Thanks, Madam Chair. Well, it may not be what we "do" but why are we building contributing towards the cost of a line that goes from Inuvik to Tuk and then just leaving the people in the community without the service? We've already seen that happen with Mackenzie Valley fibre link where it goes right by communities. There's no last mile into them. They get no benefits, nothing out of it. And I think this is a good project. But if we can't help make sure that people can get connected to it, we're failing. Thanks. And I'm a just going to leave it at that because I just don't think that our government's doing enough to make internet affordable and accessible to everyone in the Northwest Territories. Thanks, Madam Chair.
Thank you, Member. Any further questions, comments? Member for Nunakput.
Thank you, Madam Chair. Yeah, I just want to make sure that this stays on the books for my community of Tuk, and any time it's for small communities, they're ready to get cut. And I really think that we should be taking a real good serious look at everything else that's paid everywhere else in the bigger communities, bigger centres and that, as soon as it starts to come to the communities, we're the first thing they're looking at cutting. So if they want to start cutting, go start cutting. So it's really upsetting, I guess, to make sure that we're bringing projects forward for the communities, for all 33 communities in the Northwest Territories, and let's share the wealth a little bit. Thank you, Madam Chair.
Thank you, Member. Since there's no question in there, did you have any other questions or comments?
Thank you, Madam Chair. No, just make sure this project goes forward. Thank you. Just a comment.
Thank you, Member for Nunakput. Any further questions or comments on Management Board Secretariat? Seeing none, we'll call that.
Finance, Management Board Secretariat, infrastructure investment, $6 million. Does committee agree?
Agreed.
Thank you. Committee, please turn to page 31 for office of the Comptroller General with information on page 32. Questions. Member for Yellowknife North.
I guess can we just start by getting an explanation of the $70 million we see here for asset retirement obligations. I have a general sense that this is under the new P3 accounting standards. So I guess I'd like to get a sense of whether this is a onetime figure we will now just carry on our books as a debt, or whether this is a thing we will kind of expect to see in future capital budgets and how exactly that works financially. Thank you, Madam Chair.
Thank you. Minister.
Thank you, Madam Chair. Yeah, this one, I'll be frank, is not my favorite one to have to explain. It does go directly to the public accounts and to the public accounting standards, and there's been a now change within the public accounting standards that requires that asset retirement obligations be booked in a way that they weren't before.
So there does need to be as a result of that what is a onetime adjustment to the capital estimates. That's the $70 million that you're seeing. And what that does is it's providing a way of reporting on the to the public in the books what is anticipated to be a future liability. So it's not an anticipated spend that we didn't already have.
When we have an asset so, for example, if there's asbestos over at the museum, when the life of the building whatever building it might be comes to its end, we already know there would be a cost associated with decommissioning a building or cleaning up a building or removing that asset from once its useful life has come to a conclusion. But previously, that wasn't necessarily reflected. Now the requirement is that we in fact have to reflect that.
So the cost that you're seeing here is the estimate of all of the GNWT assets and what the value is. So that's been added here.
There is an ongoing forward adjustment, $8.5 million to the main estimates to reflect as part of this as well. But, again, it's a measure of what is expected to be paid on an ending asset. It's not new money, and the cost won't be incurred until the assets are actually at the end of life. Thank you, Madam Chair.
Thank you, Minister. Member for Yellowknife North.
Thank you, Madam Chair. I guess, importantly, the last time I looked at our debt ceiling and the debt projections were getting pretty close. Does this $70 million count towards the debt ceiling.
Thank you. Minister.
No, Madam Chair. Thank you.
Thank you. Member for Yellowknife North.
Thank you, Madam Chair. I also heard that there was $8.5 million in the operating budget. Can I just clarify that we are now required to have $8.5 million every single year going forward, or was it a onetime $8.5 million. Thank you.
Thank you. Minister.
Thank you, Madam Chair. Madam Chair, I do believe that that is going forward, and I was just looking for the explanation thereof. It's one of those and my other favorite word is amortization of the assets. So because we have that value now added in, we do amortize assets in the budget and so that is what you're seeing there.
And so that is going to be ongoing. Again, the actual outflow of any expenditures wouldn't be until the expense has actually occurred at the end of the life of the asset. Thanks, Madam Chair.
Thank you. Member for Yellowknife North.
Thank you, Madam Chair. I guess I'll start by saying I actually this is I do like this line as opposed to I understand why the Minister of Finance does not, but I think this goes to a public accounting standards I've asked governments to do because there was just billions of dollars of liabilities around this country in old asbestos buildings and hazardous materials. Traditionally in our territory, they've ended up in landfills where they probably shouldn't. There's been a long history of not making sure buildings and capital projects are properly disposed of, and I think the more accurate our public accounts can be to what is a cost we will inevitably incur one day, the better. So I I'm happy to see this. I think it gets back to that conversation that every time we build something, there is just lots and lots of costs which are not currently reflected.
I wanted to get a sense of this $70 million, I understand is essentially, we asked our accountants to go and look at every single piece of capital we own and then do some sort of calculation of disposing of it, so this is a reflection of everything we presently own.
Do we have an estimate of the $500 million we are projected to spend on infrastructure that we are bringing online, what that would cost in regards to increasing this liability. Thank you, Madam Chair.
Thank you, Member. Minister.
Thank you, Madam Chair. Madam Chair, I don't think that this is going to be actually as significant. The numbers that are reflected in the 70 million are because of assets that have things like the asbestos example being a particularly good one, because the costs of dealing with that are so high. But going forward, it does go on when the asset is coming online. So you'll see it in more real time, if you will. But, again, it's not expected to be nearly as costly as some of the older liabilities that we have. Thank you, Madam Chair.
Thank you. Member for Yellowknife North.
Thank you, Madam Chair. I guess, can the Minister assist me in a bit of how we reached this $70 million. I'll just you know, I'm thinking of some of our more remote communities that inevitably have assets that have hazardous materials, and then they have landfills that actually are not set up to dispose of hazardous materials.
Was there some consideration given when calculating this figure to the reality that we just don't have the tools to dispose of many of the current assets?
So were we actually doing costing, like if a building is in Ulukhaktok, what it costs to get it to Alberta. Was there specific costing to the North, or was this a generalized Canadianwide accounting principle. Thank you, Madam Chair.
Thank you. Minister.
Thank you, Madam Chair. And Madam Chair, so the change to the accounting standards is Canadawide. The estimate was done by our own teams. And I appreciate the example that was given, because there is a fairly detailed breakdown that's been provided. And I keep relying on asbestos as my example but the Member's quite right. Fuel tanks are actually a significant asset that does have a significant cost associated, as do solid waste landfills coming under MACA, sewage lagoons. So those are all fairly significant items that actually incur significant costs. So the GNWT buildings themselves is just under the $97,000, but you have you have fuel tanks, solid waste facilities, and sewage lagoons really making up the bulk of the rest of that. Thank you, Madam Chair.
Thank you. Member for Yellowknife North.
Thank you, Madam Chair. I'm happy to hear that breakdown.
I guess, you know I often think if you actually want to get government to do something, getting the accountants to change some standards is some of the most effective ways do that. But I'm curious to the extent that which now tracking this liability, does it actually put any obligation to us to follow it.
You gave the example of sewage lagoons. I know that most of our communities' sewage lagoons are not in compliance with their water licenses. Most of them are run by community governments and not at all in any condition to be maintained. Does this actually change any of the reality on the ground that we have to now deal with such things. Thank you, Madam Chair.
Thank you. Minister.
Thank you, Madam Chair. So Madam Chair, I agree with the comments earlier. This isn't actually a really positive and important transparency to all.
What triggers the obligation to book an asset under the asset retirement obligations is the fact that there's a legal obligation to do something with that asset. So it, you know, really doesn't change it doesn't change the legal obligation. It doesn't create the legal obligation. But there is now a number that an MLA who wishes to hold the government to account can point to and say, hey, you've got this asset booked and there's a certain estimate there; what's going to happen when it comes due in a few years.
So the more specific details as to what is happening and on what you know on what time scale, I would have to go to one of my colleagues from the departments that hold those assets. Thank you, Madam Chair.
Thank you. Member for Yellowknife North.
Thank you. I know this is a lot of questions, but it is $70 million.
One last question: I don't quite fully understand what having something on your books means and, you know, putting it in the operations budget, it kind of in this $8.5 million for every year doesn't mean that we're, like, putting it in the bank and then when the fuel tanks need to be moved, we have that money. It's just kind of taking up space, is my understanding.
Can I just get the Minister to explain how having something like this on our books actually makes sure we have the money on hand when it comes time to retire the asset. Thank you, Madam Chair.
Thank you, Member. Minister.
Thank you, Madam Chair. It's I mean we're having the money on hand, yeah, it it's amortization again, and amortization is something that's always reflected in the budget.
I'm going to turn this one over to the deputy minister and see if he wants to speak to that intersection between the planning and the reflection of what's in the budget, please.
Thank you. Deputy minister.
Thank you, Madam Chair. So as the Member noted, and the Minister noted, this is it's what we're reflecting is the amortization of the capital asset. So amortization's always an expense in the O and M. What this is doing is increasing the amortization because we've increased in time, we've gone back in time and increased the acquisition cost of certain assets. So the value of those assets in whatever time that we've had them to so an the example we gave you was April 1st, 2010, the value of that asset has gone up because of this liability or the, sorry the expense to the government has gone up because of the liability, and then over time, that's amortized as an expense.
And so amortization isn't new as an expense; it's just amortizing this liability is new. So that's why there's an extra $8 million on the O and M budget. Thank you, Madam Chair.
Thank you. Member for Frame Lake.
Thanks, Madam Chair. I want to thank my colleague from Yellowknife North, asked a bunch of a questions that I was going to start into.
But I think if we don't start to calculate this amount, we just pawn this off on future generations, and that's not a good way of doing business, let alone running a government.
Yeah, when I saw the amount, I was, quite frankly, astounded at how low it is. You know, the diamond mines each the big ones, they have hundreds of millions of dollars set aside in financial security to deal with their closure obligations. And all of our assets to properly dispose, take them down, whatever, only comes to $70 million? I just find that a very seems to me to be intuitively very, very low when you think about all of the landfills, sewage lagoons, fuel tanks, the buildings that we own, this seems to be extremely low. As I said, the diamond mines, they've got hundreds of millions of dollars set aside as financial security to deal with this.
So is there something different about the way that those guys have to set aside financial security and the way that this asset retirement obligation is calculated that I'm not aware of? Thanks, Madam Chair.
Thank you. Minister.
Thanks, Madam Chair. So I mean, in short, yes, there's, I think, fairly significantly different processes that are undergone when a major industrial project by a private actor is trying to get various licenses versus an accounting exercise to go in and determine what the value of an asset is that reflects potential costs.
So, you know, I can't speak to every sewage lagoon or the size of it or every fuel tank. I can't say that the intention here is not the same as an obligation to return an entire mine site to a natural state. This is an accounting exercise to understand, you know, what would you need to do to have no asbestos in a building when you're done with it. So I can certainly ensure that the folks that were on the working group, or task force, whatever it was called, that put these together, can be available. If there's some detailed questions, to understand how they went about their work, and that may be the best way to provide a more detailed response. Thanks, Madam Chair.
Thank you, Minister. Member for Frame Lake.
Thanks, Madam Chair. Yeah, thanks to the Minister for that. Yeah, I'm interested in having that meeting or discussion at some point, because the mines, they have water licenses. That's where the closure obligations are set out. They have a closure plan, standards are developed. I've seen, you know, reclamation calculations using spreadsheets. ENR actually maintains that spreadsheet.
I don't know why our system should be much different. In fact, some of our assets probably have water licenses, or should have water licenses. The sewage lagoons and so on. And they're going to have get closed at some point. We're going to have to deal with the closure of those and make sure we have the money to do it. So, yeah, I'm interested in that conversation.
So like my colleague, though, how do we actually fund this? I know that we have contaminated sites, big backlog of contaminated sites that we actually have an environment fund to basically put some money aside to deal with those contaminated sites, at least the ones that seem to be causing some kind of risk. So there's money that is going into that fund to help with remediation.
We're not going to have set up some kind of a fund to take care of these asset retirement obligations? It just gets rolled into our O and M at an annual rate of $8.5 million a year; is that how this is going to work? Thanks, Madam Chair.
Thank you, Member. Minister of Finance.
Thank you, Madam Chair. Madam Chair, it's I think, really, these are perhaps questions almost for the Department of Infrastructure and/or ENR and, with respect to the sewage lagoons, possibly MACA, because what is happening here is the accounting standards are reflecting the value of the asset, and the value of the asset now has to reflect the fact that there's costs associated.
We're not in a position yet where we have incurred an expense or where we are even anticipating an expense, you know, say, next this year, next year. Some of these assets certainly will have their end of life before others. And if there does need to be some sort of remediation, then that'll have to then get accounted for and planned for. But the big $70 million is really to bring every single asset in to reflect the value of that asset knowing that there's now this additional item to account for. But it's not, in and of itself, the method by which the government would necessarily be planning for any kind of environmental damage or environmental remediation.
So like this isn't us saying this is the total amount the government will ever pay to remediate any and all assets, sewage lagoons, fuel tanks, etcetera. It's saying that there's assets that have other costs associated, and we need to reflect that in that asset.
So I know that's maybe not the most satisfying answer, but it's just that it's not the right place to dig into how we're going to pay for that. Thanks, Madam Chair.
Thank you. Member for Frame Lake.
Madam Chair, well, if it's not the right place to dig into it, where when do we start that?
We've got $70 million that's being booked here, that we're supposed to approve, and there's at least a couple of Regular MLAs on this side that can't figure out how we're actually going to pay for this over time. Yeah, I think there's a problem here.
But, look, maybe the meeting is probably or briefing or something is the best way to try to figure this out. But as I said, I just find it really hard to understand how $70 million is really going to cut it for all of our assets that are out there right now, especially the sewage lagoons, fuel tanks.
You have to take big fuel tanks down in Ulukhaktok or Sachs Harbour or sea lifting the stuff out, power washing it, properly disposing of asbestos from those communities is going to get sea lifted out. You got to take it to an engineered landfill. If it's hazardous stuff, you might even have to take it to Swan Hills. I'm just not sure that $70 million is really going to cover all that.
Any ways, happy to get the briefing from the Minister on this and really understand how this was calculated, whether it's really going to cover all of the obligations we have in terms of our assets, and how we're going to pay for this over time. Thanks, Madam Chair.
Thank you. Minister.
Yeah, thank you, Madam Chair. Yeah, we're happy to do that, I mean but, again, it's the accountants of the Finance can come in and explain how this was done to comply with the accounting standards. But I'm going to be speaking to my colleagues about the departments that are actually responsible when the time comes to incur the costs, because this is reflective of an asset the asset's value as it's considers the fact of having to have it retired at some point. Yeah, there's a different conversation to be had that's Infrastructure, and I say, again, I suspect ENR.
I certainly wasn't expecting this to be the direction of the accounting standards discussion. So I'll have to talk to my colleagues about what their department's role in terms of, you know, remediation and remediation liabilities, which is not necessarily the same thing as an account as meeting an accounting standard. But we'll arrange the briefing, and we'll see who all we can bring together for that purpose. Thank you, Madam Chair.
Thank you, Minister. Member for Frame Lake. No more questions. Member for Great Slave.
