10 MARCH 2014
THE MAGAZINE OF CANADA’S ENTERPRISING NORTH
TO KNOW ABOUT BILL C-15
IT’S NOT JUST ABOUT DEVOLUTION ANYMORE THE SUPERBOARD IS HERE AND FIRST NATIONS HATE IT. MEET THE MAN WHO COULDN’T CONVINCE THEM OTHERWISE
THE REGULATORY PROCESS IS ABOUT TO GET TIMELIER. ALAS, THE FEDS WILL STILL BE INVOLVED
PLUS: HOW WILL ROYALTIES BE SPLIT IN NUNAVUT AFTER ITS DEVOLUTION? (THE ANSWER IS MIGHTY COMPLICATED) THE NWT IS ABOUT TO GET A NEW SOURCE OF MUCH-NEEDED CASH
BUT WHERE’S IT ➮ ALL GOING TO GO
THAT AND MUCH MUCH MORE!
THINGS TO KNOW ABOUT BILL C-15
You tired of all this devolution talk? You should be. The transfer of power for managing NWT lands, water and resources has dominated headlines like nothing else. But things truly kicked into high gear in December with Bill C-15 and the surprise inclusion of a considerably revamped regulatory system (hello there, superboard). What does this gargantuan bill include? What’s changing? Could it increase the pace of Northern development or slow things down to a crawl? We asked the key questions. Here’s what you should know. BY GUY QUENNEVILLE & CHRIS WINDEYER PORTRAIT BY ANGELA GZOWSKI
o N .1 The NWT premier is an old hat at this devolution thing. In the early 1980s, during a stint with Health and Welfare Canada (and before Nunavut’s division from the NWT), he put together the financial package for the transfer of Iqaluit’s hospital to the GNWT. Then, in 1986 and 1987, he served as the federal negotiator during talks to move forestry and the feds’ controversial Northern firefighting program—trappers and hunters felt the fire dispersal methods of the day were disruptive—to the territorial government. “I was on the other side,” he says, looking back.
UP HERE BUSINESS • MARCH 2014
IN BOB’S MIND, DEVOLUTION HAPPENS NOW OR NEVER But it was McLeod’s third (if indirect) brush with devolution in the early 1990s, after his permanent move to the GNWT in 1989, that perhaps sheds some light on why today his government is so eager to see this latest and much-anticipated round of devolution come to pass now. The transfer of power, expected to come into law by April 1 after the passing of Bill C-15, will give the territorial government substantial powers in land management, some new roles in the retooled regulatory system, and around $60 million in royalties at the end of the year 1 AD (After Devolution). It’s not a perfect
deal, but it could very well have not happened at all, given what McLeod witnessed in the early 1990s. “They were negotiating devolution of the fisheries program,” he says. “I think the package was about $26 million and maybe 100 [positions]. And if I recall correctly our government decided we couldn’t do the deal because we were short $300,000. Now, 24 years later, when you look around, how many [territorial] fisheries officers do you see here?” Up Here Business recently sat down with the noticeably-at-peace premier to discuss Devolution 2014's final, arduous lap.
“THERE WAS A SLIM AND CRITICAL OPPORTUNITY TO GET IT DONE.”
10 THINGS TO KNOW ABOUT BILL C -15
DEVOLUTION IS GOING TO INCREASE THE GNWT’S ROLE IN THE REGULATORY PROCESS. WILL YOU FEEL ANY EXTRA PRESSURE TO FOSTER A POSITIVE BUSINESS ENVIRONMENT HERE? Oh, for sure. That comes with the territory. The expectation is already there. That’s why we spent so much time getting ready, making sure that we hit the ground running, that industry recognizes that we have the expertise, we have the capacity, and to get them to buy into our system. I think we’ve been successful in doing that. BECAUSE OF BILL C-15, SO MUCH OF THE TALK ABOUT DEVOLUTION HAS COME TO FOCUS ON THE FEDERAL REGULATORY IMPROVEMENT INITIATIVE, ESPECIALLY THE SUPERBOARD. HAS THIS SOURED THE WHOLE DEVOLUTION EXPERIENCE FOR YOU? I’m not going to go tilt at windmills. It is what it is. If we’d had our druthers, would it have made it easier for it to be dealt with separately? The fact of the matter is, it was going to be dealt with one way or the other. I think everybody recognizes that regulatory improvement part was a priority for Canada. They announced what they were going to do in 2007. This is federal legislation. They don’t come to us for permission … We didn’t see the full bill until it was tabled in Parliament. WHETHER OUR REGULATORY SYSTEM NEEDS FIXING DEPENDS ON WHO YOU ASK. INDUSTRY MEMBERS SAY YES, ABORIGINAL GROUPS NO. WHAT’S THE GNWT’S POSITION ON THE CHANGES BEING PROPOSED? Our position1 is very public. We support having an effective, efficient regulatory
THE MAN WHO SAID “NO” Dehcho MLA Michael Nadli voted against this round of devolution— and he’d do it again When former premier Floyd Roland put ink to paper on the devolution agreement-in-principle in 2011, dozens of aboriginal protesters and chiefs walked out of the legislative assembly to demonstrate outside, with one departing woman yelling “Sellout!” Only two of seven NWT aboriginal groups signed that agreement—the NWT
UP HERE BUSINESS • MARCH 2014
process. And we’ll work with industry and the Government of Canada and aboriginal governments to make that happen.
The federallycommissioned McCrank report recommended that the NWT’s regional land and water boards be amalgamated into one central board. In its 2009 response to that report, the GNWT said it opposed any restructuring. “The existing system is relatively new, needs to be fully implemented and given an opportunity to function as intended,” it wrote at the time.
HOW IS DEVOLUTION GOING TO CREATE JOBS OUTSIDE OF YELLOWKNIFE? We’re taking a three-phased approach to decentralization. First we reviewed our programs and services, moving something like 29 positions from Yellowknife into the regions. The second phase was part of devolution—the positions that moved from the federal government—but a lot of the positions can’t be moved from where they’re located now for two years. Nevertheless, we were able to move [some] positions into the regions. Now we’re moving into our third, final phase, where we’re looking at investing in housing and office space and identifying the level of resources that will be decentralized.
Métis Nation and the Inuvialuit. By the time MLAs voted on devolution, last June, the resistance movement had lost its steam. The Sahtu Dene signed on, then the Gwich’in and then the Tlicho, leaving only the Akaitcho and Dehcho First Nations as holdouts. In the end, all the political pressure and protests amounted to just one “Nay” in the legislative assembly, from Dehcho MLA Michael Nadli. And he’s still against devolution. There are two main reasons for his stance: “The first one is the fact that two unsettled regions don’t have a land claim—namely the Dehcho and the Akaitcho. And the other one was just a lack of public consultations.” About that first point: Nadli’s fear is that the territorial government may have an as-yet-undefined role in land claim negotiations.2 The land claims are not making much progress, he says. [Editor's note: Dehcho Grand Chief Herb Norwegian said last month his negotiations are about 60 per cent complete, but added, “Every step is difficult.”] And according to Nadli, the Dehcho First Nations leadership is unhappy with the land offers it has been given. There is an often-trumpeted clause in the devolution agreement that allows the federal government to take back land to settle land claims, and the GNWT
A mustachioed Bob McLeod, photographed circa 1996. A decade before, McLeod served as a federal negotiator during an earlier round of NWT devolution.
We’re expecting to do that within the next one to two years. In the past, whenever anyone’s talked about decentralization, we immediately said, ‘Well, we can’t do it because we don’t have enough housing, enough office space.’ We’re saying we’re going to make decentralization happen because we’re going to invest in those areas. WHEN IT COMES TO THIS DEVOLUTION, WOULD YOU DO ANYTHING OVER IF YOU COULD? No. I think there was a slim critical path and opportunity to get it done. WHAT ARE YOU GOING TO DO, PERSONALLY, TO CELEBRATE ON APRIL 1? [McLeod’s executive assistant, Katherine, chimes in. “Do you remember what we did when you signed the AIP?” she asks him. “I was in your office. We shook hands, you turned your light off and we walked out.”] McLeod adds: When Minister Valcourt tabled Bill C-15, he gave me a signed autographed copy of the bill and said, “Premier, you’re now an official nationbuilder. Congratulations.” GQ This interview has been edited and condensed.
has made several reassurances that land claims won’t be affected. But Nadli is worried the devolution of lands and resources to the GNWT, no matter the take-back clause, will further complicate the land claim process. “I’ve heard from different perspectives [about] the fundamental relationship between First Nations and the [federal government], and devolution ... likely will change that.”
AANDC: “Resolving land claims will remain under the authority of the federal government.”
Though other MLAs spoke of their concerns, Nadli’s was the only vote against devolution. Even Yellowknife MLA Bob Bromley—who spoke at length, and damningly, of the deal, the process that led to it and the take-it-orleave-it attitude of McLeod’s cabinet—relented and gave it a “qualified yes.” When it came down to it, though, it was really just a chance for MLAs to display what side of history they were on. The motion was not legally binding, although McLeod told one media outlet, gravely, “If this vote would have failed, we would have walked away from the deal.” TIM EDWARDS
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MARCH 2014 • UP HERE BUSINESS 25
o N .2 10 THINGS TO KNOW ABOUT BILL C -15
Resources office. Another two Aboriginal Affairs and Northern Development Canada (AANDC) jobs are also moving to Inuvik. But one factor worked against major decentralization from the start: of the jobs created by devolution, more than half (135) were jobs the GNWT had to offer first to AANDC workers already working in the NWT. All but four had agreed to switch over as of February 21. Of the 131 who accepted, 114—87 per cent—already worked in Yellowknife. Disappointments have inevitably cropped up. Andrew Cassidy, mayor of Hay River, called on the GNWT for “a little bit of support.” “We don’t have the same robust economies and industry investment that some of the other regions do,” he told the CBC. Early signs do not indicate devolution will directly boost the population, either. There are other new, non-AANDC jobs for the taking, but the GNWT has had difficulty attracting workers in the past. Finance minister
THE POST DEVOLUTION ITI FAMILY TREE
ITI Department of Industry, Tourism and Investment
The department will grow by 42 positions Energy Policy and Planning
DEEP(AK) TROUBLE Sixteen years after the opening of the first diamond mine, Yellowknife is home to only one diamond cutting and polishing plant—not that the GNWT hasn’t been trying to change that. Early last year the territorial government announced a deal with Edmonton-based Deepak International to reopen (at a cost of $50 million) two previously operational plants, create up to 60 new jobs, and relaunch the NWT’s fledgling “Polar Bear Diamond” brand. Since then, the deal seems to have lost much of its lustre:
UP HERE BUSINESS • MARCH 2014
Economic Development JANUARY 2013 “Yellowknife will regain its crown as the diamond capital of Canada,” says Deepak president Deepak Kumar. The one-time ITI worker eyes a spring opening. SEPTEMBER 2013 A second opening date in June passes by. Kumar: “I didn’t realize that the tremendous amount of paperwork would take longer than anticipated.” JANUARY 2014 Still no opening. “I’m really excited to say that we’re just a step away,” says Kumar. When asked about the plants by Up Here Business, a high-level ITI official responds, curtly, “Don’t ask.”
Michael Miltenberger told a parliamentary Bill C-15 committee that the GNWT has roughly 800 vacancies. As of February 21, only three devolution jobs had been accepted by non-NWT residents.
“I THINK YOU’RE GOING TO SEE THE GNWT MORE ACTIVELY PROMOTING THE NWT AS A PLACE FOR INVESTMENT.” – DEBORAH ARCHIBALD, INCOMING ASSISTANT DEPUTY MINISTER OF MINERAL AND PETROLEUM RESOURCES As for whether $67 million in annual federal funding will be enough to carry out the GNWT’s post-devolution workload, time will tell. But on that point, Miltenberger waxed positive. “We’re confident we’ll manage well with the resources we have.” GQ
THIS MUST BE THE PLACE The GNWT’s Mineral Resources unit will take control of the Mining Recorder’s Office, where claims are registered, but the office will stay in its present downtown Yellowknife location.
Secondary Diamond Industry MINERAL RESOURCES Yellowknife 15 People GEOSCIENCE OFFICE (now fully funded by GNWT)
Yellowknife Around 25 People
MACKENZIE VALLEY PETROLEUM PLANNING Hay River Around 7 People
A SHINY NEW GIG A GNWT staffer will take the place of a federal official who sits in the room as rough diamonds from each mine are looked over to assess their value. It's a super hush-hush process.
Mineral and Petroleum Resources PETROLEUM RESOURCES Inuvik 9 People FINANCIAL ANALYSIS/ ROYALTY ADMINISTRATION Yellowknife 6 People INDUSTRIAL INITIATIVES
(handles socio-economic agreements)
Yellowknife 5 People
NOTE: THIS FAMILY TREE DOES NOT SHOW THE ENTIRE DEPARTMENT.
To most people, nothing will have changed come April 1. But behind-the-scenes, the GNWT is getting a considerable makeover. For one, the GNWT—which already accounts for more than 20 per cent of the territory's labour force—is is getting even bigger, topping out at 5,391 workers. That’s why the government is building a brand new office building in downtown Yellowknife. By the time all positions are filled, devolution will have created about 263 new jobs within the GNWT. A new, 144-person Department of Lands has been born, and other devolution-related jobs are being sprinkled throughout other departments like Industry, Tourism and Investment (see below). But did people pin too many hopes on devolution’s moving government jobs outside of Yellowknife? It depends on which region was doing the pinning. Sure, there are clear signs of decentralization. Inuvik will be home to a new, nine-person Petroleum
THE GNWT IS ABOUT TO GET SEVEN PER CENT BIGGER
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o N .3 10 THINGS TO KNOW ABOUT BILL C -15
No item in Bill C-15 has stirred as much controversy as the amendment to merge the NWT’s four land and water boards into one centralized, Yellowknife-based entity. The existing boards, from south to north, are: the Mackenzie Valley Land and Water Board (MVLWB), which issues land use permits and water licences for projects in the unsettled (and especially active) Akaitcho and Dehcho regions and in some transboundary areas; the Wek'eezhii Land and Water Board, which handles those duties for projects in the Tlicho region; the Sahtu Land and Water Board; and the Gwich’in Land and Water Board. First Nations from the settled regions hate the idea of the “superboard”—which won’t come into effect until 2015—for many reasons. For starters, their boards (the feds consider them panels) are enshrined in their land claims, which are tantamount to sacred texts. The new system may result in only one person from a region sitting on the panel evaluating a project application for that region, instead of the two local members who currently sit on each regional board (when it’s fully staffed, that is; seats have often remained empty for many months). All members but one will have to be approved by the minister of Aboriginal Affairs and Northern Development Canada (AANDC).
“AM I UNHAPPY THAT THE BIT THAT I DID IS LUMPED IN WITH BILL C-15 ALONG WITH EVERYTHING ELSE? NO. I THINK IT’S THE RIGHT THING TO DO.” – JOHN POLLARD, SUPERBOARD NEGOTIATOR Concerns abound over the quality of AANDC’s consultation on this and other changes being made in the Mackenzie Valley Resource Management Act, the document that governs the regulatory process in all of the NWT (except the Inuvialuit region). And even by the GNWT’s account, word from the feds that these sweeping changes would be included in Bill C-15, nicknamed the North-
UP HERE BUSINESS • MARCH 2014
JOHN POLLARD WILL NOT APOLOGIZE FOR THE SUPERBOARD
west Territories Devolution Act, came at the eleventh hour, omnibus-style. At this point, however, any further harping about the process that led to the superboard (originally envisioned by former Alberta Energy and Utilities Board chairperson Neil McCrank) would be pointless. Barring some otherworldly intervention, this is the system the NWT will work under for at least the next five years, perhaps even longer (depending on how bold the GNWT is feeling in 2019, the earliest point at which a further review of the MVRMA can take place).3
Bob McLeod: “We respect that people are worried about the proposed regulatory improvements. But we don’t believe it’s a reason to delay the devolution we’ve been seeking for decades.” On a future review of the MVRMA: “We [the GNWT and aboriginal groups] can work together to come up with a better system.”
From the perspective of industry members, these changes have been a long time coming. The NWT has consistently ranked poorly among jurisdictions across the world when judged according to its regulatory system. Lengthy environmental assessments, egged on by inconsistent decision-making between the regional panels in the early days of the MVRMA’s implementation, as well as a fair bit of federal foot dragging, have stretched the timelines of projects like Canadian Zinc’s Prairie Creek mine beyond economic reason. (The lack of land use plans, especially in the unsettled regions—the centre of action for exploration and mine development—hasn’t helped either.) “The guys who do get permits are getting environmental [assessments] for simple drill programs. It’s craziness,” says Martin Knutson, president of Yellowknife-based helicopter company (and exploration camp logistics provider) Matrix Aviation Solutions. “The federal govern-
ment needs to step in and allow companies that want to spend money up here to have the ability to get a permit and spend money.” Comments like this are all too common. Regardless of whether they're entirely valid (plenty of misconceptions abound), it’s the perception they give voice to that counts. The cumulative impact is that investor confidence in the NWT has plummeted, with mineral exploration figures (which bottomed out at $44 million in 2009, only in part because of the recession) dipping below the levels needed to sustain a continuous pipeline of projects to take the place of our aging diamond mines. “The Northwest Territories has to have a regulatory system that’s competitive with Nunavut and the Yukon, and I think we have achieved it here,” Bernard Valcourt, the current minister of AANDC, says of Bill C-15. Put another way, by NWT environment minister Michael Miltenberger: “If we really want devolution to be successful … we need to have this regulatory change.” Like it or not, the superboard has arrived, and it’s time to start brushing up. How will it work? And why does the federal government think it’s a better system? To find out, we spoke to John Pollard, a former GNWT finance minister and Hay River fishing lodge operator tapped by the feds to negotiate the superboard with aboriginal groups. Note: The following Q&A is an amalgam of two interviews. One took place in the summer of 2012, the other in late January 2014. HOW IS THIS NEW BOARD GOING TO OPERATE? Our proposal is that the 20 people [who collectively make up all the current boards] would come down to 11. They would all be on the larger board, and that Mackenzie Valley Land and Water Board would take on the duties the regional panels are responsible for now. SOUNDS LIKE WHAT MCCRANK RECOMMENDED. Yeah, except that he went on to say, in the second option he outlined, how the decision of that board would be the final decision. We’re not going that far. [See pages 32-35 for more on what parts of the regulatory system the fed-
At least three (but potentially more) members of the superboard will be dispatched to a region by the chairperson to hear an application from that region. One of the panel members is guaranteed to be from the region, as insisted upon by aboriginal groups. The makeup of the rest of the panel is not spelled out in Bill C-15, however.
Starting with the board’s second chair, the feds will have to consult the rest of the board before appointing that chair.
If the Dehcho and Akaitcho regions are a hotbed of activity, the Gwich’in region south of Inuvik is their ugly duckling of a cousin. “I hate to say it, but we live in a very resource poor area,” says Gwich'in Tribal Council president Robert Alexie Jr. “We have no development in our area.” A measure of the region’s lack of large-scale activity can partly be gleaned from the fact that not a single project resting solely on Gwich’in land has ever been referred to environmental assessment.
A cross-section of two regional boards reviews applications for transboundary projects located on parts of both of those regions.
All members are ultimately approved by the federal government except the Tlicho appointee.
1 member nominated and appointed by feds 1 member nominated by the Gwich’in and appointed by the feds
1 member nominated and appointed by feds
Each board/panel has two dedicated regional members— when the board is fully staffed, that is. 1 chairperson nominated and appointed by the feds
SAHTU LAND AND WATER BOARD
THE THREE-MEMBER REGIONAL PANEL
WEK’EEZHII (TLICHO) LAND AND WATER BOARD
1 member nominated by the Sahtu and appointed by the feds
THE CURRENT SYSTEM
1 member nominated and appointed by the feds
CHAIR REGIONAL GNWT
FEDS MACKENZIE VALLEY LAND AND WATER BOARD
1 member nominated and appointed by the Tlicho, as set out in land claim 1 member appointed by the feds after consultation with the Dehcho and Akaitcho areas
1 member appointed by the feds after consultation with the Dehcho and Akaitcho areas
eral government and the GNWT will have final decision-making powers for, respectively.] WOULD ALL 11 MEMBERS HANDLE EACH APPLICATION? The chairperson would have the power to say to three people, ‘Go and hear this application in that region.’ That’s the way the National Energy Board does it. The decisionmaking process would actually go to the region and hear people talk in that region about how it’s affecting them, what their concerns are. A decision of the three-person panel would be a decision of that board. That way you could have panels hearing [multiple] applications at the same time because you’ve got the ability to split the board.
GWICH’IN LAND AND WATER BOARD
1 member nominated by the GNWT and appointed by the feds
1 member nominated by the GNWT and appointed by the feds
WHAT OTHER ADVANTAGES, IN YOUR MIND, WOULD THIS NEW BOARD HAVE OVER THE OLD ONE? Each time there’s a settled land claim, or has been a settled land claim, there’s a five-person board added on. They call them boards; they’re actually panels. If you take the number of land claims that are being negotiated right now, and consider that each of them would have five panelists, you get up over 40 fairly quickly, because you’re always going to need the central board there to deal with the transboundary stuff. The present system is not sustainable from the point of view of having more people on those boards than there are on the legislative assembly. It’s not sustainable
One of the feds’ overarching reasons for restructuring the boards is that the current system results in too many cooks in the kitchen. But the only time that all 20 or so members of the collective MVLWB meet is once a year, for a planning session, says Zabey Nevitt, the MVLWB’s executive director.
OF 3 1OUT
The number of projects referred to environmental assessment that were withdrawn or cancelled.
The area with no settled claims and no land use plans also happens to be the busiest in the territory—by far. Between 1999 and 2014, 63 projects were referred to environmental assessment (EA), and 87 per cent of them were proposed for either the Akaitcho or Dehcho. Don Balsillie, chief negotiator for the Akaitcho First Nations, says his people—who, without a land claim, do not get a share of royalties—have missed out. “We’ve never received any direct compensation from the more than $15 billion in minerals removed from our traditional territory,” he says. ARE THE BOARDS EA-HAPPY? Groups such as the NWT & Nunavut Chamber of Mines have complained that projects of a small scale get referred to EA. The chamber is disappointed Bill C-15 did not address this, which raises a question: are the land and water boards and the Mackenzie Valley Environmental Impact Review Board EA-happy? Here’s what the numbers show: Of the 63 projects that have been referred to EA, 44 were referred by an NWT board. (Government departments and First Nations also have the power to refer.)
MARCH 2014 • UP HERE BUSINESS 29
10 THINGS TO KNOW ABOUT BILL C -15
SUPERFRIENDS THEY ARE NOT GROUP
SIGNED ON TO DEVOLUTION?
SUPPORTIVE OF THE SUPERBOARD?
Sahtu Secretariat Inc. Has hinted at legal action.
Dehcho First Nations
(no land claim)
Akaitcho First Nations
(no land claim) Not a co-signee
money-wise because you create an administration. And it’s not sustainable from a consistency point of view. We need to be consistent with the decision-making processes that are in a particular geographic area. IT’S OFTEN SAID THAT MANY DELAYS IN THE REGULATORY SYSTEM ARE THE FAULT OF THE FEDERAL GOVERNMENT—APPOINTMENTS AND DECISIONS GATHERING DUST ON A MINISTER’S TABLE, ETC… As much as [the federal government is] looking outwardly at the boards, it’s also looking inwardly. It’s aware the sword cuts both ways.4 [Translation: Bill C-15 includes new timelines for key decisions that directly impact companies’ ability to carry out their investments. Those new benchmarks are outlined on pages 32 and 33.]
Willard Hagen, current chair of the MVLWB, says it’s difficult to blame any one party for the delays in the regulatory system. Case in point: though the feds’ approval of regional board members can take time, sometimes the delays occur because the regions nominate people with criminal record, Hagen says.
COMPANIES WANT TO KNOW THAT THE REVAMPED PROCESS WILL BE A SEAMLESS TRANSITION, THAT IT WON’T CAUSE DELAYS. WHAT DO THESE CHANGES MEAN FOR PROJECTS THAT ARE ALREADY IN THE SYSTEM, PRE-DEVOLUTION? For any application that’s in the system, the existing members
“We support the other First Nations’ position.” – President Garry Bailey
(no land claim)
Inuvialuit Regional Corp.
“Our board has never turned down a development proposal.” – Grand Chief Eddie Erasmus (MVLWB records confirm that neither the Tlicho Government nor its board has ever referred a project to environmental assessment.) “We’re not in support of any MVRMA amendments but we’re in a tough position because we are in support of devolution.” – President Robert Alexie Jr.
Gwich’in Tribal Council
NWT & Nunavut Chamber of Mines
BLESSINGS AND BEEFS (BUT MOSTLY BEEFS) “We have not asked for these amendments.” – Chair Ethel Blondin-Andrew
NWT Métis Nation
A handy guide to who supports devolution—but not the superboard
UP HERE BUSINESS • MARCH 2014
The Mackenzie Valley Resource Management Act doesn't apply to them. “The [superboard] is a continuation of federal control and the dictating to Northerners from Ottawa.” – Peter Redvers, Katlodeeche* consultant
No land claim = no position on superboard: Chief Fred Sangris “On balance we support the amalgamation proposal provided it doesn’t negate existing working relationships the applicants and licence holders have developed with the regional panels.” – chamber executive director Tom Hoefer
who heard that application will continue to hear it until there’s a decision made. The new MVLWB will not take over hearings done previously by another board. DID ANYONE ACTUALLY LIKE THE IDEA OF A SUPERBOARD? Nobody said to me, ‘Let’s get rid of the regional panels; that’s a good idea, John.’ I gotta be honest with you—they didn’t. Others were saying, ‘Let’s make more regional panels.’ And we already had the ability in legislation for 30 on that board. So I could see the board getting bigger and bigger. I was at a meeting with [previous AANDC minister John Duncan] in Calgary with these groups where they told him, ‘We don’t want to do it.’ But … how do you square the circle— the fact that it’s written into their land claims that, by legislation, you can [create a larger board]? I don’t know. It is an emotional issue for them, and I understand it. But at the end of the day I think Canada wanted to restructure the land and water boards in the NWT; that’s what they asked me to do. When we went to a negotiation session with the Gwich’in last October, they came up with some ideas that they wanted incorporated in the legislation, and they’re in there. LIKE WHAT? The [federal] minister appoints the chair. Peter Redvers [currently a consultant to the Katlodeeche First Nation] said, ‘Shouldn’t the board have something to say about that?’ We heard that from others. So now it’s in Bill C-15. [Editor's note: the federal minister still retains final approval for all the board appointments except the Tlicho seat].
WHY WAS IT DECIDED TO LOCATE THE NEW BOARD IN YELLOWKNIFE? After meeting with the Mackenzie Valley Land and Water Board, it was pretty obvious to me that they had infrastructure in place, people in place, they had a system in place and they were doing a pretty good job. So I chose to recommend that we roll in the new board into the existing MVLWB. I’m not a centralist, but whether we like it or not, Yellowknife has the best way to get in and out of the territory. From Yellowknife you can get to any part of the territory. It also has the best communications, the biggest plate for fibre optic and downloading of huge documents. So it made sense to have those people there. I was also told and advised that retention of technical staff—good, solid, well-trained staff—is easier here than it might be in a smaller community. YOU’RE A NORTHERNER. YOU LIVE HERE. YOU SUPPORT DEVOLUTION. BUT HOW DO YOU FEEL KNOWING THAT THE DEVOLUTION INITIATIVE HAS BEEN ENTANGLED IN ALL THIS DEBATE ABOUT THE SUPERBOARD? The minister, three ministers ago, asked me to do a job. I did it. Then along came devolution. I mean, when I first started this [in May 2010], devolution wasn’t on the horizon as something that was going to happen at the same time. How the federal government put this together is entirely up to them. Am I unhappy that the bit that I did is lumped in with Bill C-15 along everything else? No. I mean, that’s how they chose to do it. I’m just happy that it’s going forward. I think it’s the right thing to do. GQ This interview has been edited and condensed.
*THE KATLODEECHE FIRST NATION IS NOW PURSUING ITS OWN LAND CLAIM | PHOTOS
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NOTICE Mark your Calendar
2014 Business Conference and AGM April 9 / 10, Yellowknife
Last year’s Business Conference was oversubscribed, so we’re moving into a larger conference area and building an even better program. We plan to deliver another slate of nationally distinguished speakers and key notes from across the NWT. As always, the program will provide a snapshot of the most compelling insights into our economy for the year ahead. Mark your calendar and watch for future information as the program develops. For further information please contact Mike Bradshaw 867-920-9505 firstname.lastname@example.org www.nwtchamber.com
MARCH 2014 • UP HERE BUSINESS 31
o N .4 10 THINGS TO KNOW ABOUT BILL C -15
For all the hoopla, the superboard isn’t the most significant revamp Bill C-15 has in store for the NWT’s regulatory system. For years companies have complained about the time it takes to shepherd a project through the system, whether it’s the environmental assessment stage or the latter permitting stage granting companies their Type A water licences for large-scale projects. And that’s because the current Mackenzie Valley Resource Management Act (MVRMA) is unquestionably a shambles when it comes to spelling out specific timelines for many key parts of the regulatory process. The MVRMA has no timelines, besides one: the federal minister’s deadline for approving the issuance of a water licence. But that’s it. The act says nothing of how long it should take to carry out an environmental assessment (EA), the most critical step of the process, nor anything about how long it should take a federal minister to sign off on that assessment. The result, in the words of Bob Bleaney, VP of external relations for the Canadian Association of Petroleum Producers, is a “historic lack of predictability and resulting uncertainty” in the NWT. Timelines are key. While market prices ultimately determine whether a company will proceed with a project, knowing when it can expect to come out of the regulatory process
“YOU CAN’T JUST SIT THERE. EACH MINE IS ABOUT $400 MILLION A YEAR TO OPERATE.” – DOMINION DIAMOND CORPORATION PRESIDENT ROBERT GANNICOTT ON WHY A SPEEDY REGULATORY PROCESS IS KEY TO KEEPING THE EKATI MINE OPEN PAST 2019 with permits in hand helps a company woo potential financial backers. Naturally, not knowing that same thing stems the potential flow of money, especially for junior exploration companies or first-time miners with no
THE BEST THING ABOUT BILL C-15 CAN BE SUMMED UP IN THREE WORDS: TIMELINES, TIMELINES, TIMELINES!
GWICH’IN GOLD CORP
THE IDIOT’S GUIDE TO THE REVAMPED NWT REGULATORY SYSTEM Now with timelines! BY GUY QUENNEVILLE
Meet Carl. He’s with the (fictional) Gwich’in Gold Corporation and he wants to build a mine in the post-devolution world (we figured we’d throw the quiet Gwich’in region some activity). What kind of new timelines is he looking at? How do these deadlines compare to the old ones? (They don’t.) And is there still potential for some seriously time-consuming rubber stamping? Behold our incredibly oversimplified guide.
The Screening Process A) A land and water board reviews the project application to make sure it’s complete. Mines typically call for a land use permit and a Type A water licence. B) The board sends the project application out for review to a number of groups, including federal government departments, the territorial government, First Nations, nearby communities, and a land use planning board. C) A preliminary screening takes place, during which anyone on the distribution list can refer an application to environmental assessment (EA). Participants can refer it for one of two reasons: because the project is deemed a public concern, or because it has the potential to harm the environment. If a project is not referred to EA, it proceeds immediately to Phase 3. D) Land use permits are simple: the board has 42 days to recommend whether to issue one. There’s a deadline for issuing a water licence, of course, but we’re assuming Carl’s company is going to go through an EA, and that licence can’t be issued until an EA is completed.
Environmental Assessment A) The Mackenzie Valley Environmental Impact Review Board carries out its assessment. B) The review board writes a report (addressed to the GNWT) recommending one of four things: that the project proceed to Phase 3; ditto but with certain measures attached; that it undergo further review; or that the project be rejected. DEADLINE: EA (WITH HEARING) REPORT WAS NON-EXISTENT
IS 16 MONTHS
CAN BE UP TO 18 MONTHS*
C) Said report goes to the GNWT. D) The GNWT distributes the report to a selection of territorial and federal ministers who, by concensus, decide whether to approve the review board’s recommendations. If no further review is needed, Phase 3 begins.
producing assets or revenue to their name. “De Beers is one thing, but smaller companies can’t wait for years,” says the NWT Chamber of Commerce’s Allen Stanzell. The poster child for this dilemma is Vancouver-based Canadian Zinc Corporation, which has been trying for years to usher its Prairie Creek base metals mine to commercial production. The company’s application for a Type A water licence was referred to environmental assessment in August 2008. The Mackenzie Valley Environmental Impact Review Board issued its environmental assessment report to the federal minister in December 2011—more than three years later. Once the minister approved the board’s findings, it took another year and a half for the company to get its water licence from the land and water board. Today, Prairie Creek— on whose regulatory process Canadian Zinc has spent between $10 million and $20 million—faces a tough road to financing due to weak metal prices. “In an ideal world, the total process, including the EA phase, should not take more than 24 months,” says Canadian Zinc president John Kearney. “The problem is not with the boards. The problem is with the entire process and the scope of the MVRMA.” Enter Bill C-15. In addition to devolving new powers to the NWT (see pages 34 and 35 for more on that), the Devolution Bill has inserted a slew of timelines (most of them unprecedented) into the regulatory process. Rick Meyers, VP of Northern and technical affairs with the Mining Association of Canada, calls these changes “the key amendments” of Bill C-15. Going by these new timelines, if Prairie Creek went through the regulatory system after April 1, its environmental assessment (including a public hearing) would take 16 to 18 months and the minister would have five to seven months to approve it (or not). That’s 25 months total—just one month over Kearney’s preferred timeline. The first real test of the revamped regulatory system and its new deadlines will be Dominion Diamond Corporation’s bid to extend the life of the NWT’s biggest diamond mine,
DEADLINE: DECISION ON EA (WITH HEARING)
UP HERE BUSINESS • MARCH 2014
IS 5 MONTHS
CAN BE UP TO 7 MONTHS*
PHOTO Angela Gzowski | ILLUSTRATIONS
E) During the assessment phase, the board can decide that a project needs to undergo a more thorough environmental impact review (EIR). But there is also potential for a full EA to be followed by a full EIR. And that has Carl sweating. Big time.
GWICH’IN GOLD CORP
DEADLINE: EIR REPORT
of regulating a project North of 60. Perhaps that’s why Bill C-15 has it so that both the territorial government (through delegation DEADLINE: DECISION ON EIR from the feds) and the latter government’s WAS IS CAN BE UP TO NON-EXISTENT 8 MONTHS* 6 MONTHS cabinet can both extend the new timelines. But even some industry members don’t PHASE THREE: Permitting feel Bill C-15 goes far enough. Tom Hoefer, A) The land and water board picks up where it left executive director of the NWT & Nunavut off at the end of Phase 1. We won't bore you with Chamber of Mines, worries that too many details; all you need to know is that, with the EA behind him, Carl still needs to get a water licence small-scale projects will continue to get enfrom the land and water board. snared in unnecessary environmental asDEADLINE: TYPE A WATER LICENCE RECOMMENDATION sessments. “Unless that fundamental change WAS IS CAN BE UP TO is made, we can be sure that exploration NON-EXISTENT 9 MONTHS 11 MONTHS* spending in the NWT will continue to fall,” he B) A GNWT minister, in consultation with other says. Hoefer is also concerned that, with the GNWT and federal ministers, approves (or not) the new timelines, projects that undergo both a issuance of the water permit. full environmental assessment and a full enDEADLINE: TYPE A WATER LICENCE APPROVAL WAS IS CAN BE UP TO vironmental impact review (yes, it’s possible) 1-2 MONTHS 1.5 MONTHS 3 MONTHS will be tied up in public hearings and endless There are a host of other authorizations Carl ministerial tête-à-têtes for years. needs to shepherd his mine to production, It’s a valid concern, and one of many but with a completed EA and a water licence that the GNWT will doubtless be pressed to in hand, he’s now got himself some major street cred with potential investors. Well, address five years from now when it comes if the markets are friendly, that is. time to review the Mackenzie Valley APPROVE Please gi D. * FEDERAL CABINET CAN FURTHER EXTEND THIS TIME LIMIT “ANY ve NUMBER OF TIMES.” ** ANY TIME TAKEN UP BY THE PROPONENT TO GWICH’IN us money. Resource Management Act again. 2019 RESPOND TO INFO REQUESTS IS FACTORED OUT OF TIMELINES. GOLD couldn’t come fast enough. GQ CORP WAS NON-EXISTENT
IS 15 MONTHS
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Ekati, by another 10 to 20 years. “It absolutely is a test case,” says Peter Vician, the GNWT’s deputy minister of Industry, Tourism and Investment. The 16-year-old Ekati mine, which employs 1,500 people and accounts for 10 per cent of the NWT’s gross domestic product (according to the NWT & Nunavut Chamber of Mines), is currently set to close in 2019. That makes permitting its currently untapped Jay and Cardinal pipes, in a timely manner, crucial. “One thing you can’t do is sit there. Each mine is about $400 million a year to operate,” Robert Gannicott, Dominion’s CEO, previously told Up Here Business. When a parliamentary committee met with a select few industry members earlier this year to discuss Bill C-15, Brendan Bell, Dominion’s president, was among them. “We have a very large interest in the bill that's presently before your committee,” Bell said. Not everybody has welcomed the new timelines with open arms. Some regional aboriginal representatives—like Ethel Blondin-Andrew, chair of the Sahtu Secretariat —caution that timelines need to be flexible to reflect the (inarguable) particularities
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uphere.ca MARCH 2014 • UP HERE BUSINESS 33
o N .5 10 THINGS TO KNOW ABOUT BILL C -15
At an industry-themed Bill C-15 parliamentary committee meeting last month, Brendan Bell, president of Dominion Diamond Corporation, spoke of how his company, formerly known as Harry Winston Diamonds, had moved its headquarters from Toronto to Yellowknife. The move—made as Dominion sets out to extend the life of the Ekati diamond mine—had much to do with devolution, Bell said. “We said to ourselves that if decisions were going to be made in the North, and that’s where the decision-makers were going to be, then that’s where we needed to be.” Dominion might want to rethink that move. Because if any part of devolution has been a tad overhyped, it’s the extent to which the GNWT (at least initially) will be getting significant new powers related to the regula-
And on the fourth day...
The devolution and MVRMA changes set out in Bill C-15 will unroll in several stages. Here’s a quick checklist: BY APRIL 1: The bill passes (or so the GNWT hopes). APRIL 1: Tons of non-MVRMA changes take effect. 2015: The 11-member superboard kicks in. AFTER 2015: The project certificate component of the MVRMA revamp takes effect. We'd explain this, but the details of this defeat even us at Up Here Business.
THE GNWT IS NOT GETTING FULL CONTROL
tory process, which is so crucial in shaping (or if there are delays, reshaping) the timeline for new developments. There’s no question that, thanks to devolution, the GNWT will be inheriting some major powers when it comes to land management, and that’s great for anyone wanting a prospector's permit. But when it comes to playing a role in how quickly new mining projects will see the light of day, the territorial government’s role will expand only slightly or remain pretty much the same, depending on what step of the process you’re talking about. When it comes to issuing Type A water licences—one of the last, critical pieces of paper a company needs to move forward, and “a major event that only happens occasionally, like getting married,” in the words of Canadian Zinc Corporation president John Kearney—a GNWT minister will give final approval. The authority to do so will be delegated to the GNWT by the feds, as set out in the devolution agreement.5 I’m naturally paranoid, so I asked the department of Aboriginal Affairs and Northern Development Canada (AANDC) if, after devolution, it could veto the GNWT's decision. “No,” it said.
But other key authorities won’t be delegated to the GNWT. For environmental assessments (EAs) and environmental impact reviews, a federal minister (likely the minis-
Another authority to be delegated to the GNWT is the power to extend the regulatory deadlines outlined on pages 32 and 33. This does not apply to the further extensions the federal cabinet can grant, however.
ter of AANDC) will remain the top dog. He’ll make the final call on whether a project’s assessment needs more work, or if a project can proceed to the final permitting phase. That’s in keeping with the changes made in 2012 by the feds to the Canadian Environmental Assessment Act, which governs the environmental assessment process in southern Canada. The provinces don't have it any better. “If we did not [retain that power] in the NWT, it would be the only jurisdiction in the country where [we] would be deprived of that power,” says AANDC minister Bernard Valcourt. When you really get down to it, however,
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UP HERE BUSINESS • MARCH 2014
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no single minister exerts full influence on the fate of a report of an environmental assessment or a licence. The press releases might give that impression, but it’s actually done in a consensus manner. “A lot of people forget that,” says NWT Premier Bob McLeod. Here’s how it works (and will work). Every project crosses a unique set of jurisdictions. That mix of jurisdictions determines what government departments (and what minister from which government) are at the decisionmaking table. That won’t change; only the makeup of the table will, based on the proj-
and environmental assessments, however. “Do we get as much say over large-scale projects? We’re basically in the same league,” says Western Arctic MP Dennis Bevington, who’s been the most vocal critic of the federal government’s decision to combine the regulatory improvement initiative and devolution into one dense thicket of a bill. Muddying matters is this: under Bill C-15 the feds can give written policy directions to the board (MVEIRB) that conducts environmental assessments. The law doesn’t require the feds to consult the GNWT before doing so.6
the system. And any friction government to government is going to cause delays.”
Bevington has raised this issue. AANDC has said “it’s a matter of good government” for the feds to consult the GNWT. To which Bevington replied: “The law is one thing; practice is another.”
The last thing industry wants is more delays in the system. Indeed, every company
“WE MAY HAVE TWO GOVERNMENTS AT LOGGERHEADS OVER THINGS. THERE’S GOING TO BE FRICTION WITHIN THE SYSTEM. AND ANY FRICTION GOVERNMENT TO GOVERNMENT IS GOING TO CAUSE DELAYS.” – DENNIS BEVINGTON, WESTERN ARCTIC MP ect. The one change to the EA process (besides timelines) will be mainly administrative: the GNWT will receive and distribute environmental assessment reports. It will still be a mix of federal and territorial ministers who weigh in on water licences
The Canadian Association of Petroleum Producers likes this, but Bevington smells trouble, citing what he sees as the GNWT’s stronger commitment to the environment. “We may have two governments at loggerheads over things. There’s going to be friction within
with a stake in the NWT will be watching closely over the next five years for any signs of “friction.” As Brendan Bell of Dominion told the Bill C-15 committee: “For us it’s critical to ensure that there are few transitional issues—at least as few as possible.” GQ
MARCH 2014 • UP HERE BUSINESS 35
10 THINGS TO KNOW ABOUT BILL C -15
41 20 41
Nation governments. We’ve seen their development corporations not just starting but prospering; they’re invested across the territories, not just here. That certainly wouldn’t
UP HERE BUSINESS • MARCH 2014
200 150 100 50 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
YUKON GOVERNMENT CAPITAL SPENDING 200
150 100 50 0
Every year the Fraser Institute ranks almost 100 jurisdictions across the world according to how attractive they are to mining companies. Below we’ve listed each territory’s average ranking between the years 2001 and 2012. NWT YUKON NUNAVUT
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
“THEY REALLY LIKE ME!”: YUKON
DO YOU THINK DEVOLUTION CAN BE AN INSTRUMENT FOR INCREASING ECONOMIC ACTIVITY? It’s part of a suite of things that contributes to a growing economy. I don’t know if I can put an 8 out of a 10 or a 9 out of a 10 on it, but it’s one of the more significant pieces of it. We can’t control global commodity prices or control certain aspects of investor interest in where that commodity lies compared to other jurisdictions, but what we can control is an environment that invites business. We can control the regulatory system, we can control the timelines, we can set up our system of government to be effective and streamlined to reduce the red tape that produces barriers.
2001 2002 2003
WHAT DID DEVOLUTION ACTUALLY CHANGE FOR THE YUKON? We’ve been able to involve all levels of government in decision-making. In the past, when we were adding another tier of consultation with the federal government and decision-making authority was outside of our control, it didn’t spur on participation and input the same way it did when it was territorially-decided. A great example is our First
have come along in the same fashion if we hadn’t had the devolution agreement. We’ve had three operating mines open. We’ve got Casino and Eagle Gold in the final stages of permitting and hundreds of exploration projects. That boom really came because the investment climate, the regulatory climate—all of those things clearly allowed a calculation for business to know how to determine feasibility for a project. Also, investments in our territory have skyrocketed.
MINERAL EXPLORATION SPENDING 300
2000-01 2001-02 2002-03 2003-04
We asked Ryan Leef, the Yukon’s Conservative MP, a few burning questions about his territory’s own experience with devolution.
staffers of its own who are qualified to assess certain oil and gas applications, it will subcontract some behind-the-scenes technical advisory work to the Alberta Energy Regulator. Meanwhile, staff from the NEB may be tapped to serve in roles like chief safety officer and chief conservation officer, the latter regulating things like natural gas flaring. How long this farm-out arrangement lasts depends on the level of activity up here. “In Alberta, the regulatory staff probably deals with 12,000 wells a year. In the NWT, they may have to deal with eight,” says Doug Matthews, former director of the GNWT's minerals, oil and gas division. “That’s why the GNWT won’t have its internal staff too soon —you don’t need them that much. It’s hard to
OUR NEIGHBOUR DID JUST FINE WITH DEVOLUTION
Companies looking to mount large-scale projects in the NWT need more than just a water licence; many other authorizations are required. But proponents of putting more power in the hands of the GNWT will be happy to know that when it comes to onshore oil and gas activities south of Inuvik, the GNWT will replace the National Energy Board (NEB) as the NWT’s technical regulator. In other words: before ConocoPhillips or Husky Energy can drill a new well to further define the promising Sahtu shale oil play, they’ll need to get their operations authorization from the GNWT. Technically, though, the GNWT won’t be carrying out this new role by itself. Because the territorial government currently lacks
pay a drilling engineer $125,000 a year if he or she only needs to look at three or four well licence applications a year.” But if the Canol shale oil play takes off? Well, that’s a different story. “The Canol play has the capacity to be a very, very large deposit. If that promise is realized, you could have activity going on in that area for the next 50 years.” Deborah Archibald, who has headed up devolution implementation for the department of Industry, Tourism and Investment, confirms the long-term goal is to build the territory’s own in-house capacity. “That’s what devolution is all about,” she says. The GNWT will also be responsible for soliciting bids from industry for the rights to explore for oil and gas on lands in the Central Mackenzie Valley and the Mackenzie Delta/ Beaufort Sea region—a task previously done by the feds. Calls for each region will still be put out once a year, says Archibald. “Our number one priority is: business as usual.” GQ
o N .6
THE GNWT NEEDS A LITTLE HELP FROM ITS FRIENDS
WOULD THE YUKON HAVE DONE ANYTHING DIFFERENTLY, LOOKING BACK? A longer phased-in approach for services might have been something we might have looked at. We took a lot on right away. [In addition to the management of land, water and resources, the Yukon government also received jurisdiction for forestry. The NWT already has forestry.] It was a really big and rapid transition. GQ This interview has been edited and condensed.
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o N .8 10 THINGS TO KNOW ABOUT BILL C -15
What the feds made off their one-third share of Imperial Oil’s Norman Wells oil field in the 2012 fiscal year. The GNWT won’t receive that share after devolution, but it will inherit the feds’ five-per-cent gross royalty on Imperial Oil’s two-thirds share.
So who pays what? It depends. The profitability of individual mines and wells is proprietary info, so it’s impossible to glean how much each project pays to the government. How do payments work? Both mines and oil wells pay out royalties according to a sliding scale that’s based on how profitable an operation is. For mines, the first $10,000 is royalty free. Beyond that, the first $5 million in profits pays a rate of five per cent, which increases by one per cent per $5 million in profits. The top rate companies can be expected to pay out is 14 per cent for any mine that clears more than $45 million per year. These rates are higher than those seen
UP HERE BUSINESS • MARCH 2014
in the Yukon and Alberta but lower than those used in eastern provinces like Newfoundland and Nova Scotia. For oil and gas operations, royalty payments begin when production starts—and that, folks, is the only simple part of the
After the GNWT gives one quarter of its share of resource revenues for the fiscal year 2014-2015 to aboriginal cosignees, this is what the government will be left with.
formula. For the first 18 months, the royalty is one per cent of gross revenues, increasing one percentage point every 18 months, to a maximum of five per cent, until the pro-
ducer recovers its initial investment. Then, it either stays at five per cent of gross revenues, or it’s charged at 30 per cent of net revenues—whichever is greater. With devolution, the GNWT also gains the power to change rates. (Bevington says the first priority should be to switch from a net royalty scheme to a gross one, but that's another story). So far the territorial government—citing the already high cost of doing business up here—is reluctant to jack up royalty rates. Still, finance minister Michael Miltenberger told Northern Journal that rates will be up for review. “We’re not rushing out to put additional taxes on anybody … but after April 1, we'll be having a discussion on the structure of our resource economy.” CW LEFT: The job of collecting royalties will fall to the GNWT—but the feds will get half. Based on these terms, the Yukon government, which went through this devolution a decade ago, renegotiated the terms of its own revenue sharing deal.
PROJECTED OPENING DATES OF FUTURE NWT MINES Gahcho Kue De Beers Canada Q4 2015* Prairie Creek Canadian Zinc, 2016 NICO Fortune Minerals, 2016 Yellowknife Gold Tyhee Gold Corp., after 2016 Nechalacho Avalon Rare Metals 2017 Courageous Lake Seabridge Gold Corporation, unknown Jay-Cardinal Project Dominion Diamond Corporation, 2019
*DATE CITED BY DE BEERS' PROJECT PARTNER, MOUNTAIN PROVINCE DIAMONDS
In a matter of months, the NWT will begin collecting royalties from mining and oil and gas operators. It’s no small chunk of change: according to Rick Meyers, vice president of technical and Northern affairs for the Mining Association of Canada, corporate taxes and royalties from NWT miners totalled $3.6 billion between 2002 and 2013. And by the end of the decade that number will reach $5.6 billion. But while the GNWT will do the actual collecting, half of the royalties will get passed on to Ottawa, in part to offset the $1.3 billion in transfer payments the NWT will still get from the federal government. The GNWT is inheriting the royalty regime currently used by Ottawa. All told, the GNWT will collect roughly $60 million in resource revenues at the end of the 2014-15 fiscal year. That includes the various license costs, fees and taxes companies need to carry out their operations. Yes, we asked for a breakdown of that $60 million—how much of it will come from royalties? How much in, say, land leases?—and no, the GNWT wouldn’t tell us.
WITH GREAT POWER (SETTING ROYALTY RATES) COMES GREAT RESPONSIBILITY (NOT DRIVING AWAY MINERS AND ENERGY COMPANIES)
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o N .9 10 THINGS TO KNOW ABOUT BILL C -15
It’s a problem plenty of places would love to have: millions of new dollars flowing into the treasury, courtesy of a fresh source— resource revenues. For the NWT, that will amount to $60 million at the end of the first post-devolution year. That might seem like a pittance against projected total government revenues of $1.8 billion for the same year. But it’s been enough to trigger a debate about what to do with all that devolution money. Tabling the first budget of the devolution era last month, finance minister Michael Miltenberger proposed setting aside five per cent of resource revenues for the NWT’s heritage fund (current balance: $500,000). That five per cent would have netted around $2.3 million for the fund. Miltenberger’s plan? To fund an ambitious line of projects including a fibre optic cable up the Mackenzie Valley (boosting internet speeds and bolstering an emerging satellite data industry in the struggling Town of Inuvik). At the same time, the government would maintain a $100-million gap between the NWT’s debt and its federallyimposed $800-million debt ceiling.
The GNWT’s current debt cap. The government is still trying to convince the feds to up that amount, according to McLeod. “We are making our case that we don’t like their definition of what is a debt,” says the premier. “You have self-liquidating debts that I don’t think should be part of our debt limit. But that’s a case we’ve been trying to make for some time. We’re looking at that again.”
But then came the inevitable blowback, with some MLAs calling for 25 per cent of resource revenues to go into the fund, not five per cent. The GNWT then held public consultations across the territory last fall to quiz residents on what they thought the proper percentage of revenues for the fund was. Suggestions ran the gamut from spending everything to saving everything, with most people falling somewhere in between. For a while Miltenberger stuck with the five-per-cent solution. “Not only do we have
UP HERE BUSINESS • MARCH 2014
IT WON’T EXACTLY BE RAINING INFRASTRUCTURE DOLLARS
to save money for the future,” he told reporters on budget day, “we also have an obligation here, with devolution and building our economic base, to put in some of the long term economic infrastructure that is critical.” Industry craves infrastructure. They’ll take anything: whether it’s an all-weather road linking the southern NWT to the (potential) shale oil riches of the Central Mackenzie Valley (which the GNWT has cited as a priority) or new, much-needed sources of cheap (or at least cheaper) power. “We just announced our 20-year power system vision,” says Premier McLeod of the $600-million plan to link the NWT’s two hydro grids and sell power to Alberta or Saskatchewan. “That will require a lot of investment. I think it’s going to make us a lot of money, so we just need some flexibility.” But it's a gamble. There's no guarantee that gold or oil prices won't tank, or that the territory can export power profitably. Vital infrastructure can turn into a white elephant overnight. That's why MLAs like Yellowknife MLA Wendy Bisaro asked that a higher percentage go toward the heritage fund. Faced with this unrest, Miltenberger ultimately caved at the final hour: 25 per cent of the GNWT’s resource revenue take will go into the heritage fund—$11.5 million in the first year. So what is the purpose of a heritage fund? Essentially, it’s to hedge against the boomand-bust nature of commodity markets. Norway, the perceived model for this sort of thing, saves all oil revenue (less carbon taxes) and can never touch the principal, which is now worth about $575 billion. Alberta, which never put a set amount away, averaged about 5.4 per cent of revenues. But its fund was never put off limits from sticky fingers. From 1977 to 2011, according to the Fraser Institute, Alberta put $31.3 billion into the fund, and took out $29.6 billion. The province has since changed the rules so that starting in 2016, all resource royalties will go into the fund. The NWT’s fund adopts those best practices. According to current rules, the princi-
pal is off-limits, and the fund’s earnings are too, at least until 2032. The fund is still managed by the Financial Management Board, a committee of cabinet. Finance officials say the annual cost of third party management isn’t worth it until the fund’s grown. And
“EVERY YEAR THAT WE CAN HELP SUPPORT EXTENDING A MINE’S LIFE, IT’S $250 MILLION [IN GDP] A MINE.” – MICHAEL MILTENBERGER, SPEAKING TO A BILL C-15 PARLIAMENTARY COMMITTEE there’s no way to stop some future government from changing the law and raiding the fund in a panic. Miltenberger, a spender, has thrown a bone to the savers. One thing hasn’t changed: the NWT’s fiscal fortunes are more closely tied to resource extraction than ever before. CW
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10 THINGS TO KNOW ABOUT BILL C -15
THERE ARE STILL A LOT OF UNANSWERED QUESTIONS
What happens in five years? Many things, including a review of the Mackenzie Valley Resource Management Act. It’s the GNWT’s
hope that the feds will be finished their regulatory overhaul by then, and that more authorities under the MVRMA could be del-
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UP HERE BUSINESS • MARCH 2014
egated to the GNWT. Who knows—maybe the GNWT will be able to give policy directions to the Mackenzie Valley Environmental Impact Review Board (instead of the federal government). But any such changes can happen no sooner than the fifth anniversary of April 1, 2014. Other things that happen after devolution's five-year anniversary include some former federal employees possibly having their salaries adjusted. We still have some questions, though. WHAT’S THE DEAL WITH OFFSHORE ROYALTIES? We don’t know yet, although the feds, the GNWT and the Inuvialuit Regional Corporation will negotiate an agreement that will cover revenue sharing from both onshore and offshore resources in the Beaufort Sea and the Mackenzie Delta. Official meetings on that deal have not begun, but preliminary talks have. HOW WILL ABORIGINAL GOVERNMENTS DIVIDE THEIR 25-PER-CENT SHARE OF RESOURCE REVENUES? That’s still unclear, because the five aboriginal governments who have signed on are still negotiating how they’ll split the approximately $15 million that will be heading their way. The formula will almost certainly factor in population, number of communities and the cost of living. GNWT finance officials also say the respective shares of the Dehcho and Akaitcho, who’ve yet to sign on, will be held in escrow until they do. WHAT IS THE INTERGOVERNMENTAL COUNCIL? In short, it’s a forum for the GNWT and aboriginal signatories to discuss issues arising from devolution. The GNWT’s new minister of lands and one representative from each aboriginal group will sit on the council, which is to meet at least once a year. The council will talk about land and water management issues (including further potential—and more politically agreeable— changes to the MVRMA), resource royalties, and legislation that the GNWT might need to enact to pave the way for impact benefit agreements. But just to be clear, the council has limited legal weight: nothing that happens there is binding on the GNWT or aboriginal governments. And, according to the text of the devolution agreement, neither can the council “give rise to any obligation” on the part of the federal government. Sounds promising. CW
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