Premier Danny Williams says the government is embarrassed that it expropriated an environmentally troubled newsprint mill it does not want. (CBC)

The Newfoundland and Labrador government admits it is on the hook for millions of dollars because it mistakenly expropriated a newsprint mill it doesn't want.

The mistake was made in a 2008 bill that was rushed through the legislature, allowing the government to seize AbitibiBowater assets, particularly timber and water rights, as well a hydroelectric power station.

The matter came up Thursday in the house of assembly, when Deputy Premier Kathy Dunderdale said the government wound up with a century-old, environmentally troubled mill in Grand Falls-Windsor.

The government had thought it was saddling responsibility for decommissioning the mill with AbitibiBowater, which closed the mill after declaring it unprofitable.

"There were mistakes made, and we did expropriate a property in Grand Falls-Windsor, the mill itself, where we did not intend to do it," Dunderdale told the house.

"That's a reality we have to live with."

The error is related to land surveys prepared for government when it drafted an expropriation bill that sailed through the house in December 2008.

In its rush, the surveys were botched and the area that the government claimed mistakenly included the land on which the mill sits.

Outside the legislature, Premier Danny Williams told reporters he's embarrassed by the turn of events, but he can live with them.

"It was something I wasn't happy with when it happened, but it was an innocent mistake that was made by an official in the department," Williams said. "As simple as that."

In February, the government announced in a statement that it had assumed "custody and management" of the mill, but did not reveal how that came to happen.

"When drafting Bill 75, we erred on the side of caution to ensure that the hydroelectric facility attached to the mill was included in the expropriation," Dunderdale said in a news release at the time.

"By not including descriptive language to specifically exempt these other properties, the province assumed legal ownership of them."

Thursday marked the first time that Williams has publicly addressed the issue.

Government rushed the expropriation legislation in December 2008 to prevent AbitibiBowater from holding a pre-bankruptcy fire sale.

AbitibiBowater, which is still struggling to survive, filed a $500-million trade complaint this winter over the expropriation.

Liberal Leader Yvonne Jones was quick to attack the accidental expropriation, even though opposition members of the assembly joined with the government in passing the bill in 2008.

"How did such a major error take place, and why wasn't this picked up during your review and that by the Department of Justice?" Jones asked.

Williams said the environmental costs could be enormous but no bureaucrats will be disciplined and no politicians will be punished for the error.