Diamond Mining and the Demise of
Environmental Assessment in the North

The BHP Environmental Assesment Panel meeting in Kugluktuk (Coppermine)

Introduction

On 8 August 1996, the Hon. Ron Irwin, Minister of Indian Affairs and Northern Development, and the Hon. Don Morin, Premier of the Government of the Northwest Territories, held a press conference in Ottawa to announce the federal Cabinet' s decision on a proposal by BHP Diamonds Inc. and Dia Met Minerals Ltd. to mine diamonds at Lac de Gras. Some weeks before. After extensive public hearings in the North, a four-person environmental assessment panel had concluded that the mine would have few negative environmental consequences and recommended that it proceed. Many intervenors were highly critical of how the panel carried out its business. The Northern Environmental Coalition (CARC, Canadian Nature Federation, Ecology North, and World Wildlife Fund Canada) was visibly disappointed with the panel' s superficial report and overly general recommendations. Feeling powerless, some environmental and aboriginal groups openly discussed litigation as they digested the long-term meaning of the report.

Most, but not all, northerners want the mine-and in light of massive unemployment in the North a good case can be made for it-but virtually everyone involved in the public hearings expected the panel to recommend clear, detailed terms and conditions to minimize environmental costs and maximize economic benefits to aboriginal peoples and other northerners. As well, it was widely hoped that the panel would address cumulative impacts in the region of the proposed mine and advise how the mine might accelerate the development of additional diamond and precious and base metal mines in the Slave Geological Province north of Yellowknife. These expectations were raised, in part, as a result of information presented in the hearings by Alex Maun, an aboriginal resident of Papua New Guinea, who showed that the Australian-based BHP had caused an environmental mess there at its Ok Tedi mine. Mr. Maun suggested that BHP also had a poor track record in dealing with aboriginal peoples. There is some evidence that BHP manipulated the Papua New Guinea government into drafting legislation that would have made it a criminal offence for those directly affected by Ok Tedi to sue BHP. Some observers were concerned that BHP might act in a similar manner towards the territorial government based in Yellowknife. While the panel had made little of this information, the August press conference was crowded, reporters were primed, and ministers looked a little nervous.

The Decision

Mr. Irwin announced that the federal Cabinet had accepted the recommendations of the panel and had approved the project in principle, freeing the proponent to apply for permits and licences to construct and operate the mine. But this was not all. He then went well beyond the recommendations of the panel and a less-than-informative press release issued by his department, saying:

the federal government will negotiate abinding environmental agreement with the company. This agreement will cover all those issues which are normally not part of licensed terms and conditions. It will provide a visible record of the commitments of the company to carry out environmental monitoring programs and to prevent and mitigate environmental impacts. Among important tools for ensuring the project impact is properly managed are the impact benefit agreements. And the company is negotiating with Aboriginal communities affected by the project. These are critical and are meant to ensure Aboriginal communities benefit from resource projects which occur in their backyard. It is important for the government of Canada to get assurance that significant progress is being made on both the environmental agreement and the impact benefit agreements before final approval is given.

Mr. Morin, supported by Mr. Irwin, noted the importance of the next 60 days, during which both governments expected "significant progress" to be made towards finalizing these agreements. Reporters pressed for details. What would happen if "significant progress" was not made? Ministers refused to be drawn, and expressed confidence that everyone would work hard towards this end. CARC was pleased that Mr. Irwin was committed to an independent, legally based environmental monitoring agency, which the Northern Environmental Coalition, aboriginal peoples, and even some government agencies had recommended but which had not been supported by the panel. Progress on a territory-wide strategy to protect key environmentally significant areas-a particular objective of the World Wildlife Fund-was also promised by governments.

Curiously, during the 60-day period and in spite of CARC' s intervention, DIAND issued an amendment to BHP' s land-use permit covering its exploration activities at Lac de Gras. The amendment allowed BHP to begin construction of the project during the 60-day period and before Cabinet approval.

There was much in the federal Cabinet's decision to applaud, and CARC issued a press release that cautiously did so. Yet Cabinet's decision, as it currently stands, has been made despite the environmental assessment and panel recommendations, not because of them. CARC believes that Cabinet's decision on terms and conditions under which the development may proceed owes more to political action and lobbying after the environmental assessment report was made public than to the report itself. While supportive of the terms and conditions announced by ministers, particularly the promised independent monitoring agency and benefit agreements, CARC remains deeply concerned about three issues-aboriginal land-claims and treaty entitlement agreements, marketing Canadian diamonds, and the capacity of the federal government to regulate resource development in the North. None of these issues was addressed by ministers, and only the first was mentioned, and then only cursorily, by the panel.

Aboriginal Land Claims and Treaty Entitlement

During the public hearings, senior managers from the Department of Indian Affairs and Northern Development stated unequivocally that Dene would not be allowed to select land within BHP' s 4000-km2 claim block as part of ongoing land-claims and treaty entitlement negotiations. Prohibitions in the federal landclaims policy, and the fact that the company' s property was in an "advanced" stage of exploration, were offered as reasons for this refusal. As well, DIAND managers said that Dene had not attempted through the now defunct 1990 Dene/Metis Final Land-Claims Agreement, to "withdraw" land in this region from disposition-essentially an expression of interest by aboriginal peoples in selecting the land.

CARC refuted this position in the hearings by noting the federal land-claims policy limits land selection to those areas over which both traditional and contemporary land use can be shown-tests passed by Dene-and reminded all that Inuit had selected mineral properties in an "advanced" stage of exploration through the Nunavut Agreement. CARC argued that the national land-claims policy should be implemented evenhandedly and fairly, not capriciously. In the hearings, the Yellowknives Dene First Nation tabled maps they had used in land-claims negotiations in the late 1980s and during the North Slave land withdrawal negotiations illustrating the Dene interest in owning land at Lac de Gras well before diamonds were discovered there. Land ownership at Lac de Gras remains unclear, and neither the report of the environmental assessment panel nor government's response to it has helped to resolve this issue.

BHP / Dia Met bulk sampling plant at Lac de Gras

Marketing Diamonds

The diamond trade is highly secretive. Most of the world's diamonds are not marketed in an open manner according to free market principles; they are handled by the London- and South African-based DeBeers and its Central Selling Organization-a very successful cartel that controls the volume of diamonds entering the world market and fixes their price. BHP Diamonds Inc. offered little information in its environmental impact statement (EIS) and in the public hearings on its plans to market Canadian diamonds. In a summary of its EIS, BHP stated:

The Proponent plans to sell rough diamonds on the world market at world prices. Sales may be directly to dealers or manufacturers; through joint venture marketing entities with established industry vendors or agency arrangement; or by auction or tender.

This circumlocution kept all the proponent' s options open, but was questioned neither by the environmental assessment panel nor by federal agencies even though our national newspapers report that BHP Diamonds Inc. and DeBeers are discussing diamond marketing. As a result, federal politicians still have to deal with a key policy question: Is Canada, a country now proud of its free-trade credentials, prepared to see its diamonds marketed by a cartel? If so, under what terms and conditions? Might there even be a case for referring this issue to the competition tribunal to ascertain the legality of this method of marketing Canadian diamonds?

These important issues question the stability of the world diamond market. The proponent plans for at least 25 years of diamond production at Lac de Gras. Northerners therefore look forward to long-term jobs and the federal government anticipates more than $2 billion in taxation and royalty revenues during the life of the mine. But are we building on shifting sand? This grand scenario must be depressingly familiar to those who fifteen years ago predicted massive oil and gas development in the Beaufort Sea region. That particular vision floundered when another cartel, the Organization of Petroleum Exporting Countries (OPEC), could not maintain a high world price for oil under conditions of plentiful and growing supplies. The laws of supply and demand eventually replaced political wishful thinking, and the world price for oil collapsed, making oil and gas exploration and development in the Arctic uneconomic. Could this scenario overtake the diamond market? As environmental assessments into oil and gas and base and precious metal projects invariably consider information about product marketing, the panel might, at least, have queried this possibility. Indeed, projects are rarely assessed until proponents provide concrete information about their product marketing arrangements.

Federal Capacity in the North

The performance of some federal departments during the BHP review was appalling. Human Resources Development Canada, the main federal agency on training and employment, failed to make a presentation. The sole Department of Fisheries and Oceans representative at the September 1996 NWT Water Board hearing on BHP's water licence application left before presenting or questioning. DIAND was criticized by CARC and others at the hearings for its declining commitment and capability to regulate resource development in the North. Although DIAND personnel vehemently denied those assertions, a recent internal audit of its land and water management related to mining confirmed many of our concerns. DIAND is ill-prepared for implementation of the new Canadian Environmental Assessment Act and still, as pointed out in the recent audit, does not have a mine site reclamation policy or a policy on sustainable development.

The blame should not fall on the few public servants left to defend the public interest in the BHP review and in similar matters. Indeed, the strong federal and territorial government support for the BHP project at the outset of the hearings in Yellowknife seriously constrained any public servant from raising concerns or issues with this project.

The clearest demonstration of the faltering federal commitment and capability in the North is the consensus on the need for an independent monitoring agency for the BHP project and perhaps for future mines in the region. When combined with a lack of confidence in government and industry to regulate development, the current inadequate regulatory systems and declining resources for monitoring, inspection, and enforcement have given birth to the legally binding environmental agreement and independent monitoring agency for the BHP project.

The Environmental Assessment

For more than 20 years the federal government has required northern development projects to be screened and assessed for their environmental and social impacts. The 1973 to 1977 Berger Inquiry into a proposed Mackenzie valley gas pipeline was the first major environmental assessment in the North. Others followed. CARC has intervened in numerous such assessments of oil, gas, and mineral exploration and development. Our involvement is documented in the pages of Northern Perspectives and in our briefs and presentations to the National Energy Board and various environmental assessment panels. Berger set a highwater mark for public patticipation and scientific rigour for assessment of resource development that, in our experience, has been steadily eroded over the years.

We conclude that the environmental assessment of the BHP diamond mine was fundamentally flawed; the process was neither rigorous, comprehensive, nor fair. This, we believe, is why the recommendations of the four-person panel are weak and insipid. Once more, environmental assessment itself is at issue. This is why in this issue of Northern Perspectives we have printed CARC's 21 June critique of the BHP Diamonds Inc. environmental assessment process and our advice to Hon. Sergio Marchi, Minister of Environment, and Hon. Ron Irwin, Minister, Indian Affairs and Northern Development, offered on 21 June and 26 July. The decision on the proposed diamond mine is now finalized, but the need for comprehensive, rigorous, and fair environmental assessments remains. The flawed process and recommendations from the panel have only fuelled the requirement for an independent monitoring agency for BHP's diamond mines.

CARC has been disappointed before in the conduct and outcome of environmental assessments, but this most recent experience prompts us to question both our participation in future assessments and their value to the public under current rules of conduct. Some observers argue that too much is expected of environmental assessments, which try to be all things to all people, and this comment is well placed, for concerns of marginal relevance to development projects are inevitably raised by citizens during public hearings. Yet this fact should neither prevent nor preclude a detailed and technical assessment of development projects.

The early 1990s witnessed a major policy and legislative debate that culminated in the January 1995 proclamation of the Canadian Environmental Assessment Act (CEAA). When announcing the BHP diamond mine assessment in December 1994, Deputy Prime Minister Sheila Copps assured that it would be conducted in the "spirit" of the CEAA. It was not. The Canadian Environmental Assessment Agency will soon adopt procedures to guide the conduct of future panels; however, the draft procedures now circulating would, if adopted, entrench the weaknesses, inadequacies, and failings of the BHP assessment. This must be avoided. This summer the CEAA circulated discussion papers to streamline environmental assessment and to recover costs of such assessments from industry. If Cabinet approves proposals in these papers, comprehensive and public environmental assessments may be a thing of the past.

Environmental assessment in the North is in crisis, the timing of which could not be worse. Additional diamond, base, and precious metal mines and associated infrastructure are planned for the Slave Geological Province north of Yellowknife. The giant nickel and cobalt deposit at Voisey' s Bay in Labrador is well on its way to development. How will Ottawa respond? Surely not with the tawdry and tortuous process used to assess the proposed BHP diamond mine? The North deserves better.

Kevin O'Reilly is CARC's Research Director.