Mr. Chairman and members of the committee, thank you for the opportunity to speak to you today about the northern regulatory environment.
Diavik is a diamond mine that produces six to eight million carats of gem quality diamonds per year. Diavik is owned 60% by Rio Tinto, a diversified multinational mining company, and 40% by Harry Winston, a Canadian miner and jewellery retailer.
Diavik is remotely located 300 kilometres northeast of Yellowknife at Lac de Gras, which has only air and seasonal ice road access. Mine construction commenced in 2000 and production started in 2003. There is an expected mine life of another 10 years, to 2023. Since 2000 we've spent $5.2 billion, of which $2 billion was with aboriginal businesses, and $3 billion was with northern businesses. We currently average 642 northern employees and 313 aboriginal employees.
I've been with Diavik since the exploration phase in the mid-1990s. I assisted the project through baseline studies, environmental assessment, permitting, permit renewals, and am now focused on closure and reclamation planning. Along this regulatory journey we have faced many challenges. The ones I'd like to focus on today are the current operational regulatory challenges as compared with pre-development or environmental assessment challenges. I'd like to provide three specific examples which I think illustrate the type of issues we face in the northern regulatory environment.
First is fish habitat compensation. The Diavik mine site is on an island surrounded by a lake 60 kilometres long. The mine footprint covered four very small lakes on the island. The Department of Fisheries and Oceans issued a subsection 35(2) authorization under the Fisheries Act for the loss of fish habitat in these lakes and connecting streams. As a condition of the authorization, we were required to provide compensation for the lost fish habitat following the DFO policy of like-for-like replacement of habitat near where it was lost.
For Diavik, given its remote location, the only compensation options near the mine site were in pristine natural areas. Aboriginal communities in particular did not see the merits of fish habitat enhancements to a pristine environment hundreds of kilometres away from where people might use those fisheries resources. Diavik worked with communities to try to change the DFO habitat compensation work so that it could be done near communities instead. DFO remained firm that its policies did not allow for this.
We're now in our second year of a $4 million fish habitat construction project that doesn't appear to be valued by anyone other than DFO and fisheries researchers.
Second is effluent standards. The primary regulatory controls in a water licence are the limits for mine effluent discharges. Mine water management is one of the most important aspects of mine environmental design and management. Effluent limits should be predictable. They should be based on science and engineering with established and documented development procedures. Prior to development, mine operators must know the effluent standards they will be required to meet.
The Northwest Territories Water Act provides for the Minister of Aboriginal Affairs and Northern Development to make regulations prescribing effluent and water quality standards. This would provide the kind of certainty developers are seeking. Unfortunately, Aboriginal Affairs and Northern Development Canada has not done this and it has been left to the land and water boards to determine effluent limits on a case-by-case and sometimes ad hoc basis. While the land and water boards are attempting to standardize methods for setting limits, these methods are unlikely to be implemented successfully without supporting regulations from Aboriginal Affairs and Northern Development Canada.
Third is closure financial security. In 2000, Diavik accepted financial security requirements against closure and reclamation obligations, which increased over time to a maximum of $212 million. The crown currently holds $201 million. The amount is significant and was influenced by historic and ongoing local mine closure concerns, coupled with the location of Diavik on an island in a valued lake. As a condition of acceptance, provisions were included to allow the amount of security to be revised over time based on actual mine performance and practices.
The Wek'eezhii Land and Water Board has the jurisdiction to determine the amount of security for Diavik.
The Wek'eezhii Land and Water Board undertook an open and transparent three-year process to review and require revisions to our closure and reclamation plan, and to re-estimate the required financial security based on expert submissions by both Aboriginal Affairs and Northern Development Canada and Diavik.
The Wek’eezhii Land and Water Board determined that the financial security was to be reduced $131 million due to Diavik's significant investment into managing our closure and reclamation liability. Despite the Wek'eezhii Land and Water Board decision, the amount of security held by the crown has not yet been reduced, and Aboriginal Affairs and Northern Development Canada officials in Yellowknife are recommending adding an additional $30 million of security. The actions of the Aboriginal Affairs and Northern Development Canada officials in this case do not support the Government of Canada's agenda to reduce regulatory duplication and increase certainty for developers.
The examples that I've provided are intended to illustrate some of the regulatory challenges facing a mining operation that has demonstrated achievements in environmental and socio-economic performance in the Northwest Territories.
In the three examples above, the federal government are both the cause and the solution for the regulatory challenges. There exists a tremendous and ready opportunity for regulatory improvement in the Northwest Territories.
Thank you.