Natural resource development in the Canadian North is emerging as one of our country’s most interesting economic policy issues. Climate change, mineral prices, Aboriginal relations, northern sovereignty, and environmental review efficiency are environmental review efficiency are among those issues that are closely integrated with northern resource development and will influence the pace of such development.
The relationship between natural resources and northern development has been hit and miss throughout Canada’s history. It remains unclear to this day whether the necessary array of variables will fall into place, leading to a sustained boom, or whether key pieces will go missing and the full economic potential again missed. In this sense, one could have either an optimistic or pessimistic take on future development.
On the positive side, there are three variables that should lend an air of optimism. First, the level of mineral exploration spending underway in northern Canada is significant. In recent years, around one of every twenty dollars in mineral exploration worldwide has been spent in the Canadian territories as companies seek potential developments in uranium, diamonds, gold, copper and other minerals.
Second, the question of northern sovereignty has gained political potency. The planting of a Russian flag on the seabed, disputes over the Lomonosov Ridge, expeditions by countries such as Denmark and US questioning of the sovereignty of Canada’s northern passage, are among recent developments. Canadian plans to acquire northern vessels and invest in a deep-sea port in Nunavut have added to this profile. Furthermore, all federal parties in Ottawa are reading the winds of change and developing policy positions.
A third positive consideration relates to the strides made by Canadian businesses in Aboriginal relations. Industry-Aboriginal partnerships have become common practice. Over 50 socio-economic agreements have been signed in recent years. These agreements can bring jobs, supply contracts, training and related benefits to Aboriginal communities. Since the discovery of diamonds in 1991, the GDP of the NWT has tripled, school graduation rates dramatically increased and dependence on government income support reduced by half. This progress is mirrored in The Mining Association of Canada (MAC’s) Toward Sustainable Mining initiative where a new framework and performance measurement protocol have been adopted and where an MOU with the Assembly of First Nations is being implemented.
Among the causes for pessimism, a key impediment to sustained northern development remains the cost and complexity of infrastructure. As one example, a Bathurst Inlet Road and Port proposal has been in play for several years as a possible method of accessing and transporting resources in northern NWT and Nunavut. Although the economics of a number of mining opportunities could be enhanced through the existence of such infrastructure, various incarnations of the project have been in discussion for the better part of a decade without real progress. It is evident that the territorial tax base is far too small to support these kinds of infrastructure expenditures, while those funds that do come from Ottawa could be diverted toward other social or economic priorities. Further infrastructure challenges are being seen in ice-roads, where the effect of global warming is diminishing the seasonality of these routes. Diamond companies in the NWT, for example, can no longer depend upon the availability of a three-month ice-road to facilitate their construction and operational activities.
Another infrastructure-related obstacle relates to the fact that Canadian governments have not been fulfilling their fundamental role of mapping the country and building modern databases of geoscience information. Annual investment in this area has fallen by half over the past two decades, with the consequence that much of the northern territories remain poorly mapped. Business requires quality geological information in order to improve the effectiveness of its exploration spending. Governments are showing signs in recent years of addressing this challenge, although this requires a long-term commitment.
A second main impediment to resource development relates to uncertainty around the Aboriginal consultation and revenue sharing theme. In response to court rulings, governments have not yet provided clarity regarding how they and industry should best accommodate Aboriginal interests – a question further complicated through recent rulings attaching importance to the “spiritual value” of geographic claims. Public policy clarity is also lacking with respect to what constitutes a proper sharing of resource revenues and from what funding source. The existence of unsettled land claims adds a final layer of complexity affecting the development of northern resource projects.
If industry, government, and Aboriginal groups can successfully address these main obstacles, then it seems likely that business investment in resource development will be able to help break the pattern of economic and social dependency on the south that has existed for so many decades in Canada’s North. It will take some time to observe the evolution of this issue — before deciding whether one should be optimistic or pessimistic in this regard.
By: Gordon Peeling and Rick Meyers
