Indigenous and Northern Affairs Committee on June 12th, 2012

[The Chair, Conservative, Chris Warkentin]

Committee members, I'm going to call this meeting to order. This is the 40th meeting of the Standing Committee on Aboriginal Affairs and Northern Development.

Today we have witnesses joining us to continue our study on land use and sustainable economic development.

Today we have two witnesses here in the room with us. Our other witness, Dr. Le Dressay, is joining us by video conference.

We'll start with our first witnesses, John Gailus and Christopher Devlin. Thank you so much for joining us. We appreciate that you've taken time out of your busy schedules to bring testimony today.

We'll turn to you for about 10 minutes, if we can keep it to about that length of time for your opening statements. Then we'll hear from Dr. Le Dressay, and then we'll turn it over to committee members, who will ask questions.

Thanks again for joining us. We'll turn it over to you.

[John Gailus, Partner, Devlin Gailus Barristers and Solicitors]

Thank you, Mr. Chair.

My name is John Gailus. I'm a partner with Devlin Gailus. We're a law firm in Victoria, British Columbia. We're lawyers. Please don't hold that against us. With me is my partner, Christopher Devlin.

By way of background, I'm a member of Haida Nation, Skidegate Band, which is pretty much as far west as you can get in Canada.

After law school, I spent four and a half years working as a land management leasing officer for what was then the Department of Indian Affairs and Northern Development. I ended up being promoted, if you can call it that, and was the senior land management leasing officer for the west coast of British Columbia.

During that time I had the responsibility of working on a great number of files dealing with land designations, leasing, and leasing disputes—that was the time of the Musqueam Park dispute—as well as additions to reserves and the creation of new reserves. I kind of carved out a bit of a niche and decided that I was going to use my law degree. I went into private practice in 1999 and have been doing that ever since.

We deal almost exclusively with first nations and first nations organizations. I hope we can share with the committee some of our experiences with the pitfalls and policy problems we see.

We think the work you're doing is extremely important. It's a fairly comprehensive study you're doing. I could probably speak for a lot more than 10 minutes. What I've tried to do today is look at this from, I suppose, 30,000 feet. We can take some questions and maybe provide you with some specific examples, if you have some questions on that.

First of all, I've looked at some of the evidence given by a number of the witnesses to this committee. We don't necessarily agree that the Indian Act is an impediment to economic development. The policies and maybe the application of those policies are really what lead to the delays. But that's common, I suggest, in any jurisdiction. With the possible exception of the federal government, you're usually going to have to seek approvals from some other level of government if you want to develop your land. Whether you're in a municipality or a province, you're going to have to get the necessary permits and approvals in order to do your project.

The problem, as I see it, is often with third-party proponents and lenders not being familiar with the process or not being willing to educate themselves.

The act is there, but the policies I see are kind of one-size-fits-all. There's no proportionality between the project and the policy. I'm sure you've probably heard that from a number of other witnesses. Essentially, whether you're developing a corner store or a shopping centre, you have to follow the same policy. If you want to do a gas station or an LNG plant, you still have to go through the same policy to get that approved.

So what do first nations do? Well, they don't follow the act. They go and just build it. They build the gas station. They build trailer parks. They don't have the proper permits in place. We see this non-compliance that comes about as a huge contingent liability for the first nation but also for the crown.

There are opportunities out there. And we've seen that in spite of the Indian Act, there have been many successful developments, in spite of the hurdles. We're in B.C., so an example I have would be Park Royal. The Burrard Tsleil-Waututh nation is developing a whole host of condominiums. The Musqueam, in spite of that dispute, is a very successful first nation. There are the Cowichan, with the Cowichan mall, the St. Mary's band, and the Campbell River band.

What these reserves all have in common is that they're near urban centres. When you're talking about economic development, geography is going to play a huge role when it comes to on-reserve development.

Isolated communities aren't going to have the same opportunities as the Musqueam and the Westbank. So we can't really apply their model to these first nations.

But, these first nations also have a number of off-reserve opportunities when you are looking at oil and gas, mining, forestry. There is economic development out there for these first nations, but oftentimes it's not on reserve.

We think the FNLMA is a good step forward, but first nations are often inheriting land management issues—legacy issues, we call them—that haven't been addressed by INAC. They spend much of their time dealing with land disputes amongst their members as to who has entitlement to this or that piece of land, without getting on with the business of economic development.

I want to speak briefly about additions to reserve. I know you have had an opportunity to hear from other witnesses. Clearly, the process is cumbersome. We're often dealing with the province—which wants to keep all the resources on the land—municipalities, and third-party interests. It can take a long time to disentangle all of those interests when you are dealing with ATRs. I did manage to complete an addition to reserve in three weeks, though, when I was working for the federal government. However, that was pursuant to a court order. Government can move quickly when it's told to.

When we are talking about social need, first nations have to do years and years of study just to get to the point of doing the actual negotiations to acquire the land. There are appraisals and environmental assessments. You may have these third-party interests you have to negotiate with. I see there is a problem with that process.

I want to speak just very briefly on the new band and new reserve policy. This would be a situation where either a group of members is looking to start their own band or break away from an existing band. That process, I submit, is set up for failure. The first nation has to fund the process themselves. They have to show there is not going to be any increase in the budget as a result. That is one glaring example of where the policy needs to be amended. There is a bit of a disconnect between one nation that can show a social need and get funded, whereas another one has to fund the process themselves.

What we're seeing in British Columbia is that ATRs aren't getting done if a first nation is in treaty negotiations. The treaties that have been negotiated to date have removed the reserve status from those lands—your Nisga'a, your Tsawwassen, and your Maa-nulth. The governments are saying, we're not going to bother doing the ATRs because you guys are going to have a treaty soon, and we're going to have to basically un-reserve these lands as part of the treaty process. Generally speaking, the policies, whether we are talking about designations, leasing, or additions to reserve, need to be responsive and flexible. That's often a challenge we have as lawyers. I can tell you, as someone who was working in the government, I had that challenge when I would have a policy that didn't seem to fit with the particular issue.

What's missing is that economic development. At least in terms of the Indian Act, economic development isn't a priority for AANDC. I think that's the right acronym now. Both human and financial resources aren't being allocated to deal with these sorts of issues. It's not necessarily the fault of the individuals who are there working away. They have heavy workloads. These human and financial resources need to be brought to task if first nations economic development is to be successful.

Those are my comments.

[The Chair, Conservative, Chris Warkentin]

Thank you very much, Mr. Gailus.

We will turn now to Dr. Le Dressay for 10 minutes.

Can you hear me all right there, Dr. Le Dressay?

[Dr. André Le Dressay, Director, Fiscal Realities Economists Ltd.]

Can you hear me?

[The Chair, Conservative, Chris Warkentin]

Yes. We will turn it over to you for 10 minutes. Thanks so much for joining us.

[Dr. André Le Dressay]

It's a privilege to appear before this committee. Over the years, I have watched this committee advance first nation initiatives and improve first nation legislation. The research and work you're doing right now is important to first nations and all of Canada.

As an introduction, I am the director of Fiscal Realities Economists. We are a group of economists located in Kamloops and Georgina Island, Ontario.

About 20 years ago, then Chief Manny Jules asked us for some advice on how to raise economic growth in his community. That began a 20-year research and development project with Manny, the First Nations Tax Commission, a number of other first nations, and a bureaucrat who believed in investment-led growth, Mr. Bob Kingsbury.

We consider ourselves among the luckiest economists alive, because we've had the opportunity to help mix the science of development with the art of politics, and facilitate hundreds of millions in investment on first nation lands. It is an honour to share what we have learned during this time with this committee. We have provided a brief about our research and some our suggestions, so I will focus this statement on four questions that might interest you.

First, what causes first nation economic disparities with the rest of Canada? The answer is simple and obvious to anyone who has ever visited first nation lands. First nations are not receiving their share of private investment. Investment generates employment and public revenues. It allows communities to provide quality local services and infrastructure, which attracts more investment. This is a circle of growth that most Canadian communities experience. Investment can come from external sources like a business locating in a community or internal sources such as individuals investing in housing or starting a business.

Instead of a virtuous circle of growth, many first nations are caught in the vicious cycle of dependency. This circle starts with public transfers that are insufficient to build business-quality infrastructures, provide quality local services, and fill the institutional gaps created by the Indian Act. This creates a poor business climate, so first nations don’t attract private investment, which means fewer jobs and lower public revenues, and the transfer-dependency cycle starts all over again.

Second, why is there so little investment on first nation lands? In 1999, my business partner, Greg Richard, and an economist who worked for us at that time, Jason Calla, completed an important study. It demonstrated that the costs of completing an investment on the best-located first nation lands were four to six times higher than they were on comparable off-reserve lands. It was, for economists, our eureka moment. If you can lower the costs of doing business for first nations, you can create a virtuous circle.

Next, what causes these high costs of doing business? Much of our work has focused on this question over the last 20 years. To begin, a sound investment climate includes a role for both the public and private sectors. The private sector looks for a competitive rate of return resulting from an advantage in location, resources, labour, or technology. The public sector supports these private decisions through secure private property rights, quality infrastructure, good local services, and transparent, responsive government at a reasonable rate of taxation.

The high costs of doing business on first nation lands are not a result of an uncompetitive first nation private sector. They are a result of an uncompetitive first nation public sector. Generally, first nation infrastructure, local services, property rights, local government powers, and administrative responsiveness are below regional standards. Stated differently, many first nations are missing the institutional framework to facilitate private investment.

Under the current system, with a lot of patience and resources, it is possible to close many of these institutional gaps. In Tk'emlups at Sun Rivers, where our office is located, an acre of land sold for $8,000 in 1996. The value of that same acre has risen to over $500,000 after Tk'emlups created the best possible legal, administrative, and infrastructure framework possible under the Indian Act at a cost of several million dollars and over a four-year time period. Similarly in Westbank, an acre of land in 1991 sold for $10,000. Now that same acre is closer to $750,000, but first it took 15 years and many millions of dollars, a self-government agreement, new infrastructure, and numerous laws.

It can be done. But you might be interested in the last question. How can you improve the first nation investment climate in a timely and cost-effective manner? It has been our observation that successful first nation changes have four elements.

First, they require first nation leadership. Second, they must be optional so that first nations can exercise their freedom of choice. Third, successful implementation requires the support of first nation institutions that help implement the legal and administrative requirements. Finally, when legislation is necessary, that change requires the political will of the federal and sometimes provincial governments.

If these ingredients are in place, here are five suggestions that could help move interested first nations towards a more competitive investment climate.

First, provide the option for interested first nations to have the same collective and individual property rights as other Canadians. This could be accomplished through the proposed first nations property ownership act, sometimes called FNPOA.

Second, provide interested first nations with an option for a turnkey legal framework that is more harmonized with adjacent jurisdictions. This could be accomplished through the proposed FNPOA. This will save interested first nations years of implementation time and millions of dollars. This will mean interested first nations will not longer have to build the economic development car before they can drive it.

Third, encourage first nations to improve their fiscal relationship through participation in the First Nations Fiscal and Statistical Management Act, also called the FSMA. The FSMA is the beginning of a new fiscal relationship where first nations have clear expenditure responsibilities and exclusive revenue authorities to meet those requirements. The FSMA should be enhanced to provide more revenue authorities, such as the first nations goods and services tax, and to accommodate transparent formula-based transfers so first nations are better able to deliver quality services and build competitive infrastructure.

Fourth, provide bursaries to students interested in accredited certificates in first nation tax administration and first nation applied economics at the Tulo Centre of Indigenous Economics. This training uses our 20 years of research and the success of the First Nations Tax Commission to train students on how to fill the institutional gaps that facilitate investment on first nation lands. Over 70 first nations have taken some of these courses, and increased bursaries would enable more to build this necessary administrative capacity.

Finally, and this has already been stated, expedite additions to reserves. For those first nations without access to markets and comparative advantages, additions to reserve offer economic opportunities. The current ATR process is far too slow and costly. ATRs could be made faster through greater use of the FSMA and the potential of the proposed property ownership act.

None of these changes are costly, and some of them only require legislation. The benefits to first nations in Canada could be significant. Raising the productivity of first nation lands by facilitating more investment could reduce much of the disparity between first nations and other Canadians. Moreover, the fastest growing element of the Canadian labour force is first nations people.

The sustainability of Canada's social programs are about to become increasingly dependent upon the productivity of first nation peoples. This is why the work of this committee is so important.

[The Chair, Conservative, Chris Warkentin]

Thank you very much, sir.

We'll start now with our rounds of questioning.

We'll turn to Ms. Crowder for the first seven minutes.

[Jean Crowder, NDP, Nanaimo—Cowichan, BC]

Thank you, Mr. Chair.

I want to thank all the witnesses, including Mr. Le Dressay, who is joining us by teleconference.

Mr. Devlin, you and I have seen each other on this committee before. It's nice to see you back.

Mr. Le Dressay, I don't expect a response on this. You indicated in your opening that first nations are not receiving a share of investment. I would also argue they're not receiving a fair share of the resources that are developed on their traditional territories. It's not just investment; it's the resources that already exist.

I have a question for Mr. Gailus. Thank you for your presentation.

I'm from British Columbia, and I live on the Cowichan people's traditional territories. I'm very familiar with the mall on Cowichan lands. A number of developments that you cited, though, are actually certificates of possession. For example, with regard to the Cowichan mall, there are a number of individual families who own that mall.

When we were in Westbank,the chief and council indicated that certificates of possession certainly present some opportunity for economic development, but they also provide serious challenges because of some of the development that's happened prior to the time that self-government or FNLMA took place.

Can you comment on what you would see as being important to recommend to this committee around certificates of possession, if anything?

[John Gailus]

In terms of the Cowichan mall, that land has been surrendered—that is the old term. The revenues, though, do go to the former CP holders. So they actually did go through the formal process under that. I know that Westbank is mostly certificate of possession lands. I think the other ones that I suggested, though, are band lands, if we call them that.

I suppose the policy that AANDC has now, as I understand it, is that they won't grant a lease over 49 years to a CP holder, and they're likely going to seek the consent of the council. I have experienced the situation where a CP holder had developed his lands without the consent of the council, hooked into the sewer and water, and had come after the fact to INAC and said, “Now I want to get a lease”, which led to some litigation. My name is all over it—a case called Tsartlip—trying to do the right thing, I suppose, as a lands officer at the time.

We weren't able to bridge that schism, if I can call it that, between the CP holder wanting to develop his lands and the council saying, “No, we want to save those lands for community members”, even though they were held under a certificate of possession.

As a practical matter, in light of Tsartlip, in light of the policy, you're not going to see a lot of large-scale developments on CP lands unless the council is on board. Just like when a first nation wants to do a large-scale development and needs services, where they have to go talk to a municipality, using Tsartlip as an example, if it's the council that has the keys to the sewer and the water, well then, the council's going to have to be on board for those developments to go forward.

[Jean Crowder, NDP, Nanaimo—Cowichan, BC]

Go ahead, Mr. Devlin.

[Christopher Devlin, Partner, Devlin Gailus Barristers and Solicitors]

I was just going to add that in some respect it's not much different from if you have a bunch of small, fee simple parcel holders. If you're looking for a large development, either all the CP holders are going to have to get together to bring together a parcel that's economically viable to develop—in the Cowichan example, the land was surrendered with the consent of the CP holders and the expectation that they would share in the rent—that's the first thing, or you can have one band member go around and buy up those CPs to accumulate a parcel.

The other issue, though, is that you have to have not only band council consent, from a regulatory perspective, for development, even if it's on CP, but then there's also the issue of whether those revenues that will come from that economic development on CP land.... The leases, for example, tend to go to the CP holder, so then how does that benefit the band as a whole, right?

Those are the kinds of issues that council will struggle with. Particularly if you have a very enterprising CP holder, who has gone around and accumulated a sufficiently sized parcel to have a big box store or whatever, and will gain substantial revenue from that, the band council will rightly say, “Well, how's the rest of the band going to benefit from this?” Those are tensions. They can do it through tax and that kind of thing, just like a municipality can, but it still gets debated.

[Jean Crowder, NDP, Nanaimo—Cowichan, BC]

Do I have time?

[The Chair, Conservative, Chris Warkentin]

You have a minute and a half.

[Jean Crowder, NDP, Nanaimo—Cowichan, BC]

In a minute and a half, can you talk about the whole issue in British Columbia about the constitutional protection under section 91(24) and giving up aboriginal title as bands enter into treaties?

I know some bands have resolved that in some way, but it is creating some tensions in British Columbia around that requirement to give up lands or to give up that constitutional protection. Some people argue that Canada's position may largely be driven by the desire to remove itself as a fiduciary. Can you comment on that?

[Christopher Devlin]

Oh, I get that one in a minute or less.

Yes. It has created huge tension. Often the first nation has to make a political choice. If the deal is you give up your reserve land in exchange for whatever the package is under your treaty, then they have to weigh that.

Is it worth it?

Certainly there is great debate over the nature and the value of the collective interest in aboriginal title as held in a reserve versus the economic opportunities that are more easily accessed if the land is not held as a reserve. For example, at the end of the day, the treaty lands that are being offered in British Columbia are some form of fee simple.

Jurisdiction remains with the first nation, but they can be bought and sold, and so those are fundamental quid pro quos that each community, I think, has to grapple with. Each community makes different decisions. Some communities say no, the collective interest prevails, and we'll figure out a different way of unlocking economic potential, and others will choose the economic potential that's more readily accessible with the fee simple option.

[The Chair, Conservative, Chris Warkentin]

Thank you very much.

We'll turn to Mr. Payne now for seven minutes.

[LaVar Payne, Conservative, Medicine Hat, AB]

Thank you, Chair.

I thank the panel members for coming and Mr. Le Dressay for appearing on the video screen with us today. It's important that we get your testimony, as of course, this is a very important study, as you've already suggested.

I would like to start off with questions for Mr. Le Dressay. In terms of what you have written here in a research paper, and comparing the municipal boundary expansion to additions to reserve, you stated that additions to reserve are too slow, too cumbersome, too unfamiliar, and many witnesses, of course, have stated that same thing when they've come to our committee.

Could you tell us what best practices from municipal boundary expansion projects could be applied to the ATR process?

[Dr. André Le Dressay]

Yes.

First, the research in that paper demonstrated a useful statistic, I think. It's that the municipal boundary expansion process—depending on the circumstances, the ones we compared—was six times shorter than the additions to reserve process.

Two reasons seem to demonstrate why that occurred. One was that it's much easier for the municipalities to expand their boundaries because there is jurisdictional harmony once they expand them. When a reserve expands its boundaries, you have a change in jurisdiction from provincial to federal, and so there are all sorts of harmonization issues.

The other aspect that results with respect to that particular issue is that the federal government is unable to—I shouldn't say unable to. It's almost like a game of fiscal ping-pong, I guess that's a better way of phrasing it. When it becomes federal land, there is potentially a liability for the federal government with respect to the cost of development on those lands. The federal government wants to make sure there is a great deal of economic viability and ultimately fiscal viability on those lands. Those requirements take a long time for first nations to fulfill and demonstrate.

What could be done to speed that up? Two things.

First, first nations are missing a lot of the legal framework that is commonplace within provincial systems. In my little research brief that I provided to the committee, we listed 30 or 40 laws that are essentially missing, by and large, on first nations lands, which you almost have to recreate.

If there was a turnkey framework that provided those laws, and there was some sort of regulatory harmony between those and the provincial system, that would greatly speed up the additions to reserve process.

Second is the demonstration by first nations of the economic viability and the economic potential. I think it doesn't become a game of fiscal ping-pong. It becomes an issue of this growth being beneficial to the whole region.

I think there's a real potential to see ATRs as economic instruments, which most first nations view them as. To realize that potential, you have to close the institutional gaps as quickly as possible.

[LaVar Payne, Conservative, Medicine Hat, AB]

Also, in the briefing material you provided to the committee, you suggest that ATRs could be made faster through greater use of the First Nations Fiscal and Statistical Management Act and the proposed first nations property ownership act.

What are the benefits of the FSMA and the FNPOA, and how would those two speed up this process?

[Dr. André Le Dressay]

The FSMA would speed it up because it would demonstrate that the first nations have, at least in terms of the institutional gaps, local revenues and local service powers. That's very important for local governments in establishing service agreements. There is support from those institutions to help first nations create those service agreements so that local governments don't see ATRs as tax losses; they see them as potential service agreement gains. That's one thing that would definitely speed up that part of the negotiation.

The proposed property ownership act, I think, would have two aspects that could speed up additions to reserves. First, because it's proposed that it come with a turnkey legal framework, it would have a lot of that harmonization already in place with respect to development approval processes, heritage management, and other aspects of the institutional gaps.

The second thing is that, because it envisions property rights very similar to those that exist off first nations lands, the transfer of the third-party interest would be much simpler, because all that would be happening would be that they would maintain their interest, but they would now be under a different jurisdiction.

It would make those processes associated with ATR much quicker.

[LaVar Payne, Conservative, Medicine Hat, AB]

Okay.

You've used the phrase “turnkey framework” a couple of times. Would that be applicable right across all first nations? We quite often hear that each first nation has its own particular issues and traditions and that sort of thing. That kind of leaves me wondering.

[Dr. André Le Dressay]

Obviously, first, that would have to be optional. First nations have to exercise their freedom of choice, and then it'll be their choice. What it would have to contain is regulatory harmony, as much as possible, within their regional context. A different turnkey framework would exist in Newfoundland than would exist in British Columbia, because there are different regional practices. But that doesn't mean you wouldn't be able to have that application in Newfoundland or B.C. It would just be a slightly different legal framework.

I'm trying to remember the rest of the question.

[LaVar Payne, Conservative, Medicine Hat, AB]

That was it. It was just on the framework and whether it would apply.

[The Chair, Conservative, Chris Warkentin]

You're pretty well out of time.

[LaVar Payne, Conservative, Medicine Hat, AB]

Darn, I still have another question.

Thank you.