Staking Our Claim:
Reform of Northern Mining Law

by Kevin O'Reilly

Claims post on top of Tally Ho Mountain, Yukon, Photo by Kevin O'Reilly

For many years the Canadian Arctic Resources Committee has keenly scrutinized northern mineral development, including the Nanisivik, Polaris, and Faro projects, to name just a few. CARC's Northern Minerals Programme has examined the way government regulates northern mining, deals with community impacts, ensures reclamation is carried out, and improves sustainability in mining. This issue of Northern Perspectives presents summaries of some of the research we commissioned under the Northern Minerals Programme to build the agenda for reform of northern mining law (1).

Northern mining law has changed little since the settlement of western Canada in the 1800s. Almost anyone may obtain the appropriate licence and then begin to stake mineral claims on most lands in the N.W.T. and Yukon, regardless of the inherent value of the land or other users. In his paper, Barry Barton outlines several alternative methods for the disposition of mineral rights and evaluates them against a set of criteria that relate to sustainability. Mr. Barton is Associate Professor of Law at the University of Waikato in New Zealand and is the author of Canadian Law of Mining (2). He contends that, even with minor reforms to northern mining law, it is possible for the Department of Indian Affairs and Northern Development (DIAND) to better live up to national and international commitments on sustainability.

Malcolm Taggart's analysis of the economics of free entry in the Northwest Territories and Yukon suggests that the federal government is not managing our public resources well from a financial viewpoint. At least $10 million each year is dissipated through the free-entry system. He suggests this money could be put to better use by mining companies in actually developing properties or might be used by government to generate longer term employment in the renewable resource sector. Mr. Taggart, a life-long Yukon resident, is completing a masters degree through the Environmental Studies department at the University of Victoria with a thesis examining the life cycle of the Faro mine from the perspective of sustainability.

Recent case law on Aboriginal rights undermines the tenuous hold on resources established under our archaic mineral rights disposition system, especially in those areas with unsettled claims. Nigel Bankes, a former CARC chairperson, and graduate student Cheryl Sharvit carefully examine the entry of the N.W.T. and Yukon into Canada and the constitutional framework for mineral dispositions in the North and conclude that current regimes are not consistent with the law. DIAND does not appear to be dealing with this legal uncertainty in a public or transparent manner. Those registering new mineral claims in Labrador are informed by the provincial government that their rights are subject to outstanding Aboriginal land claims and may be subject to new terms and conditions, whereas in Yellowknife and Whitehorse it is "business as usual."

During the course of its Northern Minerals Programme CARC has actively promoted consideration of the changes suggested by our commissioned papers. Recent amendments to the Auditor General Act allowed CARC to file the first petition from-the N.W.T. challenging the consistency of the Canada Mining Regulations with the principles of sustainable development. Highlights of the petition, along with DIAND's responses, are found in several boxes in this issue (3).  It is important to note that DIAND will not commit to any substantial changes to northern mining legislation until after all land claims are settled. Given current policies and priorities, we are not optimistic that settlement of outstanding Aboriginal claims will occur in a timely or fair fashion. Serious mining reform appears to have again been pushed off into the future.

CARC participated in three recent reviews of mining legislation and policy in the N.W.T. Two were related to proposed changes to the Canada Mining Regulations to improve administration and to revise the royalty regime in light of BHP's Ekati diamond mine, and another concerned reclamation policy. These reviews resulted in changes that could be characterized only as "tinkering" rather than fundamentally or comprehensively revising the northern mining regime.

Total federal and territorial government revenues from the Ekati and proposed Diavik mines are estimated to be $190 million per year, while the companies will earn from $700 million to $915 million per year. Even with the minor adjustments made in the latest round of changes, the N.W.T. combined royalty and taxation regimes will remain among the lowest in Canada and the world. The impetus for imposing the royalty came in the 1995 federal budget; DIAND escaped major cutbacks by committing to raise revenues. Yet DIAND officials have admitted that the only "new" revenues to be raised are a result of the opening of Ekati and have nothing to do with Canada Mining Regulations changes.

Records obtained under the Access to Information Act reveal an astonishing example of "regulatory capture"-a term used to describe the phenomenon of industry agenda becoming government agenda-while DIAND was considering how to revise the royalty regime. As early as February 1995 DIAND officials were meeting with BHP executives to discuss the changes. Written proposals were exchanged and visits made to BHP's North American corporate headquarters in San Francisco. DIAND officials accompanied BHP personnel on a visit to the diamond-producing regions of Russia. All of this occurred well before any public discussion or debate or consultation with Aboriginal peoples, in breach of at least three constitutionally entrenched Aboriginal land-claims agreements.

Northerners are understandably upset that the issue of fair distribution of revenues has yet to be dealt with and that their share of those and other benefits is minimal at best. The territorial government share of revenues from Ekati will amount to about only $400 million over its estimated 25-year life; at the same time it will incur significant costs related to social services, environmental monitoring, and infrastructure.

Equally important, if not more important than the issue of royalties, is the question of local economic benefits. What has the federal government done to assist or encourage a greater retention of local benefits? Very little. Most diamond producing countries require valuation within the country but off the mine property, sorting for marketing, and some sales to encourage the development of a domestic diamond-processing industry. Indications are that Canada will not achieve what most other diamond producers have instituted. Federal authorities argue that their hands are tied by current legislation and trade agreements.

It may be too late to achieve greater benefits and fairer distribution of revenues for the North from the BHP project; the federal government has already issued BHP 21-year renewable mining leases that do not require diamond sorting or sales in the North, or even within Canada. In the oil and gas industry-in stark contrast to the mining industry-requirements for local benefits are standard practice, even for northern lands under DIAND's jurisdiction. Northerners deserve changes before Diavik, the North's second diamond gets the green light.

It's time for a comprehensive review of the Canada Mining Regulations and for changes to make them appropriate for the new millennium. Moreover, it is in the best interest of the mining industry to participate in a review of northern mining legislation and policy to improve certainty of tenure and investor confidence. CARC will continue to press for a full review of the outdated 1986 Northern Mineral Policy, revisions to DIAND's Sustainable Development Strategy, and other changes needed to make mining in the North more consistent with sustainability. We will also continue to be active in the development and implementation of a national environmental mining council and strategy to help focus national attention on these issues. There is a great need to reduce environmental effects from mining, better respect Aboriginal peoples' rights, and redistribute the benefits of development more equitably among all northerners and all Canadians.

Kevin O'Reilly is CARC's Research Director working out of the Yellowknife office.

Notes

1. The full versions of the seven papers of CARC's Northern Minerals Programme are available from CARC's Yellowknife office at $20 each or $125 for the set, plus postage and handling.

2. Barton. B.J. 1993. Canadian Law of Mining. Calgary: Canadian Institute of Resources Law.

3. The complete versions of CARC's Petition and DIAND's Response can be found on CARC's Web site: www.carc.org.

Ekati Camp, Lac de Gras, N.W.T.  Photo by Kevin O'Reilly

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