Debates of December 8, 2021 (day 91)

Question has been called. All those in favour? All those opposed? Any abstentions? The motion is carried.

---Carried

Bill 45 has had second reading.

I call Committee of the Whole to order. What is the wish of committee? Member for Frame Lake.

Thanks, Madam Chair. Committee would like to consider Tabled Document 437-19(2), Capital Estimates 2022-2023; Committee Report 22-19(2), Report on Telecommunications; Committee Report 20-19(2), Report on Bill 30, an Act to Amend the Aurora College Act; and Bill 30, an Act to Amend the Aurora College Act. Thanks, Madam Chair.

Thank you, Member for Frame Lake. Does committee agree?

SOME HON. MEMBERS: Agreed.

Thank you, committee. We will take a short recess and start with the first item.

---SHORT RECESS

I will now call Committee of the Whole back to order. Committee, we've agreed to consider Committee Report 2219(2): Standing Committee on Economic Development and Environment, Report on Government of the Northwest Territories Approach to the Mining Fiscal Regime Review. I will go to the chair of the Standing Committee on Economic Development and Environment for any opening comments. Member for Nunakput.

Thank you, Madam Chair. The committee's report was read into the record on November 30th, 2021 so I do not have any additional substantive comments to add to this at this time. Individual Members may have comments on the report, brief comments on this report. And I'd like to thank committee for their work and our staff on this report. Thank you, Madam Chair.

Thank you. I will now open the floor to general comments on the Committee Report 2119(2): Standing Committee on Economic Development and Environment Report on Government of the Northwest Territories Approach to the Mining Fiscal Regime. Comments? Member for Frame Lake.

Merci.. Our government inherited a mining fiscal regime from the federal government at devolution. That regime has never been through a thorough public review. Why is this important now?

Government revenues from mining have accounted for a significant portion of our spending, particularly since devolution. Exactly how much remains to be seen due to a lack of transparency but these funds do help support our programs and services such as housing, education and health care. It is very important that our government gets a fair share for this onetime natural capital, and that it is shared with Indigenous governments. We need to maximize the benefits from mining just as we are trying to do with procurement.

In terms of the mining fiscal regime review, the most relevant point from the priorities of the 19th Assembly that we developed together back in November 2019 is the following: "Adopt a benefit retention approach to economic development."

In no way did committee contravene the priorities or mandate of the 19th Assembly in conducting the work that went into this report. We are simply carrying out our oversight role on the department and the mining fiscal regime review.

We have a duty to maximize benefits from the development of mineral resources. Our job as MLAs is to try to find the right balance between competing rights and interests to maximize those benefits, including revenues to public government in the form of royalties and taxes, profits to shareholders, jobs and contracts from resource development, and the distribution of benefits within the Northwest Territories and across generations. This is exactly what we are trying to do with the procurement review and should be doing the same with the review of the mining fiscal regime. These are political decisions that require access to information and careful analysis and should not be left to the public service or negotiated behind closed doors.

The Minister of Industry, Tourism and Investment launched the mining regime fiscal review in October 2020 and stated that the "re-imagining of our government's fiscal framework around royalties is one that deserves a comprehensive, collaborative, multi-phased approach." ITI commissioned PricewaterhouseCoopers (PwC) to prepare a benchmark study including developing recommendations addressing mineral royalties, taxes, and direct and indirect economic returns.

The core finding of the PwC study was that "lowering taxes is unlikely to be effective for the Northwest Territories" because the government take, the share of aftercost revenues flowing to the government as compared to the company is already very low. In terms of the fair return assessment, PwC concluded that "the Northwest Territories' tax regime is in line with other jurisdictions in Canada, and thus receiving a fair return."

Given the importance of the mining sector, the Standing Committee on Economic Development and Environment sought a review of the PwC report and an economic analysis on the NWT's proposed fiscal and regulatory mining regime review.

Committee retained resources for development consulting. It was founded in 2011 with a mandate to assist governments and communities in securing a fair share of mineral and petroleum wealth. The company assists:

in the design of fiscal regimes;

the negotiation and renegotiation of contracts;

the forecasting of future government revenues; and,

the monitoring and auditing of production, sales, and project costs to secure government revenues in practice.

The resources for development team members included the principal of the firm, who is a specialist in the economic analysis of petroleum and mining projects in more than twenty countries, including advice to First Nations communities in Canada in negotiating revenue sharing agreements for major projects. He was a member of the executive group in the Canadian Department of Foreign Affairs and an associate professor of public and international affairs at the University of Ottawa. He holds a PhD from the University of Cambridge.

Other team members included a former executive with over 30 years' experience in the mining industry and another expert with over 25 years of experience in the energy and natural resources sectors assisting over 20 countries.

Resources for development found the PwC study was specifically designed to assess competitiveness, not maximizing government revenues. The jurisdictions selected generate the impression that the NWT tax regime is only slightly more generous than most other jurisdictions. Government revenues from mining in Canada fall far below the international average. The NWT fiscal regime results "in some of the lowest "government take" in the world for minerals."

The PwC study did not assess the relative contribution, the strengths and weaknesses, or the appropriateness for the NWT of the existing royalty and corporate income taxes. There was no assessment of the historical performance of the NWT mining fiscal regime.

The PwC study conflates revenues to be paid to the federal government with revenues to be paid to the GNWT. Analysis of the potential revenues from mining must also include an analysis of the net revenues that could be expected to remain in the NWT after considering the territorial formula funding clawback.

Committee's consultant found that after-cost share of mining revenues to the government is around 36 percent, with 22 percent for the NWT and 14 percent for the federal government. The International Monetary Fund says that a government should expect 40 to 60 percent from a mining project. The consultant also found that onequarter of potential government mining revenues could fail to materialize due to factors that are commonly found in the mining sector elsewhere in Canada.

Committee posed a number of questions to the consultant and the responses the consultant follow:

Question 1: Is the GNWT maximizing benefits from resource extraction?

The share of aftercost mining revenues that flows to the government and to the GNWT falls well below what could reasonably be expected. Only by selecting multiple American and Canadian jurisdictions known to have among the lowest government take in the world does the NWT appear well situated.

Question 2: Does the GNWT fiscal and regulatory structure maximize value for NWT residents and future generations?

The NWT mining fiscal regime does not appear to be well designed to maximize government revenues. The government take is low and there is a strong likelihood that government revenues will come later in the project lifecycle, and there are significant risks in the way the royalty system is designed.

Question 3: Is the proposed approach by the GNWT to review the fiscal and regulatory regime comprehensive?

The PwC study was designed to answer only one of the many questions that should be part of a mining fiscal regime review. There should be a comprehensive review of historic payments to governments from the diamond mines, a full revenue analysis from the perspective of the GNWT, and an assessment of the net benefits that would be retained by the Northwest Territories under the territorial formula funding clawback.

Question 4: Will the proposed approach accurately assess whether the benefits of resource wealth are being maximized for the GNWT, NWT residents, and future generations?

Additional analysis is required to accurately assess whether the benefits of resource wealth are being maximized for the GNWT, for current NWT residents, and for future generations.

I will not review the recommendations of the consultant but note that committee adopted them and each one will be discussed as a motion.

It is my understanding that ITI is already working on many of these matters. I and others have been calling on the Minister for some time to publicly present all the steps, a timeline, and opportunities for engagement in the mining fiscal regime review. It's also not clear what topics are going to be covered in any regulations meant to implement the Mineral Resources Act in an overall implementation plan.

The committee took its role to date in the mining fiscal regime review very seriously. We secured world-class independent expertise and now offer our recommendations to ensure that there is an informed and public process to balance a number of competing interests including

maximizing benefits;

industry competitiveness;

shareholder profits;

intergenerational equity; and,

revenues to Indigenous governments.

In conclusion, I thank the committee for its work and look forward to more opportunities to discuss the mining fiscal regime review, greater transparency around resource revenues, and benefit retention. Merci, Madam Speaker.

Thank you, Member. Any other comments? Seeing no further comments, Mr. Jacobson.

Thank you, Madam Chair. Committee recommends that the Government of the Northwest Territories analyze performance of the Northwest Territories mining fiscal regime since devolution and published these results. Thank you, Madam Chair.

The motion is in order. To the motion?

Question.

Question has been called. All those in favour? All those opposed? Abstentions? Motion is carried.

---Carried

Member for Nunakput.

Thank you, Madam Chair. I move that the committee recommends that the Government of the Northwest Territories implement government-led revenue transparency. Thank you, Madam Chair.

Thank you. The motion is in order. To the motion?

Question.

Question has been called. All those in favour? All those opposed? Abstentions? The motion is carried.

---Carried

Member for Nunakput.

Thank you, Madam Chair. I move the committee recommends that the Government of the Northwest Territories conduct fiscal regime review focused on maximizing government revenue. Thank you, Madam Chair.

Thank you, Member. The motion is in order. To the motion?

Question.

Question has been called. All those in favour? All those opposed? Abstentions? The motion is carried.

---Carried

Member for Nunakput.

Thank you, Madam Chair. I move that the committee recommends that the Government of the Northwest Territories analyze the net revenue benefits for the Northwest Territories. Thank you, Madam Chair.

Thank you. The motion is in order. To the motion?

Question.

Question has been called. All those in favour? All those opposed? Abstentions? The motion is carried.

---Carried

Member for Nunakput.

Thank you, Madam Chair. I move that the committee recommends that the Government of the Northwest Territories generate greater mining revenues to benefit the future generations. Thank you, Madam Chair.

Thank you. Member for Frame Lake.

Thanks, Madam Chair. Just briefly, I checked the heritage fund balance, and it's predicted to be $27 million at the end of 2020-2021. And I calculated the value of the diamonds that have been exported from the Northwest Territories since diamond production began, and it's about $35 billion.

I know we got a late start on the heritage fund, and the heritage fund is something that's going to be reviewed hopefully during the life of this Assembly, but I think we kind of need to do better for our future generations. Thanks, Madam Chair.

Thank you, Member for Frame Lake. To the motion?

Question.

Question has been called. All those in favour? All those opposed? Abstentions? The motion is carried.

---Carried

Member for Nunakput.

Thank you, Madam Chair. I move that the committee recommends that the Government of the Northwest Territories expand Indigenous governments' economic benefit sharing. Thank you, Madam Chair.

Thank you. Member for Frame Lake.

Thanks, Madam Chair. Yes, just briefly, I do want to acknowledge that the Mineral Resources Act when it was being developed there are provisions now in the act for benefit agreements to be negotiated prior to production licences. I think that was a good thing to do. I think there's still some details to be worked out in that regard. But I think that was a good start in acknowledging that there's a need to share greater benefits with Indigenous governments from mining. Yes, thanks, Madam Chair.

Thank you. To the motion? Member for Thebacha.

I just want to make a comment on his comment. In that benefit agreements to Indigenous governments, the money comes, the money goes. I think that the only way to go in future with any kind of industry, especially large industry like mining or anything else, they have to have ownership. Indigenous governments should have ownership in the projects. So I just want to make that comment. And you know what, we have to I know there was the comments made by and I know he's very you know, I respect his views, although I don't always agree with them, and I respect anybody in this House views. We are all very what we believe in, we try to express on the floor of the House. And I'm very much about making sure that the mining industry survives. I want to make sure that the mining industry is that we're open for business, and I want to make sure that we all have jobs in the future, especially there's a lot of jobs that are like, even in my community, many of the people out of Fort Smith work at the mines. And I don't want to make things more difficult because sometimes, you know, too many rules and too many of everything and government likes to do that. Too much paper. Too much everything. And there's better ways of doing things in business. Thank you, Madam Chair.

Thank you, Member for Thebacha. Member for Yellowknife North.

Thank you, Madam Chair. The consultant pointed out that we are doing some things in this area, but we actually have a lot of room to expand into making sure that, as MLA Martselos noted, that Indigenous-owned corporations and their governments, you know, take equity stakes in mines. I think it's pretty clear that some of our dev corps are doing much better than others and have really built, you know, wealth and experience off of mining. But there's a lot to learn. I think a great jurisdiction to turn to is Alaska.

If you go to Alaska, nine out of the ten largest owned corporations are Indigenousowned corporations. They have really took their dev corps to a whole other scale. And I think you're going to get a long way down the list of companies operating in the NWT before you even find a local one let alone an Indigenous one. It is clear that no one in the NWT is operating on the scale of the companies currently running our mines. And I think a future world to envision in the mining world is that, you know, instead of it maybe being Rio Tinto or De Beers, it's actually an Indigenous-owned company that owns that mine. I don't think that is an outrageous dream and it is something that I hope that this mining fiscal regime can look to. I know that gets into IBAs, and I know that gets into the confidentiality of what is actually currently being paid out, but I think there is probably a lot of room to grow in this area. Thank you, Madam Chair.

To the motion?

Question.

Question has been called. All those in favour? All those opposed? Abstentions? Motion carried.

---Carried

Member for Nunakput.