow or another convince the government of Ontario to move down a similar path," said Layton, following a meeting with Williams.

"So I think he's opened up an important new approach to public policy and to the custodianship of a public asset, and a public trust."