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Debate grows of mining royalties in new legislation

Depending on who you talk to, mines in the NWT either pay a pittance of mining royalties or the hurdles of remoteness, operational costs and taxes are strangling investment in new mines.

When Diavik goes offline in 2025, three up and coming mines won’t be enough to make up for labour demand losses in the territory, says Tom Hoefer, executive director of the NWT and Nunavut Chamber of Mines. NNSL file photo
When Diavik goes offline in 2025, three up and coming mines won’t be enough to make up for labour demand losses in the territory, says Tom Hoefer, executive director of the NWT and Nunavut Chamber of Mines.
NNSL file photo

By 2019, the GNWT will debate a new Mineral Resources Act, intended to “create homegrown legislation to increase competitiveness in the mining sector,” according to the department of Industry, Tourism and Investment.

With the best data available, Frame Lake MLA Kevin O’Reilly estimates that for $38.7-billion in extracted resources between 1999 and 2017, companies paid $1.15-billion in royalties, or three per cent of production value.

A key report by natural resource governance consultant Andrew Bauer described the territory’s royalty revenues as “paltry.”

The NWT and Nunavut Chamber of Mines characterized that report as “bipolar” and “misleading” in its submissions on the GNWT’s draft legislation.

Mining companies already face an assortment of taxes, including the pending carbon tax, said the chamber’s executive director Tom Hoefer in an interview with News/North.

Hoefer maintains that when Diavik goes offline in 2025, the start up of Pine Point, Prairie Creek and NICO mines won’t be enough to replace lost labour demand.

A proposed Mineral Resources Act should improve conditions for mining, rather than make the territory less competitive, he said.

An uncertain climate for investors is driving off necessary exploration and investment required to open new mines, said Hoefer.

O’Reilly has repeatedly pressed Industry, Tourism and Investment (ITI) Minister Wally Schuman and Finance Minister Robert C. McLeod to take more royalties from the mining industry and to improve government transparency on the collection and reporting of revenues.

In September, Schumann told News/North that royalties were not on the table in the 18th assembly.

The royalty regime handed down to the GNWT through devolution remains largely unchanged, a key complaint for which O’Reilly took the minister to task during the Oct. 31 non-confidence vote, which Schumann survived.

Schumann’s stance on resource revenues is “the most serious issue” for which he voted to remove the minister from cabinet.

“While billions of dollars of resources are extracted here each year, revenues to our government have been described by an international expert as paltry and our management as ‘one of the world's most charitable fiscal regimes for the mining sector,’” said O’Reilly.

O’Reilly wants mining in the territory, he said, but asked that Schumann prioritize public interests, as the minister responsible for both promoting and regulating resource development.

The NWT and Nunavut are the only Canadian jurisdictions without a standalone mining act, leaving it at a competitive disadvantage, states the ITI website.

In its consultation stages, the GNWT heard that a new act should preserve jobs, spread the benefits of mining to local communities and protect wildlife and the environment. The GNWT also heard the need to establish safeguards for abandonment and remediation of mines and improved transparency.

Existing data on royalties collected on non-renewable resource commodities conceals the value of individual commodities, said O’Reilly.

This frustrates efforts to determine exactly who is profiting from extraction and whether the territory gets a “fair shake” of benefits from extraction, said O’Reilly.

The public doesn't have access to separate royalty figures for individual commodities extracted in the NWT, despite a growing trend of transparency for reporting resource revenues, he said.

“While our government receives more from tobacco tax than royalties this year, Cabinet has cut programs and service in the name of fiscal austerity and refuses to review our resource royalty regimes,” he said.

The NWT has several pieces of draft legislation on mining and protected areas, all of which will change the face of mining, said Hoefer.

He opposes embedding specific royalty regulations within the act and is asking the GNWT to use a “less detailed” NWT Mineral Resources Act to allow the creation of more specific regulations outside the act.

The chamber asked for an online staking mechanism to decrease costs in the exploration stage and make it easier to meet work requirements, said Hoefer.

There is “concern about the size” of the proposed Thaidene Nene protected area, which would be closed to development, without complete land use planning and studies on mineral values, he said.

Mines “need access to land” but unsettled claims, including Akaitcho, create uncertainty for investors, said Hoefer.

In a response to consultations on the proposed act, the chamber requested that the GNWT resolve land claims and that interim withdrawal lands be put back into circulation for exploration after 10 years of stagnated claims.

The GNWT slated a draft of the act for this fall, followed by a consultation on how it will affect treaty rights under Section 35 of the Constitution Act. The bill won’t be introduced and debated in the assembly until fall 2019.

While the NWT and Nunavut Chamber of Mines isn’t flatly opposed to royalties, Hoefer said it classifies it as another tax that shouldn’t be outlined in the new Mineral Resources Act.

“The public would benefit from information on gross royalties collected,” stated the chamber in its submissions.