Indigenous and Northern Affairs Committee on June 1st, 2010

[The Chair, Conservative, Bruce Stanton]

Order.

I'd like to begin our 20th meeting of the Standing Committee on Aboriginal Affairs and Northern Development, pursuant to Standing Order 108(2), a study of northern territories and economic development, specifically the barriers and solutions for the same.

We're delighted today to welcome three witnesses, and I'll get to that in a moment.

Members will know that we have scheduled votes today in the House at 5:30 p.m., so the bells will sound at 5:15 p.m., assuming everything stays on schedule. We'll try to gear our schedule around that, with the likely adjournment of the meeting at or about 5:15 p.m.

Two of our guests today are joining us by video conference, and we're awaiting one of our other witnesses. I think we'll begin with our guest who is here with us in Ottawa, Mr. Robert Reid, the president of the Mackenzie Valley Aboriginal Pipeline LP. Of course, he's here on a topic that is extremely pertinent to our study and interest in economic development in the north, so let's open up.

Mr. Reid, we normally have a 10-minute presentation by each of the witnesses. For the benefit of Mr. Quin, who is joining us here as well, you have up to 10 minutes each for the opening presentation. We'll do each of those in sequence, after which we will proceed to questions from members.

Let's begin with Mr. Reid.

[Robert Reid, President, Mackenzie Valley Aboriginal Pipeline LP]

Thank you, Mr. Chairman, good afternoon, ladies and gentlemen, and bonjour, mesdames et monsieurs.

I appreciate the opportunity to appear before you this afternoon. The clerk has circulated a handout that I hope all of you have in your possession. I'm just going to go through that quickly; I'm not going to go through it in detail.

This afternoon I'll provide you with a high-level overview of the Mackenzie gas project, and then I'll focus on the Aboriginal Pipeline Group and the role we're playing in making this important project a reality.

The Mackenzie gas project accesses the closest frontier natural gas basin in North America. There are 6 trillion cubic feet of onshore natural gas reserves, and onshore these days is important. The project, as it stands, does not access offshore resources. It will have an initial capacity of 1.2 billion cubic feet per day, expandable to 1.8 billion cubic feet a day through the addition of compressor units. The total project cost is $16.2 billion. The Aboriginal Pipeline Group is a partner in the natural gas pipeline portion of the project only, and that amounts to $7.8 billion.

The original proposal to develop the Mackenzie Delta Basin dates back to the early 1970s. Public hearings were held under Justice Berger, and I understand he is going to be joining us this afternoon. The aboriginal groups at that time were unanimously opposed to the construction of the pipeline. The main reason behind this was that there were no land claims in place at that time.

In 1977 Justice Berger declared a 10-year moratorium on development. The aboriginal communities were simply not ready to capture the benefits that would have been available to them from a project of this magnitude. That decision was quite controversial at the time, but history has shown it to be a wise decision indeed.

During the 1980s and 1990s, three of the four aboriginal groups along the pipeline right-of-way settled their land claims. In January of 2000, before an application to build this pipeline had been filed, the aboriginal leaders of the Mackenzie Valley got together and reached agreement on a vision, and that was to maximize aboriginal ownership and benefits from a Mackenzie Valley pipeline. The Aboriginal Pipeline Group is the result of that vision. Today the project has strong aboriginal alignment and support all along its right-of-way. The Berger era is over.

APG is a unique alignment of the aboriginal groups in the Mackenzie Valley, not only to support the construction of the pipeline but to be a part of it. APG is a business deal negotiated by aboriginal people for aboriginal people. Our mandate is to maximize the long-term financial return to the aboriginal groups of the Northwest Territories through ownership in the pipeline. We've negotiated the right to secure a one-third interest in this pipeline. Our shareholders are the Gwich’in Tribal Council, the Inuvialuit Regional Corporation, and the Sahtu Pipeline Trust.

I'll introduce our board at the end of this presentation.

As for ownership of the Mackenzie gas project, Imperial Oil is the largest partner, at 34%; APG is the second largest partner, at one-third, or 33%; and then ConocoPhillips Canada, Shell Canada, and Exxon Mobil Canada make up the balance.

As a full partner, we have a seat on the board of the Mackenzie gas project. We participate in all committees and subcommittees, and in this way we have a direct voice in how this major project will be developed. We bring the concerns from the communities right to the board table.

The next slide in the package outlines the regulatory timeline. I won't go through it in detail, other than to say that the application was originally filed in October 2004. Public hearings commenced in January 2006. The NEB sat adjourned for three years, waiting for the joint review panel to produce their report, which they did last December. The NEB is moving toward a decision this fall. APG will continue to support the regulatory process through to the NEB decision. We're in the final stages of restructuring the project to make it a true basin-opening pipeline that will attract incremental shippers and have attractive tolls and tariffs. After that we'll begin detailed engineering, finalize the route alignment, and then there is the small matter of obtaining 7,000 local permits from the local land and water boards.

The next slide shows the timeline. All I'll say on that is if we get a decision this fall, construction will commence in the fall of 2016 and it will take place over three winter seasons. This pipeline will be built 100% in the wintertime, because the tundra cannot support heavy equipment during the summer months and you create less environmental impact during winter construction. We'll see the first gas flow in 2018.

There are very significant benefits to the Mackenzie Valley through the implementation of this project. First of all, there's a socio-economic impact fund of $500 million that has been negotiated by the aboriginal groups with the federal government. There's $1 billion in set-aside work for corridor groups. That's work under the access and benefits agreements that has been guaranteed to go to local contractors.

There are business and employment opportunities in the Northwest Territories for 7,000 jobs during construction and over 100,000 jobs across Canada, with approximately 150 permanent full-time positions. This project is not only good for the north, it's good for Canada as a whole.

This slide shows the gross domestic product benefits of over $100 billion and tax and royalty revenue of over $10 billion to the various governments.

The final slide shows our board of directors. I'm proud to report to a board of directors who are all aboriginal. They're a fantastic group of people to work for.

Thank you very much.

[The Chair, Conservative, Bruce Stanton]

Thank you, Mr. Reid. I appreciate that.

Now we'll move on, and I see that we have both of our next witnesses with us.

At this point I'd like to invite former Justice Thomas Berger to speak. Taking nothing away from our first presentation, in our case the Berger era has just begun.

Thomas Berger, it's good to have you with us this afternoon. Of course, you know the topic. We have up to 10 minutes for an opening presentation, and we'll be delighted to hear your insights on the issue of barriers and solutions as they pertain to economic development in the north.

Good afternoon, and please go ahead.

[Thomas Berger, As an Individual]

Thank you, Mr. Chairman.

I'm relieved by your introduction. When the previous speaker said the Berger era is over, I thought, well, it had a good run, 30 years or more.

I'm also relieved to know the topic is the general one of economic development in the north. For a moment there I thought it was a reprise of the whole Mackenzie Valley issue, which is now in other hands, and no doubt very competent hands.

Maybe I could just tell you that I did spend three years in the Mackenzie Valley, in the western Arctic, back in the late seventies, and I think I learned something about the north and economic development. I did emphasize in my report the importance of maintaining the traditional economy of hunting, fishing, and trapping, which was then, and I believe is today, an important component of northern culture and putting food on the table. That tends to be overlooked in the enthusiasm for industrial projects. Part of the reason I emphasized it 30 years ago was to ensure that the measures were taken in land claims agreements to secure those hunting, fishing, and trapping rights. That was a precondition to industrial development.

I was in Nunavut in 2005 and 2006 as conciliator between Canada, Nunavut, and the ITC, the Inuit corporation that represents the beneficiaries. Could I just leave you with a few thoughts that I expressed in my report in March 1, 2006, about development in the north, with particular attention to Nunavut so that nobody will think I'm giving any firm opinions about the Mackenzie Valley or development there?

In Nunavut I was of course dealing with the Nunavut Land Claims Agreement of 1993, which established the Government of Nunavut in 1999. The concern was, now you've got the land claims settled, you've got your own government, what about the next steps? Of course, my concern was that there should be measures taken to ensure that the Inuit, in that case--but the principle would apply generally throughout the north to the aboriginal peoples--inhabited their own government, so to speak, and that they had opportunities for employment on development as it occurred in the north. Of course, in Nunavut you're faced with the overlying issue, so to speak, of global warming and the melting of the ice, and the greater access this offers, I think, to industry in Nunavut. It makes mines and minerals and oil and gas that much more accessible. The question is this. How do the Inuit people become participants? How do they become miners, how do they become biologists, and how do they become members of all the trained occupations and professions that are essential if they are to occupy 50% of the jobs in their own government that they don't possess now because they don't have the qualifications? The same will be reproduced in the private sector as it moves into the north and onto the Arctic islands, as they begin searching for minerals and oil and gas under the seabed.

That means that education and employment have to be the concerns that are uppermost in the north for aboriginal people. People who are non-aboriginal will be coming in to fill many of these jobs, and they are already qualified. What concerns me is the qualification of aboriginal people. I made recommendations that had mainly to do with education in Nunavut, because with 75% of Inuit children dropping out of school before they complete high school.... The figures are better in the western Arctic, but they are still figures that should make us distinctly uneasy. We want to make sure that Inuit will be able to get those jobs. Even working for their own corporations, even working in oil or gas, in mining partnerships that their land claims agreements have now made possible for them, how are they to get the jobs for which you need to be qualified?

I don't want to make too much of this, and I'm sure you're aware of that concern. I made the point in my report, which I have here, that you need a true system of bilingual education in Nunavut. Right now they educate in Inuktitut until about grade 4 or 5, and then they switch to English. It means that their education is in two segments, if you will, and they emerge not really literate in either their own language, which is a written language, or in English, which is the primary language of most people--other than Inuktitut.

I urged that the federal government subsidize that program, because it would be expensive. We'd have to train more teachers, mainly Inuit teachers. We would have to have the programs that have worked in other jurisdictions for children to learn their own language after school from older people. This is because 75% of the people of Nunavut still speak Inuktitut as their first language. These kids ought to have the opportunity to become literate in the language that is spoken in their homes and is the aboriginal language in Canada that is spoken by the largest body of aboriginal people. It's not going to go away. If you consider that, and I hope you do, bilingual education.... I urged at the time, in 2006, that we could graduate the first classes in 2020, and those people would be equipped to go on to vocational training. They would be equipped to go on to college or university, and they would be able to take their place in their own government--as people in charge of the wildlife of this vast area, as people who would be able to enter the private sector as geologists or engineers. That has to be our goal, because otherwise, the industrial development of these northern territories may once again occur with aboriginal people being, in many cases, bystanders, or working in the catering division or as janitors and so on. We don't want to see that.

They've had 30 years to consider how to integrate aboriginal people into the Mackenzie gas project. The same possibilities don't currently exist to integrate the Inuit people into projects that are already on the drawing board for Nunavut, and they won't exist unless we establish an appropriate system of education that equips them for the training they will need in the Arctic in the years to come.

I'm grateful to you for giving me 10 minutes, and I'm afraid that's all I've got to say.

[The Chair, Conservative, Bruce Stanton]

Thank you, Your Honour. I'm sure there will be some excellent questions.

At this point we're going to go to our third presentation.

Now we welcome Mr. Stephen Quin, who is there with you, sir. Stephen is the president of Capstone Mining Corporation. I think a profile and background paper in that regard were also circulated to members earlier today.

Mr. Quin, you have the floor for up to 10 minutes, after which we'll go to questions from members. Go ahead.

[Stephen Quin, President, Capstone Mining Corp.]

Thank you, Mr. Chairman, and thank you, members, for the opportunity to talk to you about this issue. I did circulate a presentation, as the chair mentioned, that has been sent around to you, I believe. What I thought I'd do is touch on the major points that were in that summary.

First, my background is that I've been working on major mining projects in the Canadian north since 1993. I've worked on major projects in Nunavut, Northwest Territories, and Yukon, so perhaps I'm somewhat unique from that perspective. I've worked in all three territories on major mining projects and have had quite a bit of exposure to the regulatory environment, economic development there, both successfully and unsuccessfully, over those years.

To set the scene, the economic potential of the north is tremendous. There is a huge amount of natural resource opportunity, which is well-known from the past, but new discoveries have been made, such as diamond mines. And 20 or 25 years ago people would have laughed to hear of diamonds in Canada. Now they're some of the largest mines in the world. There are gold projects, such as I was involved in at Hope Bay, which is one of Canada's largest resources anywhere. Only last year, a discovery was made by a company called Underworld, in the Yukon.

All of these are new things that are coming out. So it's not only what is known, like the gas in Mackenzie Valley, but there are new discoveries that have been made over the last 20 years that are really simply demonstrating the barely tapped potential of the north.

The big question is, why is so little happening up there? Why have there been so few mines developed in the Canadian north, given what is known in natural resources, and also the obvious potential, to go and find world-class deposits with relatively short timeframes to development? Essentially, I would argue that it's the regulatory regime that is extremely complex and burdensome, extremely expensive, and very, very uncertain. When mining companies and other resource companies look around the world, they look at where they can get things done, how long it will take, and how much it will cost. The bottom line is that they'll go somewhere else when it's too challenging, so the money flows to other locations.

I mentioned the Fraser Institute survey on regulatory competitiveness that goes out annually. As I said in the letter, some people might not like the Fraser Institute politically, but the bottom line is that the survey is simply a survey of over 300 senior mining executives. It compiles their feelings in a survey ranking all different aspects of regulatory competitiveness. Yukon came 11th, Nunavut came 43rd, and Northwest Territories came 50th out of 72 jurisdictions surveyed around the world, which is a pretty dismal showing, apart from Yukon—not quite in the top ten, just one below that. Essentially, I would agree with that. Having worked there, I wouldn't argue with those rankings. Relatively or absolutely, those are appropriate.

So what's the problem? It's essentially the regulatory environment that is a huge disincentive to spending the time to go and find deposits, and then seeing the challenges of trying to develop a mine and advance it to production, to the point where companies say if it is going to take three, four, five times as long, they might as well go do it somewhere else because they can get it done more readily. That doesn't mean standards are lower anywhere else—they're just as tough, just as strict on standards—it's simply the process to get through that is such a challenge.

The experience in the Northwest Territories and Nunavut...I gave a couple of examples in my presentation, but the simple one is we were trying to permit a tiny mine, what would have been Canada's smallest mine, 600 tonnes a day. It would have cost $70 million and it would have lasted for two years. We spent over six years--I think it was six and a half years--and $20 million trying to get that mine permitted. It was a hugely burdensome process that goes to demonstrate the impracticality and unreasonableness of that process and why companies give up and go somewhere else. That was in Nunavut.

In the Northwest Territories I gave the example of our Con Mine. We bought it in 1993, about six years after a draft closure plan was completed. It took another 13 years for that plan to be approved. It was a 20-year process to get a closure plan approved for an operating mine. You know, it's just an absolutely ridiculous amount of time to get through those kinds of processes. Of course, the challenge for a company is that you don't know what your liabilities are until that process is completed, because you don't know what standards or requirements you're going to be held to. So you just look at it and say the uncertainty is too great and I'm not going to bother; I'll go somewhere else.

What are the major things that need fixing? A significant issue that applies to the Northwest Territories and Nunavut is the fact that a lot of approvals during the process have to go to the minister of INAC for sign-off, and that process often ends up in delays of three, six, or nine months. I've seen delays as long as two or three years, simply waiting for the minister to sign off on a process that has already been completed and recommended by his own ministry. Obviously, it gets to the bottom of the pile and it's not a priority, so it doesn't happen. That extends the regulatory process for substantial amounts of time.

On the duplicative processes, for example, DIAND or INAC runs a process in Nunavut in our Hope Bay project, but it runs a parallel process in Ottawa for the minister to be able to sign off. So you have one ministry running two processes, let alone all the other ministries and governments running their processes. It's just a huge waste of time, money, and process for everybody.

Response times, particularly by federal regulators, are extremely slow. They will always ask for more extensions on timelines. Then usually--and I've had this experience personally on several occasions--they'll show up with 70 pages of comments the night before a meeting that's been set up months in advance, and the process the next day is just pointless because you can't answer the 70 pages of questions. They've had months to provide those questions in advance to give the company an opportunity to deal with them. What you often have, for example, in those 70-page questions and comments is a request for a huge amount of information that wasn't originally contemplated in the applications. You provide that information, which can often take months or even years to generate, and that just leads to more and more questions. So you end up in this never-ending loop of information requests that can take a simple document.... For example, our water management plan for the Hope Bay project went from about 100 pages to I think 2,000 pages by the time it was completed, in multiple iterations of aspects from regulators.

I don't think it really added anything to the equation in the end, but it ties into another component, which is the consultants that everybody hires. We go through a regulatory process. We have our consultants. The federal regulators have their consultants, usually one each. The first nations will have their consultants. You can end up with six, seven, or eight different sets of consultants in the room, and everybody's just asking each other questions and arguing about who's the better expert on whatever aspect it's going to be. The net result is there's no incentive for the consultants to see the process completed, because the more questions they ask, the more they get information provided, which gives them more time to review and more billings for everybody. So it just ends up an extremely inefficient process that drags on and on, and it takes huge amounts of time to add virtually no value to the whole equation.

A similar aspect is the morphing of review processes into regulatory processes. Each territory has an environmental assessment process, such as NIRB in Nunavut, Mackenzie Valley in the Northwest Territories, and YESAA in the Yukon. Those processes have essentially morphed into where they're essentially doing the regulator's job, but then they get to the end and they provide their recommendations to the regulator. The regulator is the one that has the legal responsibility plus the expertise to actually regulate whatever process it happens to be: discharging water, building tailings dams, whatever it happens to be. The net result is that often the review process is in conflict with the regulator's own opinion, but the regulator is now hamstrung, because if he disagrees with the review process it has to go right back to the beginning and start all over again.

So you end up with an overlap that creates this box. It has just happened to a project in Yukon, for example. A project is now trapped between a review process that has been deemed adequate and complete and a regulatory process that disagrees. The net result is that unless it's resolved, it will be kicked back to the beginning.

My last point is really on--

[The Chair, Conservative, Bruce Stanton]

Excuse me just for a second. We are at the 10-minute point.

I see, Mr. Quin, that you have summarized some of your key recommendations. Perhaps in the course of questions you can speak to some of them, and I'm sure you'll have the opportunity to do that. Even if you don't, we have them here in print.

We're up against a vote timeline today at about 5:15, so at this point I would like to move to questions from members. We'll give you sufficient time to comment on those recommendations.

Mr. Reid, there will be questions in French.

So you'll need your audio piece in and working.

For our witnesses, Mr. Quin and former Justice Berger, I think the translation will come over the audio.

Mr. Bagnell, you have the floor for seven minutes.

[Larry Bagnell, Liberal, Yukon, YT]

Merci, monsieur le président.

Mr. Reid, you mentioned the amount of proven resources of gas. If the pipeline were to open tomorrow, filled with the amount you mentioned, how long would that last?

[Robert Reid]

At the contracted rate, which is 1.2 bcf a day, it would last approximately 25 years.

[Larry Bagnell, Liberal, Yukon, YT]

One of the problems with the delay, of course, is that the price of steel, labour, and everything has gone up. What discussions have you had with the government on ways they could help to sort of kickstart...? I know you have to wait for the NEB, but I'm sure they're going to approve it. So what would you need to kickstart the project?

[Robert Reid]

For the last two or three years we've been working on restructuring the project to comply with some principles that Minister Prentice set forth two or three years ago. Generally, those principles were that it had to be in the public interest and it had to be properly approved by the regulatory agencies. But in addition it needed to have toll and tariff structures that would attract new customers. That meant lower tolls at a time when costs were going up and what I'll refer to as a user-friendly tariff that was capable of attracting new customers.

We have been working on that process for some time. The details of those discussions are confidential, as agreed on by the federal government and the partners. We have not been able to reach agreement at this point. Discussions broke off last spring, and they're in the pause mode right now. Mr. Prentice's office has advised that we will resume those discussions after receipt of a certificate this fall.

[Larry Bagnell, Liberal, Yukon, YT]

My understanding is that the approval will ensure that a lateral pipe east and west will be able to put gas in, that it won't be filled with just nearby Mackenzie Delta gas.

[Robert Reid]

In part that's correct. There are other volumes down the valley. For example, Colville Lake has some reserves, and they're about 100 kilometres from the pipeline.

[Larry Bagnell, Liberal, Yukon, YT]

And there's Eagle Plains.

[Robert Reid]

That's correct.

[Larry Bagnell, Liberal, Yukon, YT]

So there'll be room for them to put in?

[Robert Reid]

Exactly.

[Larry Bagnell, Liberal, Yukon, YT]

Mr. Berger, I'm wondering what the federal government has done to implement your report and what still needs to be done to implement it, especially the parallel language recommendation, etc., in the schools.

[Thomas Berger]

I was appointed by the Liberal government and I handed my report in to the new Conservative government. Mr. Prentice was the Minister of Indian Affairs and Northern Development, I think. I'm sure they looked at it. I think they are opposed to the principal recommendation, which is that there should be federal subsidies to teaching in Inuktitut as well as in English and French. The federal policy has been for many years that Canada will subsidize English and French as languages of education.

I made the point--and I would like to make it here, if I could--that back in the 1960s we had a royal commission on bilingualism and biculturalism that discovered that in the federal government, about 3% of the employees were francophone; the rest were English-speaking. They said that was a crisis and they should do something about it. It led to a whole stream of reforms, the measures to make Canada a truly bilingual and bicultural nation. And because we subsidized the training of people to learn both languages, by--I don't know--1995 we had reached the point where francophones constituted about one-third of the workforce in the federal government.

My point is that we agreed when we set up Nunavut that they would have 85% of the jobs in their own government. That was a promise made in 1993. Everybody wanted to fulfill it. We didn't realize what would be needed: a new bilingual system of education. They have their own government, and it has 3,200 or 3,300 employees. Only about half are Inuit, and they are by and large in the lower-paid categories.

So to fulfill that promise, that's what I thought we ought to do. I said not to worry about subsidizing Inuktitut as an official language because this is the only jurisdiction in Canada where the great majority are neither English-speaking nor French-speaking. It's a one-off. You don't have to trouble yourselves that this is going to be a ghastly precedent.

[Larry Bagnell, Liberal, Yukon, YT]

Sorry, Thomas. My time is up.

[Thomas Berger]

I'm sorry. I went on for too long.

[Larry Bagnell, Liberal, Yukon, YT]

No, that's good. It's just that I have limited time.

Stephen, it was great being at the opening of your mine in Yukon. I have just one quick question, because that's all the time I have.

Bill C-25 is coming to us shortly, hopefully in the next week or two. The Nunavut Planning and Project Assessment Act implements what's in the land claim. I think it's already somewhat operational. Will that help give more certainty so there's not the uncertainty you talked about in your opening remarks, and do you have any problems with that act?

[Stephen Quin]

No, I think the act is long overdue, because for a long time Nunavut has been acting as though it's been in place. But I don't think it resolves the issue of what is essentially the continual loop back to Ottawa for approvals along the way. A Yukon-type system would be miles ahead of what is currently in place in Northwest Territories or Nunavut.

[The Chair, Conservative, Bruce Stanton]

Thank you, Mr. Bagnell.

It is now over to the Bloc Québécois member. Will Mr. Lemay or Mr. Lévesque be speaking?

Mr. Lemay, you have the floor.

[Marc Lemay, Bloc, Abitibi—Témiscamingue, QC]

I listened carefully to what Justice Berger said about languages, and I think he is right. It is important that Inuktitut be taught in communities. Should they teach English, French and Inuktitut? That is a political decision, but I think that, in certain places, Inuktitut should be taught in schools first and foremost. Then another language should be taught, one that is chosen by the people in question, in the areas in question. In northern Quebec, French, English and Inuktitut are taught, but it could be different elsewhere.

I agree with you that education should be available in Inuktitut and that we should make it a priority if we want the people to be involved in the development. I think our recommendations will touch on that.

Furthermore, I am worried. I read Mr. Quin's brief, which was translated into French, carefully. I took notes. I really like recommendation 7, but could you tell me why we cannot remove Ottawa from the process? In fact, that could be one of our recommendations, but it appears that the federal government has decided to embed itself in the north to assert Canada's sovereignty in the Arctic. That creates a problem in terms of your recommendation. So you should resign yourself to that fact. I am not sure what your take on that is, but Ottawa does not appear to want to remove itself from all the projects, quite the opposite.

In addition, the government has established CanNor. I am not sure if you are aware, but CanNor is the agency that is going to manage all that. So what is your take on that, as an expert in mine development?