Indigenous and Northern Affairs Committee on May 16th, 2019

[Merven Gruben]

They did, but $100 million came from the territories.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

Yes, that's right. Trinkets and T-shirts are great but there's a big difference. Your number one resource would be social assistance right now.

[Merven Gruben]

Right now, yes, but in a month or so it will be a little different.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

But only for three or four months, is that right?

[Merven Gruben]

For now.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

Good. Thank you.

[The Vice-Chair, Conservative, Cathy McLeod]

That concludes this round. I would like to thank those who came in person, those by phone, and those by video conference for your contributions to our deliberations on Bill C-88.

The meeting is suspended.

[The Vice-Chair, Conservative, Cathy McLeod]

I call this meeting back to order.

I would like to thank our three witnesses as we go into panel three of four panels today on Bill C-88, which of course is a piece of legislation before us. As we have someone on video and we always worry about the video, we'll start with Mr. McCrank.

Mr. McCrank, there are 10 minutes for your presentation. Then after all the witnesses have done their presentations, we'll go to questions and answers.

Go ahead.

[Neil McCrank, Senior Counsel, Commercial Litigation, Borden Ladner Gervais LLP, As an Individual]

Thank you very much, Vice-Chair McLeod.

First of all, thank you for the opportunity to participate. It's an honour to be asked to appear before one of your committees or one of the Senate committees. I hope that I can add something to the debate that is currently ongoing with respect to this issue.

In full disclosure, I have testified on three different occasions on this issue: twice before the House of Commons committee, once in June 2009 and another time on January 2014; and before the Senate committee on December 2013. I've had the questions asked at some point on some of the issues, but we'll see how they go today.

I'm here to explain my report, “Road to Improvement”, which I'm sure all of you have had an opportunity to read. Maybe it's put you to sleep at night. That's fine, too. This was commissioned, as you know, by former minister Chuck Strahl, who was the minister of INAC. I was commissioned to do this report in fall 2007. The purpose of the assignment was to make recommendations to see if the regulatory systems in the north, at least north of 60°, could be improved.

The process that I engaged in through winter 2018 was to attend and spend most of my time in the north, most of it in Yellowknife. Although I did go to Nunavut and to the Yukon, I concentrated my efforts on the Northwest Territories. By the way, the process was to meet with everybody who would meet with me—all the regulatory bodies, the governments both territorial and federal, officials, aboriginal groups, at that time the treaty groups. Anybody who wanted to talk about this issue I was prepared to meet with.

We ended up then following those discussions by having a round table discussion in Yellowknife, where we invited all of the participants to come to hear what I had heard and to tell me what we should recommend in this report. The round table was opened with a prayer by Ms. Gabrielle Mackenzie-Scott, who at that time was the chair of MVEIRB. I just want to read it to you because it's important and it focuses on what we were talking about. She said the prayer was to look at the regulatory system to see if there can be some jobs created at the same time as making sure the environment is totally and absolutely protected. The overriding principles were to protect the environment and to ensure that the people who live in that part of the world make the decisions relating to resource development. The themes were clear.

The second theme, beyond the one of making sure that people in the north were engaged, was to ensure that the regulatory bodies had some improvements made to them to make them predictable, effective and efficient. To address these themes it was decided at the round table that I should make recommendations in three areas. First was for the local input of the residents, to make sure that the decisions were made in the north. Second was to make structural changes to the regulatory bodies, to make them efficient, responsible and so on. The third was to make some process changes to the regulatory bodies.

The input from the residents, an overriding suggestion, and it was the number one recommendation in my report, was that the land use plans for all the territories, particularly for the treaty areas in the Northwest Territories, had to be completed. They were delayed in completion. They had to be completed. That's where the voice of the north was to be provided.

Structural changes were to be made because there was recognition that if the land use plans were completed, the regulatory bodies would perform a different function, which would be a far more technical function relating to the environment, to safety, and to other issues of a technical nature. Therefore, there had to be some reduction in the number of regulatory bodies.

The one recommendation that seems to have attracted the most attention, and probably what I will be questioned on, is the reduction of the land and water boards from three to a super-board, as it was called later. My position was, and at the round table we all agreed, that if the land use plans were completed, there would not be a need for every regional body, every treaty area, to have a regional body. Rather, it should be one focus for the entire Mackenzie Valley.

I should point out at this stage that the recommendation with respect to the reduction of the bodies was in two parts. One was a complete reduction. The other was that the quasi-judicial nature of the decision-making would be concentrated on one Mackenzie Valley Environmental Impact Review Board, but that the administrative activity would take place at the local treaty level.

The question often came up as to whose idea it was. I don't know whose idea this was. It certainly came out of our round table discussions. There certainly was no surprise when I made my recommendations, because it was clearly debated during the round table discussion with all of the interested people in attendance.

Second, as is my custom, having been around government for a long time, I made sure that I spoke to the leaders of not all of the groups, but most of the groups, to advise them of what my recommendations would be. They said that was fine. They might not publicly support it, but they thought the recommendations were good. In fact, at one point in the course of the round table, I was told to have an honest and hard-hitting take-no-prisoners report. In other words, they said, “Be bold.”

That completes my opening remarks. I have some closing remarks that I'd like to make later, after the questioning.

Thank you, Madam Vice-Chair.

[The Vice-Chair, Conservative, Cathy McLeod]

Just so you know, there is no opportunity for closing remarks. If you have anything more to say that is formal, I recommend that you take another couple of minutes, or we can leave it where you are.

[Neil McCrank]

Thank you.

I'll just leave it where it is. Probably in the course of the questions this will come out in any event.

[The Vice-Chair, Conservative, Cathy McLeod]

Thank you.

Obviously, for all the witnesses, if there's anything you want to submit after this hearing is complete, you're welcome to submit it to the committee.

We will now go to the Northwest Territories and Nunavut Chamber of Mines, with Mr. Campbell.

Go ahead.

[Joseph Campbell, Vice-President, Northwest Territories, Northwest Territories and Nunavut Chamber of Mines]

Good morning, honourable members.

My name is Joe Campbell. I am an executive board member of the Northwest Territories and Nunavut Chamber of Mines and vice-president for the Northwest Territories. I am here to present the chamber's comments on Bill C-88.

I am also an executive chairman of TerraX Minerals, a publicly traded junior exploration company currently exploring for gold around the city of Yellowknife in the Northwest Territories. I am also president of a geological consulting company providing services to the mining industry around the world. As part of that consulting business, I have acted as expert adviser to the Kivalliq Inuit Association in Nunavut for environmental review of mine developments. My varied work experience is relevant to my appearance here on Bill C-88.

I wish I could say that the layering of personal workload is exceptional. However, it is commonplace in the mining industry, in which business risk is high and making ends meet is a constant challenge. These challenges are greatest in the Northwest Territories—the central target of Bill C-88. Severe climate is certainly a factor, but a far greater issue that we face is the lack of infrastructure, which escalates development costs and timelines and renders the dream of being a leader in producing the critical metals of the green economy exactly that—a dream.

There is no level playing field for the north. We are beset by higher costs and tougher regulations from all levels of government—local, indigenous, territorial and federal. Against these odds, the mineral industry persists and provides thousands of jobs, fuelling the northern economy with billions in business expenditures and taxes and helping to contribute to regional infrastructure. Mining remains the only viable private industry that staves off the total welfare state in the Northwest Territories.

The mining industry has made great strides with indigenous communities, creating thousands of person-years of employment, supporting a wave of new aboriginal businesses and producing a flow of millions in taxes and royalties, not only to public governments but to indigenous governments also. Mining has significantly catalyzed the creation of a middle class in the indigenous communities of the north.

This economy was bought with a very small footprint for our current Northwest Territories mines of about 0.005% of the Northwest Territories, yet mining is the only industry that is regulated to provide a comprehensive project description detailing all environmental and social impacts, plans for mitigating those impacts that include impact benefit agreements, and closure plans to return the area to nature. We post the costs of those closure plans up front before digging a hole. I would bet that residential housing developments would grind to a halt under a similar strain.

Mining is not a threat in this highly regulated world and our mines operate to very high standards. We can coexist with the environment. This is the vision of Canada's north and should furnish the guiding principles for this legislation.

Despite this record and the honourable people who created it, the mining industry is demonized by NGOs and often by our own governments. Each new piece of legislation escalates the effort to constrain or prevent resource development, sometimes explicitly within the legislation but more often as an insidious increase in regulatory inefficiency that ups the costs and timelines of the process, making mine investment more uncertain.

Let's be clear. This bill's main purpose is to regulate our industry, yet that industry is criticized as self-serving if we provide comment—comment to make changes on issues that affect us directly. Let me state clearly that we are not opposed to the spirit of Bill C-88. To attract investment in the north, we see it as necessary to have clear and firmly established rules of law to guide our development.

Do we want more certainty, clarity and timeliness of process than is provided by Bill C-88? Of course we do, but I am not here to argue for a single board or for shortcuts to process timelines. I will argue that legislated uncertainty and raising the cost of the process is counterproductive to regulating development. Arguably, it is included in Bill C-88 as prevention of development.

As regards certainty of process, please use this as an opportunity to change the legislation to enact sections 3.18 and 3.19 of the devolution act as promised in the Mackenzie Valley Resource Management Act. By addressing the need to fully devolve the MVRMA to the territorial government, we will allow northerners to make their own decisions. This will coordinate the process and rid us of the lack of accountability and ambivalence that now infests it

As regards cost, please do not enact cost recovery on Bill C-88. Embedded within the bill—including but not limited to proposed sections 79.4, 90.31, 109.3 and 142.01—are broad provisions for cost recovery. This industry is expected to shoulder these costs, but we are given no control over them. The federal government empowers the boards, and they control the activity and the clock. Then, after pulling all the levers, they turn around and put out their hands for the recovery of the costs of the process they are entirely responsible for.

If you believe these costs are unsubstantial, please review sections 124 through 128 of the MVRMA and the corresponding amendments within Bill C-88. After several years of baseline studies and consultation, all mine developments go to an environmental review with a minimum timeline of approximately 18 months for determination. ln practice, a determination is rarely reached in that timeline. As an example, the Governor in Council can extend the timeline to infinity based on subsection 128(2.3) of the MVRMA.

ln addition, the review board can freeze a review timeline to request more information from the developer, with no restriction on how many times it can do this. Requests to the board for delay can be submitted by any interested party. No other industry, except oil, lives daily with the spectre of never-ending regulatory processes, and now you expect us to pay for it.

ln Bill C-88, the only written control on what is an applicable cost is for “prescribed” services. There is not a person on the planet who would sign a contract under these terms, yet the industry is expected to swallow it whole while shouldering all the other extra monetary challenges that northern development entails.

The industry cannot bear the burden of cost recovery, particularly when we have no ability to control the process or budget for it. Until the mine is built, we have no source of income. More correctly, our investment backers will not bear the cost. No investment equals no development, which equals no cost recovery at all.

ln closing, our industry provides the products that you all use daily. The green economy will rest on the backs of the rare earth metals mined by our industry. The mining industry is and will remain the backbone of northern Canada's economy, providing meaningful employment, particularly in indigenous communities.

Building a strong mining future benefits those northern communities. Don't enact legislation that diminishes that growth.

Thank you for listening. I would be pleased to answer any of your questions later.

[The Vice-Chair, Conservative, Cathy McLeod]

Thank you.

We will go to Mr. Brooks from WWF-Canada.

[Mark Brooks, Senior Specialist, Artic Oil and Gas, World Wildlife Fund-Canada]

Thank you, Madam Vice-Chair.

Good morning. My name is Mark Brooks. I'm the Arctic oil and gas senior specialist with WWF-Canada. I wish to thank the committee for their invitation to speak about Bill C-88. We are submitting written comments in addition to this oral submission. I'll be speaking specifically about the proposed CPRA amendments.

First, I have a few words about my organization, the World Wildlife Fund. WWF is one of the largest independent conservation organizations in the world with projects in more than 100 countries. We have offices across Canada, including the Arctic, and we partner with local communities, indigenous peoples and other groups to help find solutions to the environmental challenges that matter most for Canadians.

Let me first say that WWF-Canada believes that community-supported economic development is vitally important throughout the Arctic. However, significant capacity, information and funding gaps currently exist in Canada's oil spill response framework across the Arctic, including in the Beaufort Sea region, which make potential offshore oil and gas activities particularly high risk at the present time.

I also want to emphasize the position of our organization on the need for modernizing laws governing offshore oil and gas activities in Canada, including the Canada Petroleum Resources Act, which has not been substantially updated in decades and tends to favour industrial development at the expense of other possible alternatives.

CPRA is over 30 years old. Its guiding policy focuses almost exclusively on expediting the development of petroleum resources at the expense of other alternatives. Contemporary priorities such as conservation, indigenous rights, climate change, marine safety and other issues are not mentioned in the CPRA's policy framework. Full modernization of the CPRA, along with the entire oil and gas regulatory regime is long overdue.

As for Bill C-88, it's proposing, as you well know, an amendment to the CPRA that would permit the government to prohibit any licence holder from commencing or continuing any work or activity authorized under the Canada Oil and Gas Operations Act, if the Governor in Council considers that it is in the national interest to do so.

WWF-Canada has some concerns with this bill. It's timing and precise purpose has raised some questions for us, which we believe should also be of concern to members of this committee. First, let me back up and provide some context. Of course, this has come up already today, but the December 2016 Canada-U.S. joint leaders' statement included a moratorium on new offshore oil and gas licensing in Canada's Arctic. This was followed by a year of private, closed-door consultations between government and oil and gas licence holders to discuss their interests. Public interest groups and civil society organizations were not invited, nor were we permitted to participate in these meetings. The results of the negotiations were not made public.

Following the conclusion of these consultations, in October 2018, the Government of Canada announced it planned to “freeze the terms of the existing [exploration] licences in the Arctic offshore to preserve existing rights, remit the balance of any financial deposit related to licences to affected licence holders and suspend any oil and gas activities for the duration of the moratorium”.

Eleven exploration licences in the Beaufort region are set to expire over the next few years. The government could simply allow these licences to expire on their own, likely without any liability on the government's part, and collect hundreds of millions, perhaps billions of dollars, in forfeited financial deposits for work that was promised under the terms of the licence but not carried out. This is money that could be used for critical investments in the north.

Instead, the government is introducing a proposed amendment to the CPRA through Bill C-88 to prohibit oil and gas activities for reasons of national interest, which is not defined, and it's not clear to us why there is a need for this expanded power.

Concurrently, in last week's Canada Gazette, the government announced its intention to issue new exploration licences in the Beaufort Sea, effective July 10, 2019, to replace existing licences. From our perspective, the proposed amendment in Bill C-88 appears to be a way of ensuring, after one year of private negotiations with industry, that licence holders do not lose their rights or their licence deposits, despite having failed to do the work required by the terms of their exploration licences.

Extensions to exploration licence terms are expressly prohibited by the CPRA. If the government is using Bill C-88 as a way to preserve rights and extend licence terms, we believe this would be an abuse of the expanded prohibition powers. As noted, term extensions would also mean that licence holders do not lose their deposits, even though they were unable or unwilling to complete the work they had committed to doing. As companies will avoid substantial financial losses, one could argue that, in effect, this is a form of indirect subsidy to industry from a government that has committed itself to eliminating all inefficient oil and gas subsidies.

Licence holders may argue they are entitled to licence extensions and a refund of financial deposits because the 2016 oil and gas moratorium in the Arctic and the 2015 ministerial review of the CPRA created regulatory uncertainty. However, the review of the CPRA lasted only 10 months, and the moratorium did not apply to existing licences.

I want to emphasize this point, because I'm not sure it's been raised yet this morning: The moratorium did not apply to existing licences. The government's announcement at the time, in 2016, even stated, “Exploratory licences may accede to Significant Discovery within their existing permit timelines.”

As an example, Imperial Oil holds two of the largest exploration licences in the Beaufort Sea, both of which are due to expire in the next year and a half. Despite holding these licences since September 2010, Imperial has done no exploration work to our knowledge. Chevron, another licence holder in the Beaufort, put its plans on hold in 2014, citing a drop in oil prices. These and other licence holders appear to have been speculating when they bid on these licences years ago. Now that the time limit on their interests is expiring, they seem to want the government to extend their terms and preserve their rights, which the government appears willing to do. This is not acceptable in our view.

In addition to being unjustified, this attempt to preserve rights and extend licence terms is a threat to the sensitive Arctic marine environment. An oil spill from shipping or a well blowout would devastate the surrounding marine environment, potentially destroying habitat for polar bears, seals, walrus and seabirds, as well as beluga, narwhal and bowhead whales. In addition, research indicates that seismic testing can seriously harm marine wildlife, which many Inuit depend upon for their livelihoods. However, in the Canadian Arctic only limited emergency response equipment currently exists on a scale required to adequately deal with a major oil spill or well blowout. Many coastal communities have access to only the most basic oil spill response equipment from the Canadian Coast Guard.

We believe there's no justification for the government to extend licence terms and refund financial deposits to licence holders, and we're deeply concerned by the government's stated intention to reissue identical exploration licences with extended terms before Canada is sufficiently prepared for the risks of offshore oil and gas activities. Until oil recovery and cleanup technologies in icy waters have improved and Canada is better prepared for these activities, drilling in the Canadian Arctic should not proceed.

Immediate steps, including substantial investments and more research to fill many data gaps, must be taken to provide adequate response capacity and infrastructure support if offshore oil and gas activities are ever to take place in the Canadian Arctic.

Thank you again for your invitation today. I welcome any questions you might have.

[The Vice-Chair, Conservative, Cathy McLeod]

Thank you to all the presenters.

We will start with the seven-minute round and MP Michael McLeod.

[Michael McLeod, Liberal, Northwest Territories, NT]

Thank you, Madam Chair, and thank you to the presenters here today.

I see a lot of people in the audience from the Northwest Territories, so I'll choose my words very carefully.

My first question is to Mr. McCrank.

I was serving in the government of the Northwest Territories at the time you put out this report. It's my understanding you were appointed by Chuck Strahl, the Minister of Indian Affairs and Northern Development in 2007. I wanted to ask you if he gave you any marching orders. Did he mention or suggest that maybe you should look at rolling back some of the regional boards into a super-board? I'm just wondering where the concept of the super-board came from.

[Neil McCrank]

First of all, thank you very much, honourable member, for that question.

The answer to the first part of your question is, no, I did not receive any instruction or any advice from Minister Strahl. I should say, just to be clear, that I was actually appointed to do this by Minister Prentice, but he then moved on to another portfolio and Minister Strahl took over. At no time did they give me any instruction other than to try to improve the regulatory processes in the north. They thought, there are complaints; improve them whatever way possible.

As to where the idea came from, as I mentioned in my opening remarks I can't tell you who came up with the concept to begin with. It could have been me. I'm not a very creative guy, so I doubt it was me. What came out of it, in any case, was that if the plan we talked about were followed, which was to ensure that the land use plans were approved in advance, you could then look at the regulatory bodies and try to make them true, technical regulatory bodies.

For that to be the case, you'd have to have a certain capacity. You couldn't have that in all of these regional boards, so they would then be refined into one board that would be able to do the work that should be done by a regulatory body. Does that answer your question?

[Michael McLeod, Liberal, Northwest Territories, NT]

Yes, thank you.

When you say you weren't sure who came up with the idea, it could have been former minister Chuck Strahl at that time. He might have made a suggestion.

I see that you have a lot of history and experience in the area of oil and gas. The decision to merge the boards despite the impacts on constitutionally protected land claims and self-government agreements has created significant legal issues and caused a lot of problems for land and water management in the Northwest Territories.

Could you just tell us what experience you had, before writing this report, with the northern land and water board regulatory system based on co-management principles?

[Neil McCrank]

First of all, it did not come from Minister Strahl. As I say, it may have fallen out of the round table discussion; it may have come out of my mind. I don't know, but it certainly did not come from any instruction from the government.

Secondly, with respect to what my experience is with land and water boards, my only experience with land and water boards has to be related to my experience as chairman of the Alberta Energy and Utilities Board, which I chaired for 10 years. It has similar kinds of issues to deal with, whether they are environmental, safety or conservation issues, but not issues related to land use planning. That's a different concept.

Does that answer your question?

[Michael McLeod, Liberal, Northwest Territories, NT]

I think there's no comparison between the Northwest Territories' regulatory process and Alberta's.

It's interesting that the premier of the day whom you worked with became the Conservative candidate in the next election.

In hindsight, because you believe that merging the boards was a way to deal with a system that was costly, complex, unpredictable and I think “time-consuming” was a word you used.... It made it very difficult because that's not the way indigenous government partners felt. Industry was not in support of this and communities were not in support of it.

Do you concede that impacting constitutionally protected land claims and self-government agreements without the proper consultation was a mistake? Do you concede that it had an effect opposite to what you were attempting to achieve? Everybody said don't do it, especially the super-board portion of it.

[Neil McCrank]

I'm not sure I agree with you that everybody was in disagreement. As I indicated in my opening remarks, at the round table discussion it was pretty clear in what area the recommendations would be at the end of it. Nobody objected. I spent some time, as I mentioned, with some of the aboriginal leadership in Yellowknife, prior to the round table and post-round table, and outlined what some of the potential recommendations would be, including the reduction of land and water boards, and there was no objection. In fact, all of them said they supported it but would not support it publicly, because it, of course, reduced manpower in the regions.

[Michael McLeod, Liberal, Northwest Territories, NT]

Is there another report that captures what was not reported publicly, in your side discussions?

[Neil McCrank]

No, there was just what I've said today. My discussions—

[Michael McLeod, Liberal, Northwest Territories, NT]

You did not include all the side discussions.