Natural Resources Committee on June 12th, 2012

[The Chair, Conservative, Leon Benoit]

Good morning, everyone. We're here to continue our study on resource development in northern Canada.

We have with us today two witnesses. Before I introduce those witnesses and have them give their presentations, I would just like to say that we've been having some difficulty, the clerk in particular, in getting opposition witnesses to appear. It's not for lack of trying. I would really encourage you to talk to your witnesses and make sure that those on the list are all given the head's up needed and all the encouragement possible to attend, because we've had great difficulty in that. Any help would be appreciated.

The witnesses today will both be by video conference. From the Northwest Territories Chamber of Commerce in Yellowknife, we have Hughie Graham, the president. And from the Yukon Chamber of Commerce in Whitehorse, we have Sandy Babcock, the president.

Welcome to both of you. We'll have you give your presentations in the order listed on the agenda for today. We'll start with Hughie Graham. Go ahead with your presentation for up to 10 minutes, please.

Thank you both very much for being with us today. We're looking forward to the information from your presentations and the question period.

[Hughie Graham, President, Northwest Territories Chamber of Commerce]

Thank you.

My name is Hughie Graham. I am president of the Northwest Territories Chamber of Commerce.

I'll give you a brief overview of the NWT Chamber of Commerce, the only pan-territorial voice for business in the Northwest Territories. Established in 1973, the NWT Chamber of Commerce has representation from every region of the Northwest Territories.

The chamber works to promote and create business opportunity, foster business development, and serve as a conduit for professional business relations between our members, territorial, national, and international governments.

We represent over 600 members collectively through member chambers in Inuvik, Norman Wells, Yellowknife, Hay River, Fort Simpson, and Fort Smith.

The NWT is resource rich. Resources account for 34% of the NWT's GDP. Of that 34%, three diamond mines currently in production account for 90% of that GDP. Of these mines, BHP's EKATI mine is at its half-life.

The NWT runs the risk of boom-bust cycles, with future projects facing uncertain regulatory hurdles. Secondary industry suffers with the uncertainty of regulatory process, as well as aligning construction and production with market demands. One might only look at the Mackenzie Valley pipeline as opportunity lost due to regulatory uncertainty.

Some challenges that face industry in the NWT include access and infrastructure. With the completion of the Mackenzie Valley highway, a road to resources would be created. Norman Wells is a prime example of the lack of access to infrastructure in the NWT.

Husky Energy has been exploring parcels of land in the Mackenzie Valley over the past winter season. Exploration and drilling are set to increase, with more industry players joining Husky in Norman Wells.

Norman Wells is currently only serviced in winter by a roads system and in summer by barging on the Mackenzie River. Not only is the winter road season short but increased use of the winter roads caused residents of the communities on this road system to suffer due to overuse of the road.

Other mines on the horizon, such as Fortune Minerals NICO project and Prairie Creek Mine, will also need road infrastructure.

Another challenge is community capacity, small communities such as Fort Simpson with the Prairie Creek Mine and Norman Wells with Husky Energy need to build capacity to face the challenge of increased secondary industry demand.

As for markets, the Nechalacho mine on the north shore of Great Slave Lake faces real issues of missing potential market demands, much like the Mackenzie Valley gas project is doing currently.

Regarding exploration and mapping, the NWT remains largely unexplored and undermapped. This situation is being addressed somewhat through the federal government's commitment to the extension of the mineral exploration tax credit program and the commitment of the Government of the Northwest Territories to its mineral strategy.

As for aboriginal considerations, training capacities for aboriginals have been championed by the mining industry in the NWT. However, commitment from the federal government in training initiatives and education must be forefront as aboriginal populations account for half of the NWT's population.

Aboriginal consultation also needs to be clarified. We acknowledge that the Mackenzie Valley resource management boards and the federal government have recently undertaken a number of initiatives that are intended to clarify the requirements and procedures that are necessary in order to fulfill the constitutional duty to consult aboriginal peoples, and where appropriate, to accommodate any potential infringement of aboriginal rights, titles, or interests. However, considerable doubt and uncertainty still surround the role that the proponents are expected to play. There is increasing recognition within the exploration and mining sector that it needs to secure and maintain a social licence to operate, and industry is prepared to do its part. The risk of inadequately fulfilling the duty to consult is another source of uncertainty for the industry.

We also need guidance on how to ensure that the scope and intensity of consultation is proportionate to the potential of the project to infringe upon aboriginal rights or interests. From industry's perspective, there is a critical need to resolve what the crown's duty is, and what industry's role is, especially given that the duty to consult and to accommodate are fundamentally obligations of the crown.

What can the federal government do? Regulatory requires capacity-building and funding. Appointments need to be made in a timely fashion. Land claims should be settled. Land-use plans should be encouraged to proceed whether land claims are settled or not. Funding needs to be in place to facilitate the creation of land-use plans. We need to clarify aboriginal consultation. There needs to be advancement of legislative changes and timelines for projects. Community capacity needs to increase. We need to support aboriginal training funding. We need to support business capacity-building, and we need to ensure funding to participate in the regulatory process.

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Graham, for your presentation.

We have now, from the Yukon Chamber of Commerce, Sandy Babcock, president.

Go ahead please, Ms. Babcock.

[Sandy Babcock, President, Yukon Chamber of Commerce]

Thank you.

Thank you to the members of the standing committee for this opportunity to appear before you today to express the views of the Yukon Chamber of Commerce on the socio-economic impacts of resource development in northern Canada.

The Yukon Chamber of Commerce is the umbrella organization of all Yukon community chambers of commerce. It effectively represents over 800 businesses in the territory.

As a business organization, our primary areas of interest include the development of legislation, regulations, and public policy that shape and support sustainable economic growth in the territory and the strategic spending of public funds that support economic development, infrastructure development, and business and economic development.

The Yukon Territory occupies a land mass of 482,433 square kilometres and has a population of 35,944, the highest since the Klondike gold rush of 1898. Since 2002, the Yukon has enjoyed sustained economic growth, primarily from mineral exploration and development. Eleven of the 14 first nations in the Yukon have settled their land claims and have self-government.

The Yukon has three operating mines that extract copper, gold, silver, lead, and zinc. A recent survey of junior mining companies holding Yukon properties highlights that eight companies each anticipate having a producing mine by 2015. Another four are planning production by 2018. This would give us 15 operating mines in the Yukon territory over the next six years.

Tourism is also an important economic generator in the territory, with strong markets in Europe, Asia, the United States, and the domestic market.

Other sectors of the economy include forestry, agriculture, oil and gas, trapping, and innovation and technology. We anticipate continued strong economic growth in mineral exploration, development, and production; construction; tourism; and retail.

A strong economy does not come without its challenges. A key challenge is to balance the needs of resource development activities with the needs of other sectors, such as tourism, culture, and environment. The resource sector places heavy demands on transportation and energy infrastructure, broadband width, and labour markets.

In terms of investment in infrastructure, the Yukon is a small jurisdiction, with limited financial resources under the current resource revenue sharing agreement with Canada. However, its infrastructure needs are large. With a huge demand for its resources and a highly active mining sector, roads, airports, communications, health care, and power generation are all feeling pressure to provide service to this growth sector. The importance of infrastructure cannot be stressed enough.

Our recommendation to Canada is that the Yukon government and Canada negotiate a resource revenue sharing agreement that recognizes the demands and financial implications placed on the Yukon because of resource development. My understanding is that discussions are under way. However, we need to see that concluded sooner rather than later.

Growth in resource development and population growth have placed a severe strain on energy generation surpluses and the energy transmission network. We recommend that the federal government invest in the Yukon by providing clean and reliable energy generation and transmission that supports economic growth.

With the implementation of the Yukon Environmental and Socio-economic Assessment Act, environmental impacts of resource extraction are well identified and heavily weighed. However, the socio-economic impacts are not as well illustrated or identified, unless there is a negative reaction to a project. Due to the high volume of projects required to go through the YESAA process, little energy is invested in identifying the socio-economic benefits. The majority of projects are located in rural Yukon, where only small population bases exist. There is not the capacity in the communities as a whole or in first nations that may see projects in or near their traditional territories.

The Yukon Chamber of Commerce recommends that Canada consider that the Canadian Northern Economic Development Agency, known as CanNor, provide information, research, and support to Yukon communities on the potential impacts and benefits of projects registered through the YESAA process.

The Government of Canada has developed a northern strategy. This strategy has raised awareness of and commitment to developing Canada's north. However, the absence of a comprehensive economic development strategy for the Yukon is seen by us to be detrimental to the execution of the strategy.

Further, a comprehensive strategy can identify and mitigate the demands and needs of growth before they reach a critical condition.

Our recommendation is for Canada to support and participate in the development of a comprehensive economic development strategy in partnership with the private sector, Yukon government, and Yukon first nations.

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you very much for your presentation, Ms. Babcock.

We go now to the questions and comments. We will start with the member of Parliament from the Yukon, Mr. Leef. Go ahead, please, for up to seven minutes.

[Ryan Leef, Conservative, Yukon, YT]

Thank you very much, Mr. Chair. Thank you to both our witnesses. It's very interesting to hear the similarities in challenges in the neighbouring territories presented by both of you.

Mr. Graham, you talked about the challenges with the development and access to infrastructure, particularly in some of the more remote communities and the Mackenzie Valley area. I'm wondering if you could speak about, and if you are aware of, the increase our government has worked with in the territorial borrowing limits for the Northwest Territories.

Some are criticizing that as problematic for the NWT. I think it's our position that increasing the territorial borrowing limit, particularly for the Northwest Territories, will allow the territorial government to invest over the long term and to build the critical infrastructure you are talking about to meet those challenges. Do you have any comments on that?

[Hughie Graham]

I couldn't agree more. The ability for the Government of Canada to increase the territorial borrowing limit when necessary is certainly critical to investing in major infrastructure projects in the Northwest Territories. One might only look at the proposed Inuvik to Tuk highway that's going ahead. That will be a big piece of infrastructure in the Northwest Territories, to be able to meet the challenges of that project as it goes forward. It's certainly critical to be able to deal with the territorial borrowing limit.

[Ryan Leef, Conservative, Yukon, YT]

You spoke about the NWT's GDP—34% coming from resource development, and 90% of that 34% from your diamond mines. Do you have an indication of what the total exploration investment represents in terms of the GDP—just exploration, not necessarily operating mines?

[Hughie Graham]

I don't. I can only comment that I know that the exploration dollars that are going to be spent in 2012 are an increase over what they were in 2011. I don't have an exact figure as to what that accounts for in the GDP.

[Ryan Leef, Conservative, Yukon, YT]

What was the dollar amount in 2011?

[Hughie Graham]

I don't have that in front of me. I think it was in the neighbourhood of just over $100 million. This year it is set to be about $130 million.

[Ryan Leef, Conservative, Yukon, YT]

That's still a significant investment just in the exploration aspect.

[Hughie Graham]

Yes, it is.

[Ryan Leef, Conservative, Yukon, YT]

Do you think the investment in infrastructure and access to that infrastructure would boost your exploration, or would it just support your operations?

[Hughie Graham]

Certainly. If we look at the creation of a Mackenzie Valley highway, that opens up a road to resources. Not only that, but if the Mackenzie Valley pipeline were ever to be constructed, that opens up the Mackenzie Valley as well to start to contribute to that pipeline. Definitely, any infrastructure would increase any exploration.

[Ryan Leef, Conservative, Yukon, YT]

Thank you.

Good morning, Ms. Babcock. How are you today?

[Sandy Babcock]

I'm good, thanks.

[Ryan Leef, Conservative, Yukon, YT]

Good.

Both of you talked about capacity development. Could you maybe touch on the importance to industry in the Yukon of the temporary foreign workers program and the foreign workers initiatives?

[Sandy Babcock]

Yes. The temporary foreign workers program has been extremely successful and beneficial to our business community, particularly in the capital city of Whitehorse. A number of years ago, businesses were considering either reducing their hours of service or closing down completely because they could not find skilled or unskilled workers to service their businesses. With the improvements in the temporary foreign workers program, it's a lot more expedient than it was in the past.

A number of businesses in Whitehorse, as well as some in other communities, take advantage of that program. Then we see a lot of these temporary foreign workers apply to the nominee program and become citizens in Whitehorse. It has been extremely beneficial. We don't know where we would be without it. We have a severe labour shortage. It does include skilled and unskilled workers. Our population of Filipinos who have come through on the temporary foreign worker program has grown to 2,000 within the last three to five years. That's pretty significant. They play an important part in our community.

[Ryan Leef, Conservative, Yukon, YT]

You talked about the infrastructure as well, and we just in the past year made some significant investments in the international airport in the Yukon, and recently up to $37 million in infrastructure projects across the territory for roads and municipal infrastructure that's been required. Can you maybe touch on how important the maintenance of the international status and the Government of Canada's investment in that international status of the Whitehorse airport is for the tourism economy and broadening our economic basket, so to speak?

[Sandy Babcock]

Certainly our penetration in the European market would not be what it is today without the investment in the Erik Nielsen Whitehorse International Airport. Due to regulations through Canada Customs, the airport was at threat of being shut down from accepting international flights. Through investment from Canada and the Yukon, an expansion was made to accommodate an enlarged and more secure holding area for international flights.

Last year we enjoyed two flights a year from Frankfurt direct to Whitehorse, as well as one flight a week direct from Zurich, Switzerland. This year, I believe, we are seeing one flight a week from Frankfurt, but I do believe that there is exploration into the Asian market, because if you look at the globe, we're actually closer to Japan on a direct flight than Vancouver. So the improvements at the airport are extremely important. You have to keep in mind that when visitors fly into the territory, that airport is their first impression of the territory, and to have something that is more modern.... I've been to the airports in our sister territories and we're very fortunate to have the airport that we do. It makes a huge impact on tourism development.

[The Chair, Conservative, Leon Benoit]

Mr. Leef, it's great to have you at our committee. As you can see, the issues we discuss here are extremely important to the territory you represent.

Now we go to the member of Parliament for the Northwest Territories, Mr. Bevington.

Go ahead, please, sir, for up to seven minutes.

[Dennis Bevington, NDP, Western Arctic, NT]

Thank you, Mr. Chairman.

I'm pleased to be here as well, and welcome to our guests, Mr. Graham and Ms. Babcock.

I want to go after this issue of dollars and cents, because to me it's vital in the Northwest Territories. The federal government raised the borrowing limit in March to $800 million for our territory, but our borrowing right now—and a lot of it is utility borrowing that is self-financing—is at $575 million at the end of this fiscal year. We have the project, the Inuvik-Tuk highway, where we're looking at having to invest up to $100 million in that project to meet the federal commitment of $150 million. We have renovations to the Stanton hospital, which are going to run in excess of a quarter of a billion dollars. We have a number of fiscal requirements here. The $800 million might sound large, but when you take it in context with what it really is, it's going to be just a temporary measure and we'll be back to the government for more.

The question is really about what the government has put in this year's budget implementation bill. They put conditions for borrowing, and one of the conditions that I've seen through the internal documents of the Government of the Northwest Territories is that the government is going to include in the borrowing limit all self-financing debt. So this means that the types of investments that we're looking for in the Northwest Territories and in Yukon—as I see from the comments of Darrell Pasloski, the premier there—in hydro development, in transportation infrastructure, are going to be considerable.

Do you think that the self-financing part of the borrowing limit should be a condition that is set by the federal cabinet, or should we be lobbying this federal cabinet to make sure that is not part of the conditions of borrowing? I'll go to either of you to answer it if you could.

[The Chair, Conservative, Leon Benoit]

Mr. Graham.

[Hughie Graham]

I guess that's all a matter of perspective. If you see the federal government controlling the NWT's borrowing limit as setting a limit and not being able to increase it, then that's certainly an issue. But if the perspective is that the federal government is able to increase the borrowing limit to handle major infrastructure projects, then that matter of perspective is not an issue.