Thank you, Mr. Speaker. Your Standing Committee on Economic Development and Environment is pleased to provide its Report on the Government of the Northwest Territories Approach to the Mining Regime Fiscal Review and commends it to the House.
As part of the Government of the Northwest Territories (GNWT) work to bring the Mineral Resources Act into force, as well as to further implement the devolution of the land resources management, the GNWT has commenced a review of the mining fiscal regime, including royalties paid.
The GNWT’s first step of the review was to produce a study that assessed the tax and royalty competitiveness of the mineral sector in the NWT. The Tax and Royalty Benchmarking Report released October 2020 was the GNWT’s first step of the process.
In the public release of this document the Minister notes, the reimagining of our government’s fiscal framework around royalties is one that deserves a comprehensive, collaborative, and multiphased approach." The committee was concerned about the scope of work for this benchmarking research and given the technical nature of this study, an independent review was undertaken for committee.
Mr. Speaker, I ask the Member from Frame Lake to conclude. Thank you.
Thank you, Member for Nunakput. Member for Frame Lake.
Merci, Monsieur le President.
Committee decided to seek proposals from resource economic consultants to provide an independent opinion on the following questions:
Is the GNWT maximizing benefits from resource extraction?
Does the GNWT fiscal and regulatory structure maximize value for Northwest Territories residents and future generations?
Is the proposed approach by the GNWT to review this fiscal and regulatory regime comprehensive?
Will the proposed approach accurately assess whether the benefits of resource wealth are being maximized for the GNWT, NWT residents, and future generations?
The majority of committee agreed to hire resources for development consulting for this independent review. One Member was not supportive of the direction committee was taking regarding an independent analysis on the GNWT’s benchmarking study. This Member’s position in opposition to the independent research commissioned by committee is provided in the dissenting opinion which is included as Appendix A.
Resources for development consulting 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.
As part of the team undertaking this work for committee, additional expertise was secured, including an executive with over 30 years experience in the mining industry and another expert with almost 25 years of experience in the energy and natural resources sectors assisting over 20 countries.
On June 29, 2021, the consultant provided a public briefing for committee on the research findings. The meeting was recorded and posted on the Legislative Assembly Facebook and Youtube channels. The final research report, An Economic Analysis of the GNWT’s Approach to the Mining Regime Fiscal Review, as prepared by Resources for Development Consulting is attached as Appendix B.
Mr. Speaker, I'd like to turn it over now to the MLA for Yellowknife North. Merci.
Thank you, Member for Frame Lake. Member for Yellowknife North.
Thank you, Mr. Speaker.
While committee supports a review of the mining fiscal regime, there was not consensus how to approach this review to stimulate investment, maximize benefits and maintain competitiveness. Not all Members accepted the recommendations as presented in the report. Regardless committee submits the following recommendations to the GNWT for a response as suggested by Resources for Development Consulting.
The report's findings suggest that in determining how to improve the NWT’s mining fiscal regime, an analysis should be made publicly available that demonstrates how well the current fiscal regime has served the NWT since devolution.
Recommendations
The Standing Committee on Economic Development and Environment recommends that the Government of the Northwest Territories analyze the performance of the NWT mining fiscal regime since devolution and publish these results.
Committee agreed that fiscal transparency was a key aspect of any fiscal regime and should be included in the current fiscal regime review.
The Standing Committee on Economic Development and Environment recommends that the Government of the Northwest Territories implement governmentled revenue transparency.
Committee was concerned about the GNWT's share of revenue from the mineral resources sector. Committee recommends the review of the Mining fiscal regime focus on maximizing government revenue while not impeding competitiveness in the industry.
The Standing Committee on Economic Development and Environment recommends that the Government of the Northwest Territories conduct a fiscal regime review focused on maximizing government revenue.
Committee recognizes revenue analysis for the GNWT from the mineral sector is complex in addition to accounting for the Territorial formula financing arrangement.
To ensure the GNWT and Indigenous governments are maximizing revenue, committee recommends the mining fiscal regime focus on assessing net revenue benefits to the NWT. This focus should include an analysis on the overall mining sector in the NWT, including revenue payments from all mining operations.
I'll now turn it over to the Member for Frame Lake.
Thank you, Member for Yellowknife North. Member for Frame Lake.
Merci, Monsieur le President.
The Standing Committee on Economic Development and Environment recommends that the Government of the Northwest Territories analyse the net revenue benefits for the NWT.
The purpose of the Heritage Fund is to ensure that future generations of people of the Northwest Territories benefit from ongoing economic development, including the development of nonrenewable resources. Committee was concerned with the value of wealth that has been created through the Heritage Fund and recommends the Mining Fiscal Regime Review include an assessment of how to generate more wealth for future generations.
The Standing Committee on Economic Development and Environment recommends that the Government of the Northwest Territories generate greater mining revenues to benefit future generations.
As the GNWT can pursue wider government revenues from mining projects, those economic benefits will extend to Indigenous governments. Indigenous governments also have independent mechanisms to secure economic benefits directly from mining companies.
The Standing Committee on Economic Development and Environment recommends that the Government of the Northwest Territories expands Indigenous governments' economic benefit sharing.
Committee is not aware of any publicly available information on the steps, timelines, and opportunities for public engagement for the remainder of the review of the mining fiscal regime.
The Standing Committee on Economic Development and Environment recommends that the Government of the Northwest Territories make public, as soon as possible, information on the steps, timeline, and opportunities for public engagement for the review of the mining fiscal regime.
Mr. Speaker, I'd like to turn it over now to the MLA for Nunakput to conclude the committee report. Merci.
Thank you, Member for Frame Lake. Member for Nunakput.
Thank you, Mr. Speaker.
The Standing Committee on Economic Development and Environment recommends the Government provide a response to the recommendations contained in this report within 120 days.
Committee is committed to providing timely and constructive feedback during the review of the mining fiscal regime. Committee looks forward to a comprehensive, collaborative, and multiphased approach with meaningful opportunities for the public and Indigenous government engagement.
Mr. Speaker, I'd like to hand it over to the Member from Great Slave. Thank you.
Thank you, Member for Nunakput. Member for Great Slave.
Thank you, Mr. Speaker. Dissenting opinion of Katrina Nokleby, MLA for Great Slave.
The GNWT has committed to undertaking a review of its approach to the NWT’s mining fiscal regime. As a first step, the GNWT commissioned a study by international firm PricewaterhouseCoopers (PwC) to provide an analysis of tax and royalty benchmark mining in the Northwest Territories. Some Members of the Standing Committee on Economic Development and Environment (SCEDE) had concerns regarding the scope of work of this research and proceeded to hire an independent economic consultant to provide an opinion on the GNWT’s mineral benchmarking research.
This decision by SCEDE to question the GNWT’s approach does not reflect my concerns or opinions in this area.
SCEDE established the following terms of reference for Committee’s independent research:
Is the GNWT maximizing benefits from resource extraction?
Does the GNWT fiscal and regulatory structure maximize value for NWT residents and future generations?
Is the proposed approach by the GNWT to review this fiscal and regulatory regime comprehensive?
And will the proposed approach accurately assess whether the benefits of resource wealth are being maximized for the GNWT, NWT residents and future generations?
I disagree that these are the most important questions to be asking, particularly in a time when exploration is at an all-time low in the NWT. It is my opinion that this contravenes the mandate of the 19th Assembly which is to support our mineral resource industry. PwC’s research is relevant, sound, and is indeed a credible report in which to inform the Mining Fiscal Regime Review, comparing the climate in the NWT of relevant and relatable jurisdictions like Australia and South Africa. Contextually, based on my extensive professional experience, PwC has captured the situation in the NWT quite well and provides data to back up its conclusions.
I believe that the most relevant questions to be considering right now as the GNWT undertakes the Mining Fiscal Regime Review is:
How will the GNWT create a climate that attracts high quality investors?
How can the GNWT aid and incentivize the existing diamond mines to extend the life of their operations and develop new projects?
How can the GNWT promote the exploration sector to ensure successive mines are coming online to help the territory avoid economic recession?
How can the GNWT incentivize mining corporations to establish and keep head offices in the NWT?
How can the GNWT support residents and businesses to increase participation in the mineral sector?
What are the spinoff industries that could be developed?
How can the GNWT support the development of energy and transportation infrastructure to attract investment in the territory?
The NWT has always been a resourcebased economy. Mining jobs keep families housed and people fed. Mining is the largest private sector employer in the NWT with diamond mining at the foundation of our current economy. This was only driven home further as the pandemic has progressed. Without the support of the mining industry and its dollars, the NWT would have been in economic ruin by now. The mines sent vulnerable people home with pay and set up some of the safest work sites in the entire territory, meeting weekly with our officials to ensure a coordinated effort was made to keep people healthy.
Diamond mining represented 26.7 percent of the territorial GDP in 2019, and is currently forecasted to contribute 20.7 percent of the territorial GDP in 2020 even though the industry declined 30.3 percent over that time period. There is no other sector that can replace the value that the mineral sector has brought to the NWT, unfortunately the NWT's economic outlook is not encouraging and taking jabs at this sector now is only going to be the nail in its coffin.
The value of our mineral productions is decreasing. The territorial GDP declined 10.4 percent from 2019 to 2020, the largest drop in the country, and for the first time ever is being surpassed by Nunavut’s value of mineral production as predicted by the NWT and Nunvaut Chamber of Mines on July 29, 2021. The NWT and Nunavut are on opposing trends. Nunavut is surging up with the development of a new gold mine, and strong prices for iron and gold. While the NWT’s mining industry is suffering from the effects of COVID19; weak global diamond sales; and the shortterm closure of Dominion’s mine; and the slow rate of new mines coming online.
The value of exploration expenditures is also decreasing.
The NWT Mineral Development Strategy shows a similar trend exists for the NWT with respect to exploration expenditures. The total value of exploration expenditure in the NWT over the last five years has also declined to less than 3 percent of the Canadian total. In the meantime, Nunavut has attracted four times as much exploration investment as the NWT and about twice as much as the Yukon. Current NWT expenditures are mainly for advanced exploration projects and deposits with very few grassroots projects underway, something that is extremely worrisome for the long term prospects of a sector that employs a large portion of Northerners as well as accounts for so much of our GDP.
As Minister, I heard that the NWT is not viewed as a jurisdiction that is attractive to investment. The Fraser Institute Annual Survey of Mining Companies 2020 Investment Attractiveness Index ranked the NWT 46 out of 77 other jurisdictions. The NWT was among the very lowest ranked when compared to other Canadian jurisdictions, with Nova Scotia ranking the worst at 66 out of 77. Conversely Saskatchewan was at the top of attractive jurisdictions coming in at 3rd place, followed by Quebec in 6th, and Newfoundland and Labrador at 8.
While prospects don’t look great, there has been some extension to the life of the diamond mines as detailed in the 2019 Socio-Economic Agreement Report. Diavik Diamond Mine’s production life has been extended to 2025 due to the A-21 pit; Ekati’s production life has been extended to 2034; and Gahcho Kue production life is estimated to run until 2030 with the discovery of new kimberlite pipes in 2019. However, this is not enough to sustain our economy and the lack of upcoming projects to replace the diamond mines is worrisome. Coupled with little oil and gas development, the sunsetting of the diamond mines will likely cause the NWT to be in an extremely weak and limited economic environment in as short of a time as 13 years. Even if ongoing exploration work proves fruitful, metal mines have nowhere near the economic impact as a diamond mine and production values will be extremely limited comparatively.
Diversification is key to developing our economy, but diversification needs to happen quicker and on a much greater scale than it is currently happening to be relevant. In the meantime, we cannot afford to have a territory with no economy. Without successful exploration and subsequent mining projects coming online, we are destined to become a government or public service economy, with little population, little territorial budget, and little private services. With a lack of jobs there will be little incentive for our youth to remain in their home communities or even in the NWT, and our talent drain to the south will continue.
For all the reasons above, I believe the scope of work for the Tax and Royalty Benchmark Report, Mining in the Northwest Territories is an effective benchmark report to understand the NWT’s competitiveness in the mineral sector. I am disappointed that committee time and resources were spent on work that I see as largely irrelevant given the reputation of the authors of the original report as well as the current economic situation of the NWT. I encourage my colleagues to put our time and efforts towards improving the economic outlook of our territory instead. I support the work of the GNWT and ITI to advance the Mining Fiscal Regime Review expeditiously to enable the development of regulations and incentives that will ensure a prosperous future for the NWT and all residents. Thank you, Mr. Speaker.
Thank you, Member for Great Slave. To the report, Member for Nunakput.
Thank you, Mr. Speaker. I move, seconded by the Honourable Member from Frame Lake, that Committee Report 2119(2): Standing Committee on Economic Development and Environment Report of the Government of the Northwest Territories Approach to the Mining Regime Fiscal Review, be received in the Assembly, moved into Committee of the Whole for further consideration. Thank you, Mr. Speaker.
Thank you, Member for Nunakput. Motion is in order. To the motion?
Question.
Question has been called. All those in favor? All those opposed? Any abstentions? The motion is carried. The report will be moved into Committee of the Whole.
--Carried
Reports of standing and special committees. Member for Nunakput.
