Finance Committee on April 7th, 2017

[The Chair, Liberal, Wayne Easter]

We'll call the meeting to order. We're meeting pursuant to Standing Order 108(2) in regard to the study of economic growth in the territories. We're fortunate to have with us this morning the Premier of Nunavut, with the minister of community and government services and the deputy minister of executive and intergovernmental affairs.

Premier, welcome. I understand you have an opening statement. I believe the minister also has a bit of a statement. Following that, we will go to questions.

Welcome. It's great to have you in Ottawa.

[Peter Taptuna, Premier, Government of Nunavut]

Thank you very much.

I'll start right away. Again, thanks to all of you for inviting me to this committee meeting.

When this committee first thought of inviting territorial premiers to speak to you, it was to consult us ahead of the federal government's 2017 budget. Of course, for us, the timing didn't work out, and Canada released its budget two weeks ago. Given this, though, I thought it would be appropriate to speak to you today about this budget and what it means to the Government of Nunavut.

Mr. Chairman, please consider this a post-budget debriefing, instead of a pre-budget consultation.

The budget contained four take-aways of particular interest to Nunavut: a much-needed investment in housing, the Arctic energy fund, the national trade corridors fund, and the renewal of the territorial health investment fund. I'll touch briefly on these today and then be available to answer some of the questions.

On the housing first, Canada committed to provide $240 million over 11 years to help address the Nunavut housing crisis that we face. To us, this shows that Canada remains aware that the lack of housing is a major issue in Nunavut.

In particular, we appreciate the fact that Canada has committed to a long-term, stable funding mechanism. We prefer this to a short-term announcement. We've seen in the past that knowing about a decade of funding helps us to plan ahead and means that we can be smarter in our housing investments. This ability to plan ahead is particularly important in our communities where we can only bring in supplies by boat, by supply ships, for a few short months of the year. Our Nunavut Housing Corporation is the provider of public housing units in the territory and will continue to work closely with the Canada Mortgage and Housing Corporation and use this investment to build homes for the most vulnerable Nunavummiut.

While this new funding is significant, Nunavut remains in a housing crisis that will continue to limit the well-being of our people. Leading up to budget 2017, we had asked the Government of Canada to invest $525 million over four years to build 1,000 of the roughly 3,000 housing units that we desperately need in Nunavut. Budget 2017 has proposed far less. While we appreciate the $24 million a year to help us build homes and shelter for a number of Nunavut's families, we'll continue to require more federal support in the years ahead to help us eliminate Nunavut's housing crisis.

Next, Mr. Chairman, I was encouraged to hear about the proposed Arctic energy fund. While details of this are still limited, we understand that this $400-million fund is to address energy needs in communities across the territories over the next 10 years. We are hopeful that investments made through the fund will help Nunavut reduce our dependence on diesel-burning electric generators. We want to do our part to address climate change, and the Canadian Arctic is one of the first places in the world to experience the negative impacts of the warmer world.

At the same time, Nunavut is perhaps the least equipped to move away from carbon-intensive fossil fuels. Our remote communities, small populations, and challenging environment mean that we do not have access to the same solutions as other jurisdictions in Canada. Before we begin to reduce our reliance on fossil fuels in Nunavut, we need to improve energy security in our communities, where power outages can be disastrous.

Currently, half our communities are supported by power plants that have reached or passed the end of their expected useful life cycles. The Government of Canada built many of these when Inuit first moved into permanent settlements in the 1960s and 1970s. These upgrades and replacements are badly needed.

However, we're unable to pass the high cost of infrastructure upgrades on to Nunavut ratepayers, many of whom already cannot afford the high cost of electricity in our territory. As a result, the Government of Nunavut already covers almost 80% of the cost of delivering electricity in our territory.

The Senate Standing Committee on Energy, the Environment and Natural Resources recently acknowledged the need for continued investment in energy infrastructure in our territory of Nunavut. Consistent with that, my government had requested $250 million over 10 years to replace nine power plants and 17 generators so as to improve safety and the viability of our communities.

Depending on how it's implemented, the Arctic energy fund could address some of this need. Through this fund, we hope to upgrade and replace aging generators to provide more security for our remote communities. As part of this, we intend to integrate renewable energy into our existing electrical infrastructure. Over time, this may lead to more sustainable and environmentally friendly alternatives.

Looking to budget 2017, I am especially hopeful that Nunavut and our neighbours in the Northwest Territories will benefit from a national trade corridors fund, which is meant to better connect Canadian goods with markets. I'm thinking specifically of how the fund might support our proposed Grays Bay road and port project, which would connect western Nunavut's rich mineral potential with Arctic shipping routes and the international market. This proposed port at Grays Bay on the Northwest Passage would be the only deepwater port in the western Arctic and Canada's first overland connection to a deepwater port in the Arctic Ocean.

The total construction cost of the Grays Bay road and port project is estimated to be around $500 million but the project wins out in the cost-benefit analysis. According to some estimates, just one successful mine developed alongside the project could add roughly $5.1 billion to Nunavut's GDP over 15 years and could add as much as $7.6 billion to Canada's economy as a whole. The project could add jobs in a region of Canada that is eager to work but that suffers one of the highest unemployment rates in the nation. It would connect Nunavut, for the first time, to the rest of Canada and international shipping routes. Such a road would greatly increase viability of mining projects in the region.

Mr. Chairman, as you can imagine, we in Nunavut would look forward to learning more about this national trade corridors fund and how it could support northern infrastructure like the Grays Bay road and port project.

The final budget initiative of interest is a proposal to extend the territorial health investment fund for four years at $13.5 million per year. This funding we need badly, especially following Canada's cut to the Canada health transfer growth rate, which starts this year. Provinces and territories receive Canada health transfer based on population. This equal per capita spending does not consider basic realities in Nunavut health delivery and it severely underfunds Nunavut's health system as a result.

For example, our small communities cannot take advantage of the more efficient health delivery that large and connected population centres take for granted. Another example is the high and unavoidable travel costs of bringing patients and health professionals to and from our isolated communities. Canada intends to have the extended territorial health investment fund cover some of these added costs and to increase innovation in our health system. Frankly, the $13.5 million per year falls short for the Nunavut health system.

It covers less than one-fifth of the $75 million our government pays for medical travel each year. In fact, medical travel alone costs Nunavut almost twice as much as we receive from the entire Canada health transfer in any given year. In short, we'll put the short-term investment fund extension to good use by offsetting a portion of our medical travel cost. However, we are still a long way from being able to offer Nunavummiut health care services comparable to those in southern Canada.

To wrap up, budget 2017 contains some good news for Nunavut, like the long-term care support for housing. It also proposes some interesting funding mechanisms we think could lead to important investments in the territory. I'm thinking of the Arctic energy fund and the national trade corridors fund. As I say, however, the devil is in the details. We do not yet know how Nunavut can access these funds. Until these details are available and funding decisions are finalized, we'll be optimistic that Nunavut will benefit.

Finally, we will put the extended territorial health investment fund to good use, but certainly we need some support for health delivery in Nunavut. Our government, communities, and people rely on continued federal investment, like the funds proposed through budget 2017. While we still have a long way to go, budget 2017 is good for Nunavummiut and a step in the right direction. My colleagues and I would like to see more budgets like the one announced last month. We continue to encourage Canada to invest in Nunavut and Nunavummiut.

However, we remain very concerned with the requirement to introduce a carbon tax on Nunavummiut and businesses in our territory and its possible negative effect on those investments. Nunavut relies exclusively on fossil fuel for home heating, electrical generation, and transportation. With no feasible alternative available, the carbon tax will simply be another tax with no positive mitigation or adaptation effects being seen at all.

I'll give you an example. The mining company, Agnico Eagle, currently engaged in a mining operation near Baker Lake, estimates that, when fully implemented, a carbon tax will cost an additional $20 million per year, or $300 million over the life of their mining operations in Nunavut.

For marginal mines, that could be a game-changer with respect to proceeding or not with the development and creation of much-needed jobs and tax revenues in an environment where mining is already two and a half times as costly to develop and operate as in southern Canada. Firms are already taking a second look at the economic viability of their projects once a carbon price is imposed.

For Nunavut to succeed, to become self-reliant, and to prosper, barriers to investments such as a carbon price and the recently announced five-year moratorium on issuing offshore oil and gas permits must be minimized, all while ensuring a balanced approach to conservation.

Again, Mr. Chairman, I thank you for giving me this opportunity to speak, and I'll be happy to answer questions after my minister colleague gives his presentation.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Premier, and we do appreciate your directness at this committee.

Now we have the Minister of Community and Government Services.

[Joe Savikataaq, Minister of Community and Government Services, Government of Nunavut]

Thank you, Mr. Chair.

First, I'd like to thank you for inviting me to have the privilege of addressing you. We're here to discuss issues that are important to Nunavut. There are many issues, and they're big and they're complex. Nunavut is a unique territory in terms of it not being that simple to get a simple task done.

We thank you that you're going to help us build our communities better and stronger, and that's what we need. As the Minister of Community and Government Services, I am responsible for the projects, the programs, and the services that contribute to building capacity in Nunavut communities. I have to do that in a timely and cost-effective manner.

We appreciate the funds we get, and we have to make sure that these funds are spent wisely. Although the municipalities are funded through our department, there are very few that are tax-based. Therefore, they're all block funded, so all the funds to run all the communities come through the GN, the Government of Nunavut.

I'm very grateful that there's a growing trend toward long-term, multi-year federal funding. It is especially important that there is long-term funding for projects, so that we can have our plans laid out in a multi-year plan, so that we don't always have to rush and spend the money quickly because there's a deadline in terms of funding and project ends.

It was encouraging to see that some of the investments in the 2017 budget will help Nunavut's economy grow and diversify. Aside from the four areas that were identified, I'm concerned that there are other areas that are not being addressed. I'd like to address those.

Improving the connectivity in the north needs to be built into the federal funding strategy in future budgets. More focus in this area will have major beneficial impacts on overall development in the territory. I believe we're the only territory that does not have any fibre optic broadband links. We're all satellite, and I believe on two occasions we had problems with satellites and had no communications at all within Nunavut. That is a serious problem when it occurs, as we're all aware that everything is connected to the Internet now. It's just a fact and a way of life.

Having access to improved, affordable Internet will increase businesses' and economic benefits and enable better delivery of services to residents, as well as better access for education and health, for both youth and adults. Once the people of Nunavut are connected to the global economy, they will find ways to empower themselves. That is the story of Nunavut.

Although we have been very resilient and resourceful throughout our history, we need the proper tools to adapt to many of the challenges. We know now that, with the Internet, you have a global audience and a global economy, and as long as you have the transportation connection and the Internet connection, the economies of scale are worldwide.

Nunavut is a vast territory with potential, and it'll take considerable investment on the part of the Government of Canada to help unlock the potential, but it's a worthwhile venture. We believe that any funds that are invested in Nunavut will bring many more investments back, because unemployment is really high and we need the jobs that are available with the help of the Canadian government.

Thank you, Mr. Chairman.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Minister. Thank you both.

I have been to Nunavut before it was Nunavut. In fact, I was around when we brought in the legislation that made Nunavut a territory. I don't know if anybody else around the table was or not. You're right; it is a vast territory with vast potential.

We'll go to five-minute rounds rather than seven, if we could. I know a couple of people have a tight connection problem, so we'll go with five-minute rounds, starting with Mr. Tootoo.

Mr. Sorbara, do you want to give your time to Mr. Tootoo?

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Good morning, everyone.

Before I turn over my time to my friend Mr. Tootoo, Premier, Minister, and deputy minister, thank you very much for your testimony this morning. Premier, I found your testimony to be very direct, succinct, and a lot of questions came out of it for me. I'll save them for another time, because I wish to allocate my time to Mr. Tootoo.

[Hunter Tootoo, Independent, Nunavut, NU]

Thank you, Mr. Sorbara and Mr. Chair, and welcome. It's always good to see a fellow Nunavummiut here in Ottawa. I have three or four questions, whatever I have time for.

Mr. Premier, you mentioned carbon pricing and the impact on the territory. I think it's no secret that we are unique, and we are 100% reliant on diesel, as you pointed out. Until some opportunities arise for that, that's not going to change. I know the three territories have been discussing with Canada a way to address that uniqueness on carbon pricing in the territories, and I understand you guys were in discussions with Canada on that.

I'm wondering if the goal of those discussions was to recognize the unique challenges and circumstances of Nunavut, and when it does come, that it would be either cost neutral to the territory or have exemptions that take those unique circumstances under consideration. Is that the direction you'd like to see it go?

[Peter Taptuna]

It's very difficult because at this point during our discussions on the pan-Canadian climate change framework, we had indicated on many occasions that Nunavut's unique, the Arctic is unique. In Nunavut, we don't have any alternative sources to turn to when it comes to cleaner energy. We're not like any other jurisdiction. We don't have those options.

We've been given an opportunity to talk to our federal colleagues on how we could minimize the impact of carbon pricing. We're hoping that home heating, diesel generation, and transportation can be exempt from carbon pricing because in Nunavut we don't have any alternative. When it comes down to business and industry, it's already one of the most expensive places in the world to do any kind of business. We're looking for development to make sure our people, our children, are going to be employed in the future, and we do have to find ways to minimize the impact on industry.

As I indicated in my presentation, if it's going to cost a developer an extra $300 million, it's just not going to work. We're really hoping that our federal partners can come to the table and hash out the details and make sure that Nunavut, the youngest territory of Canada, is not put in a position where it's not possible to exist there at all.

[Hunter Tootoo, Independent, Nunavut, NU]

Thank you, Mr. Premier. Yes, I think it's no secret that it costs three times as much to operate anything in the north. I always say that a dollar down here is like 33¢ in the north.

I think another important point is the fact that any investment in infrastructure in the north, whether it be housing or any kind of infrastructure, is actually a direct investment in the southern economy, because anything we buy up there to build with comes from the south. You talked about major infrastructure. You mentioned the Grays Bay port and road project. I was in Winnipeg about a week and a half ago for the Hudson Bay regional round table. We just had the 20th mining symposium in Iqaluit this week. There are two major projects there, Grays Bay and the Manitoba Hydro road project coming up into the Kivalliq region.

We all know that in order for the economy to grow...and that's what this is about, economic growth for the territory and the government's commitment to look toward creating a sustainable economy in the north. Canada invested in the roads across the country in the south. They invested in the railway. They invested in the harbours. The only jurisdiction left in Canada that hasn't had that investment is the north, and specifically Nunavut.

Do you think there is a requirement for this type of infrastructure investment to allow for the economy to grow and to have the opportunities there for the territory to create employment, lower the cost of living, and bring in alternative sources of energy? As Minister Savikataaq mentioned, there's also the connectivity with fibre optics. I know it's something that the territory can't afford.

As we know, an investment like this would be high up front, but with dividends would pay for itself in the long run and create that opportunity. What we all want is a sustainable, self-sufficient, self-reliant territory, and these investments would help achieve that.

[Peter Taptuna]

Absolutely. I mentioned in my presentation the Grays Bay road and port project. I also mentioned a little bit about devolution and the moratorium on oil and gas. Of course, any kind of construction investment that the federal government has for Nunavut also benefits all other southern jurisdictions. As you know, all our construction material, all our equipment, and everything else has to be shipped up from southern jurisdictions. If Nunavut does good, southern jurisdictions also do very well. When it comes to increased costs, however, because of the carbon price, we have to pay that for the other jurisdictions. It drives our cost up.

One of the things I mentioned before is that with this oil and gas moratorium, while we're in the middle of our devolution negotiations, that's.... I'll be fairly blunt with this. At the end of the day, the territory of Nunavut is a potential economic engine for the nation going into the future. We're rich in minerals. We have precious base metals. Opening up the geological region, the Slave region, for Canada with that infrastructure will create many jobs for a long time. I'm talking about generations. I guess I could compare it to building a railroad from the east across to the west.

It has to happen soon. This will be our economic activity for the nation going into the future, and it's very difficult to do at this point. We do want to become self-sustaining and contribute to the nation. One way of doing that is through good devolution agreements with our federal partner.

At this point, I see it as being very difficult. The major potential source of revenue going into the future, of oil and gas for the territory, just doesn't exist anymore. Although it's a five-year moratorium, it will be very difficult to talk about oil and gas while we're sitting at the negotiating table. As a territory, we do want to become self-sustaining. We do want to contribute to the nation and have our people employed. There is just no other way. At the end of the day, however, that makes it extra difficult. We do not want to become reliant on Ottawa to give us our funding year after year. We do want to become self-sufficient.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Premier.

I want clarification. On the port, was it Great Bay or Grace Bay? Which was it? Was it $500 million you said it would be to build that port?

[Peter Taptuna]

Yes. That's the approximate cost.

As a territorial government we partnered with Kitikmeot Inuit Association, and that's at Grays Bay.

As you know, there are Inuit-owned lands, and part of the project goes through their lands. At the end of the day, that infrastructure will hopefully belong to the Inuit of the region.

Again, I'm talking about potential benefits going forward into the future. At this point with our rapid population growth, we have the highest birth rate in Canada. Our graduation rates are going up, and at any given time, we need at least 5,000 to 8,000 new jobs in our territory for new workers. We just can't supply that through our government, so development has to happen.

When I say development has to happen, it has to happen responsibly. We have, in our land claims agreement, the institution of public government that regulates and makes recommendations at this point to the federal minister on any kind of development. Again, having said that, we want to take charge and have authority on our own lands and water for possible development to benefit our territory.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Premier.

Mr. Albas.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Thank you, Mr. Chair. I thank our guests today.

Premier, it's very educational to have your last comment in particular. You have a fast growing population. They're more educated than any in the past. Where are they going to go? What are they going to do? I think those are important words for us to consider.

You mentioned earlier, Mr. Chair, about the creation of Nunavut. Former minister Tom Siddon—who is still an elected official in my region of the Okanagan—says one of the most important things he did in his long parliamentary career was to help with the creation, because the people had aspirations and he wanted to see a different tone in Ottawa when it came to the relationship.

Certainly, Premier, your words are well-received.

In regard to the moratorium, I asked many of the same questions of your counterpart from the Northwest Territories. Obviously, it seems apparent that there was very little consultation, and I agree with your comment about coming at a very critical time when you're having negotiations on devolution, and how that could impact things.

If we see the administration down south reverse that moratorium—the previous one put in by President Obama—would you be in support of a similar...to rescind that moratorium here?

[Peter Taptuna]

Devolution is long term. It's forever. Having that potential there, going into the future, certainly....

At the end of the day, there's the potential that the territory can become self-sustaining. Again, it has to be done responsibly. As Inuit, we care for our environment. Whatever development happens has to be done responsibly and benefit our people, our territory, and the nation.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Again, if you have a rising population, and you want to diversify, that would be one critical way to do it.

I appreciate your bluntness earlier, because you asked for an exemption. I think that given the fact that many of the areas you're in....

How does a carbon tax work when you have diesel-dependent communities where 80% of the costs are already being paid for by the government? Who's going to pay that tax, ultimately? You rely on money from federal transfers, and if only 20% is there, and they don't have the tools to be able to switch off onto their own independent source, how does a carbon tax innovate in that area?

[Peter Taptuna]

It's going to be very difficult. That's why we asked for assistance from the technical folks in the federal department.

We pay 80% of the cost of power generation in Nunavut. We have 25 small communities. Again, when it comes to public units, we pay a major part of that. The O and M cost per unit is about $26,000 per year. In other words, it's going to be very difficult if we don't have any option other than to have a carbon tax, tax ourselves, and figure out a way that's going to work. It will have a major impact on industry up there in our territory.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Again, these are just projections that you pointed out from existing relationships you have with companies doing business.

In this country right now, we are at the lowest level of business investment since 1981. Do you see that this carbon tax could potentially not only shoo away new investment, but also make people look again at whether or not they are going to continue operations? Is that a worry?

[Peter Taptuna]

Yes. You are absolutely correct. It's already very difficult to attract investors to our territory, and more taxes being levied to industry just compounds the problem. At the same time, we're trying to make it attractive to industry to invest in our territory. In fact, in Canada, with that carbon tax being levied it's going to make it absolutely....

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Having no ability to switch given the very difficult situations.... You have established supply lines for diesel for your communities. They are on older infrastructure, which means it's very costly to change without federal assistance, yet a carbon tax being placed on...where 80% is already being borne by government. If you don't put it in place, the federal government will tax you for it and then give you your own money back. Is that how it will work?

[Peter Taptuna]

Supposedly. That's why it's very difficult. We're asking for the technical fellows to give us some pointers. We're even asking industry to help us out in trying to figure out exactly what their situation is going to be.

As I indicated, if a developer is going to be paying an extra $300 million over three years, I'm sure they are not going to be sticking around because they already paid the royalty taxes and every other tax that you could think of. Topping it all off with other taxes where we have no alternative in Nunavut, in our territory, makes it really unattractive for any kind of development or investors.

[The Chair, Liberal, Wayne Easter]

I'm going to have to cut it there, Dan.

Mr. Grewal.

[Raj Grewal, Liberal, Brampton East, ON]

Thank you, Mr. Chair, and thank you, Premier, and deputy minister, for coming. I really appreciate it.

One thing I've learned in my short time—well, I've learned many things as a member of Parliament, but I will say this. Obviously, the people of Nunavut and the Government of Nunavut know best how to help their people and how to help their economy. What's the one thing—if you had to name it—that the federal government could do to help the people of Nunavut?

[Peter Taptuna]

One of the things we want to do is develop our territory. As you know, Nunavut is one-fifth the size of Canada, but at this point I do believe we have more protected lands and marine sanctuaries than the rest of Canada put together. We have national parks, territorial parks, management zones, and we're the only jurisdiction left where the federal government can grab land for their own political agendas.

At the end of the day, we want to be consulted. When the moratorium was put in, I was notified 20 minutes before the announcement happened. That's not consultation. We want to be a part of making decisions for our own territory. That's what we were promised, and I'm hoping that can change such that we are actually consulted for any major decisions that affect our lives in our territory.

[Raj Grewal, Liberal, Brampton East, ON]

There's a chart in our briefing notes that says a lot of your trade is interprovincial within the country. The government has been working really hard on an interprovincial, interterritorial free trade agreement.

How would that benefit the territory of Nunavut?