Thank you, Mr. Speaker. A recent report commissioned by the Gwich’in Tribal Council has raised some questions about certain financial aspects of the devolution agreement-in-principle. The Government of the Northwest Territories does not agree with most of the conclusions of this report. We remain confident that the financial provisions of the devolution AIP are fair and reflect the best deal available. I rise today to set the record straight and address some of the confusion this report may have caused.
First of all I would like to point out that devolution is not just about money, it is about moving responsibility for public lands and resources from the Government of Canada to the Government of the Northwest Territories. With devolution, the people of the NWT will be making decisions respecting land, water and resource development that are currently being made in Ottawa. The financial components of the AIP are important but they need to be considered against the entire devolution agreement.
Anybody can pick and choose selected portions of the AIP and criticize them, but that isolated criticism is meaningless if it doesn’t take into account the benefits and advantages that have been achieved in other parts of the AIP. The Gwich’in report in fact concludes that “accepting the proposed AIP would be beneficial, but not optimal.” Taken along with the rest of the deal, it is the GNWT’s position that the financial arrangements of the AIP provide the basis for a final devolution agreement that will create real benefits for all NWT residents. Devolution negotiators spent considerable time and effort maximizing the financial benefits of the deal. All of the issues were raised and discussed at the table, from the treatment of resource revenues from Norman Wells to the net fiscal benefit and A-base funding. If there had been any realistic prospect of dramatically improving the financial components of the federal offer, the GNWT would have pursued it.
The net fiscal benefit reflected in the AIP is a vast improvement over previous federal offers. Once we have devolution, the Government of the Northwest Territories will collect the resource revenues that are currently going directly to Ottawa. These resource revenues will reduce our formula financing grant, but only by 50 cents for every dollar collected. The net fiscal benefit or the difference between the resource revenues we collect and reduction in the grant is subject to a cap equal to 5 percent of our gross expenditure base; about $60 million right now. By comparison, the Yukon devolution agreement only allows them to keep $3 million in mineral revenues and between 20 percent and 40 percent of oil and gas revenues, with everything above that going to Ottawa. It’s no wonder that the Yukon government is already indicating a desire to renegotiate their agreement.
The arrangements in the AIP are completely consistent with what the provinces would receive under the Federal-Provincial Equalization Program. Under this program, 50 percent of a province’s resource revenues are excluded from the equalization calculation, not 100 percent like the GTC report claims. Certain provinces did negotiate special time-limited agreements for off-shore revenues 25 years ago, but off-shore resources are not part of the NWT devolution AIP. While provinces that do not receive equalization payments get to keep 100 percent of their resource revenues, no province receiving equalization gets better treatment than what is contemplated in the devolution AIP.
The GTC report questions whether the net fiscal benefit will be adequate for managing the resources being devolved to the Government of the Northwest Territories, but this is not the purpose of the net fiscal benefit. The Government of the Northwest Territories will receive funding -- known as A-base funding -- each year to cover the cost of operating the programs and services that will be devolved to the Government of the Northwest Territories. This is funding over and above any resource revenues the Government of the Northwest Territories will retain.
A-base funding will begin at $65.3 million per year and will escalate annually under the terms of the Territorial Formula Financing. This amount was based on the work that the GNWT did to determine how much it would cost to operate devolved programs.
There has been some public discussion of a higher A-base amount supposedly negotiated in 2007. The GNWT and Aboriginal governments did propose a higher A-base figure to Canada in 2007, based on a best-case scenario that assumed very high levels of resource development in the Northwest Territories. There was never any guarantee that we would experience that level of development and Canada never did seriously entertain the proposal.
What Canada has agreed to, however, is to negotiate a post-devolution resource development cooperation agreement. We recognize that there may be times when additional investment may be necessary to help the Government of the Northwest Territories deal with the pressures of high levels of resource development. Where there are major projects with considerable national, environmental, social and economic significance, it would be in the interests of Canada and the Government of the Northwest Territories to work together to address their implications. Rather than try to accommodate that through higher A-base funding, these implications can be considered through a post-devolution cooperation agreement with Canada.
Mr. Speaker, it is the Government of the Northwest Territories position that we have achieved a good deal on devolution that includes fair and reasonable financial arrangements. After years of negotiations we have an agreement-in-principle that can serve as a basis for a devolution agreement that will create real economic benefits for all NWT residents, Aboriginal and non-Aboriginal alike. We have the basis of a deal that will give us access to substantial resource revenues and legislative authority over public lands, water and resources. We have the basis of a deal that will establish government-to-government relationships with northern Aboriginal governments and give them a share of revenues earned from resource royalties.
We have the basis for an agreement that will see Canada continue to contribute to the development of projects of national significance in the Northwest Territories. And we have the basis for an agreement that will see the Northwest Territories enter into negotiations with Canada over revenue sharing for offshore oil and gas resources.
Based on the current agreement-in-principle, the Government of the Northwest Territories would stand to receive $26.5 million in one-time transition costs from Canada. The first year of the agreement we would receive another $65.3 million in A-base funding. On top of the A-base funding, we would also begin to receive annual revenues from the development of NWT resources. Over the past five years we calculated that we have missed out on $200 million in resource revenues based on the current AIP. That’s money that the Northwest Territories governments could have invested in economic development, infrastructure and programs and services for our residents.
Today we are faced with all the potential impacts of resource development but have no control over the pace of development. This will be rectified with devolution and the Government of the Northwest Territories will have the tools necessary to manage risks. Every day that goes by without a devolution agreement, opportunity is lost. Non-renewable resources are being extracted from public lands in the Northwest Territories and resource revenues are flowing out of the North.
We can hold out for a marginally better financial deal from Canada, Mr. Speaker, but we will never be able to make a deal rich enough to make up for the millions of dollars that we are losing each year that we do not have a devolution agreement. This is a fair deal and an important step. It’s time to get down to business and put NWT governments in charge of the decisions that affect our Territory and our future. Mahsi.
Thank you, Mr. Miltenberger. The honourable Premier, Mr. Roland.
