Indigenous and Northern Affairs Committee on Nov. 19th, 2009

[Gilbert Cazon]

I just wanted to add that in the early seventies we had a group called the Indian Brotherhood. At that point, I understand and I think a lot of the first nations groups understand that the federal government was.... We were dealing with them directly, and the territorial government was just interim until the first nation groups or the people of the Northwest Territories decided to put a constitution together. Once they did that, then it would give direction to where everybody stands and who are going to be the players in the future of the Northwest Territories.

Thank you.

[The Chair, Conservative, Bruce Stanton]

Okay, Mr. Cazon, thank you very much.

We went over a little bit. That's what happens sometimes when you've got a question that's very fulsome and you're looking for fulsome answers. It takes the whole five minutes.

Let's go to Mr. Bevington now for five minutes.

[Dennis Bevington, NDP, Western Arctic, NT]

Thank you, Mr. Chair.

Thank you to all the panel participants in this process, which I think is a very good process for the Government of Canada and for Parliament to be involved in. This has been ongoing since March, and certainly in this phase of our community consultations we're also picking up much more information. But it will continue afterwards, in Ottawa, as well.

I could weigh in on the environmental assessment process. I was one of the first members on the Mackenzie Valley board, and we conducted assessments of projects in good fashion. Whether it was the K-29 gas development in the Fort Liard region, or the BHP expansion project, all were done in a reasonable fashion.

It seems we have created a bit more of a problem, in that everybody wants in on this now. With the Mackenzie Valley project, they created a cooperation plan that brought in a lot of other elements outside the Mackenzie Valley Resource Management Act. We can't really blame the Mackenzie Valley Resource Management Act for the Mackenzie Valley project, because it went far beyond the scope of that act. We have to keep that in context.

What's happened now is not what was happening at the beginning. Certainly with the Prairie Creek project, I remember approving a project for a winter road that then went to the minister's office and disappeared for a number of years. I see you've now completed the winter road almost ten years later.

There are things about people in the north understanding how to get projects going that somehow loses context when they get into a larger frame of things. I think northerners are practical about development, but we're also very sensitive to the interplay of political issues that have to take place here.

Those are the things that I'll take a couple of my five minutes to talk about.

I want to speak to the Taltson project. With this project you're going to create an energy source for the mining companies. If the mining companies themselves were creating an energy source on their property, they would receive a great royalty break. When a mining company in the Northwest Territories invests in capital, it gets to write that capital down against the royalties. Here you're investing in a project that will serve to reduce the mining industry's costs. Do you see the same kind of benefit accruing to you from the federal government in the development of your project?

[Daniel Grabke, Managing Director, Dezé Energy Corporation]

No, we do not. And actually one of our struggles in discussions with the customers is their stranded assets, the depreciation of the diesels they have bought, and that sort of thing. They've invested in that equipment already, so our hydroelectric alternative has to compete against that, which isn't quite a level playing field.

[Dennis Bevington, NDP, Western Arctic, NT]

To Mr. Kearney, does the same break on royalties against the capital investment exist in all three territories?

[John F. Kearney]

I believe it does exist in all three territories.

[Dennis Bevington, NDP, Western Arctic, NT]

With your project, if you were to put in a hydro facility—suppose you had the opportunity—would you build a write-down capital cost of that hydro facility against the royalties being generated by your mine?

[John F. Kearney]

Yes, but I think in addition to depreciation against the royalties there is the corporate depreciation against income tax. All investment in capital would be a write-off or a credit against normal corporate tax.

On the royalty side, you have a slightly different situation. The royalty is theoretically paid to the owner of the underlying resource, and the deductibilities for the resource calculation are different from those for the income tax calculation. Because power is such a significant element of the cost of the mining industry, the calculation of the royalty recognizes that the power is a significant cost on the province or the territories not providing it. So you get a credit for the deduction for the cost of the power, but you'll get the deduction against the capital costs in income tax equally.

[Dennis Bevington, NDP, Western Arctic, NT]

You'd be willing to give that up, then, because you get it anyhow?

[John F. Kearney]

As you well know, Mr. Bevington, we are a long way from power. We're relying on diesel power, so we're not going to get it. We would love to have hydro supplied to the mines. It would make a huge difference in our economics.

[Dennis Bevington, NDP, Western Arctic, NT]

I'm trying to get to the point of--

[The Chair, Conservative, Bruce Stanton]

We're actually finished there. There should be enough time to get back to you. I'm sorry about that.

We'll now proceed to Mr. Duncan. Please go ahead. You have five minutes.

[John Duncan, Conservative, Vancouver Island North, BC]

Thank you very much. Five minutes is not a long time, as you can see.

We've heard a lot of consistent messages since we've been here, and we've heard similar things in Ottawa. The Taltson project is very significant, not just because of Taltson, but also because the whole energy message we're getting is that it's crucial for the north and for NWT infrastructure.

I know fairly closely what's going on in my area, which is the northern part of Vancouver Island and the adjacent coast. We have a 1000-megawatt run-of-river project proposed for Bute Inlet, and I'm very close with the first nations side of that set of negotiations. You did talk about financing, and I'm confident that they have a project that will get financed by the international financial community. I'm really happy to see that there is so much focus and priority on energy, both from the mining industry and from the government.

The federal government is going there as well. We have the Mayo B project in the Yukon. We have the 335-kilometre extension of the British Columbia transmission up to Bob Quinn Lake. These kinds of projects are crucial, so this focus on the Taltson project is very good.

I have some questions related to it. Does the route of the line potentially develop other hydro prospects? Is this the heart of what the chamber of mines calls the Slave geological province? I keep seeing reference to those words and I wasn't sure what that meant.

What is the Nonacho Lake infrastructure? I wasn't sure what that reference was on this map that we have been provided with. Will a permanent road follow, or be enabled by, the transmission line?

[Daniel Grabke]

The Nonacho infrastructure is the main reservoir for the existing Taltson plant. It's built in a rather strange way, in that the powerhouse itself is 100 kilometres north of the plant, which is the way they did it in the 1960s.

What that allows us to do, though, is build subsequent power plants below that reservoir, so there actually is quite a bit of hydroelectric potential that this project could enhance at a later date. Sometimes you have to be careful about cumulative effects and everything else. This project is a stand-alone, with the one expansion, but there is potential for a great deal more hydroelectric power. The transmission line is going into the heart of the Slave geological province, just about dead centre of most of the diamond areas, and there are a lot of gold and other mineral deposits. It's like the Mackenzie pipeline in that they call it a basin-opening project. It would enhance that region.

Unfortunately you can't finance on potential and on your gut feeling, so that's one of the struggles we're having. It is to have these diamond mines with known life spans and to have all those stars aligned perfectly to get the financing, because some of them are falling off the map as the new ones are coming on. It might never be a perfect situation that we can actually do hard financing or total financing on. That's one of the struggles.

We're trying to make the transmission line as benign as possible. There is no winter road access for construction, so there is a lot of helicopter access through some sensitive areas. It's going around the proposed east arm national park. That is intended to be hand-cleared only and helicopter support only. The road systems are minimal, with just winter road access.

Thank you.

[The Chair, Conservative, Bruce Stanton]

There are about another 30 seconds, if anyone else wants to respond to Mr. Duncan's question.

Mr. Taylor.

[Alan Taylor, Chief Operating Officer, Canadian Zinc Corporation]

As a geologist, I'd like to promote the exploration potential that the north still has. You cannot emphasize too much that there is a lack of infrastructure here and a lack of exploration, but there still remains huge potential. We should endeavour to support it through establishing the infrastructure. That would in turn create more mines and other such developments.

[John Duncan, Conservative, Vancouver Island North, BC]

Do transmission lines tend to enable a road, do you believe?

[Alan Taylor]

They do, absolutely.

[The Chair, Conservative, Bruce Stanton]

Thank you, Mr. Duncan.

Now we'll go to round two. We'll begin with Mr. Russell, for five minutes.

[Todd Russell, Liberal, Labrador, NL]

Thank you, Mr. Chair.

Good afternoon to each of you.

This takes me back home, as I listen to most of the witnesses speak. You talk about hydroelectricity—a huge issue, of course, in Labrador, with Lower Churchill. You talk about mines. I understand, Mr. Kearney, you're associated with the Labrador Iron Mines project, which of course is in the great riding of Labrador.

And to hear about land claims, settled and unsettled, is again similar to the situation back home. I don't believe that the settlement of land claims totally clears the path, but many times it does clarify for proponents or for companies who is at the table. In Labrador we've had projects approved, and we have one settled claim and two unsettled claims in Labrador.

Here in the north you have three diamond mines that have come on, so some things are advancing. But is it about the pace of approvals under the regulatory process that we are talking, or is it the infrastructure itself that you are saying needs to be changed? Is there something we can do with the current architecture of the regulatory process to make it better and work for all people, aboriginal and non-aboriginal, and for the companies, or are you fundamentally advocating a change in the regulatory architecture?

[John F. Kearney]

As was mentioned earlier, in 2007 the Minister of Indian Affairs and Northern Development appointed a special representative to produce what we call the McCrank report, which is entitled The Road to Improvement. That report was delivered to the minister in July 2008. It listed 22 recommendations concerning the regulatory process. The Mining Association of Canada, the NWT & Nunavut Chamber of Mines, and many mining companies made detailed presentations for the McCrank report. Many of those were incorporated in his report to the minister.

That was in July 2008. Regrettably, very few of those recommendations have been implemented. That is not because there is not a political will to do it. We believe the minister has the political will and recognizes the necessity to implement some of the recommendations. Unfortunately, as I mentioned earlier, they would involve amendments to the Mackenzie Valley Resource Management Act, which in turn is based on the underlying land claim agreement, and there is a reluctance on the part of the federal government to address the issue of amendments to the act, because they frankly seem to be afraid to re-open the land claim agreement.

We would suggest that they should grasp the nettle. We urge the aboriginal communities, the first nations, who now, I believe, more and more recognize that it is in their own interest to improve the regulatory process and to come forward and say that they know the land claim is sacrosanct but that we can still fix the regulatory process. There are 22 recommendations, I believe, in that report, and that indicates the magnitude of the problem, in our view. It is regulatory.

Infrastructure is everywhere. In northern Labrador, as you are well aware, there is no infrastructure either. There is a very important railroad that was built many years ago, and that's the key to the infrastructure. The mines built it and paid for it. There are infrastructure challenges all over northern Canada, but the particular issues here, which we would suggest are more important and are fixable, are the regulatory issues.

[The Chair, Conservative, Bruce Stanton]

Mr. Balsillie wanted to get in there as well, Mr. Russell.

[Donald Balsillie]

Thank you, Mr. Chairman.

In reference to the comments made on the land claims agreements protected under the Constitution, in order to go back, the parties all have to agree that they will open those agreements. If you're opening one part of the agreement to better serve a particular stakeholder, such as the mining industry, then the aboriginal groups, after having had these land claims in motion for a number of years, are going to work through the mechanics and find problems there as well, and they'll want to improve those problems.

I don't think these claim agreements should be cast in stone, because as societies move on, things change, and there's a necessity to go back to the mechanics of any agreement with understanding. Having used that vehicle, hopefully they can see improvements all the way around for everyone in this territory.

[The Chair, Conservative, Bruce Stanton]

I have Mr. Dreeshen on the list and Mr. Duncan. We'll go to Mr. Dreeshen first and then come back to Mr. Duncan later.

Mr. Dreeshen, go ahead.

[Earl Dreeshen, Conservative, Red Deer, AB]

Thanks very much, Mr. Chair.

Thank you very much, gentlemen, for coming here this afternoon.

It's indeed an honour for me to be here as well to hear about some of the issues of the north. It's my first opportunity, as I'm new on the committee.

I have a couple of comments before I start.

The environmental concern messages get a lot more attention south of 60 than do your good news economic development stories. I know it's very difficult to get the message out when you seem to have other groups converging on anything that is done. I certainly think working with you in that regard is a good idea, but it's also something wherein you have to work with us to give us the pertinent information.

I have a couple of other comments. Concerning power, if you were purchasing it from some of the companies, you would also be paying for it. It would be an expense on your bottom line and would also be helping the others. There is a bit of a balance that comes out there as well.

The other is that when we were flying here last night, I had an opportunity to look at a magazine that indicated that the caribou herds have actually been increasing since 2006; some biologist had been looking at that. I thought I'd ask about that as a question as well, while I have the floor.

This morning when we were talking with the Government of the Northwest Territories, they said their major concerns were related to devolution and adjustments to the current regulatory system, especially as these pertain to environmental concerns. My question is, have you been able to work with the Government of the Northwest Territories? Have they been working with industry in the development of any new regulatory regimes?