Reforming the Mining Law:
A Comparison of Options

by Barry Barton

Rights to Crown-owned hardrock minerals in the Northwest Territories are issued under the Canada Mining Regulations.1 How they are issued plays a role in environmental and resources policy that is attracting increasing interest. This article, comparing the existing law with some possible alternatives, sheds light on the strengths and weaknesses of the possibilities for reform and sharpens our understanding of the existing system.2

Five Options for Mineral Title

1.  The Present System: Free Entry

Under the Regulations, the holder of a licence to prospect (which is freely available) has a general right to enter and locate (i.e., stake) mineral claims on Crown lands except lands within certain classes (e.g., national parks, cemeteries) or lands withdrawn from mineral activity by Cabinet order. This right to enter does not apply to lands where the mineral rights have been vested in Aboriginal owners under a settlement agreement, and it is modified on those Aboriginal lands where the Crown continues to hold the mineral rights.

Where lands are open, a licensee may stake mineral claims for exploration purposes. A claim is square or rectangular and can incorporate from 51.65 to 2582.5 acres (20.9 to 1045 hectares). It is staked by erecting a legal post in each corner, writing details on the post or a tag on the post, and marking the boundaries with other posts and blazing. The claim is then recorded at the Mining Recorder's office. To maintain the claim, the holder must perform exploration work valued at $4 per acre (0.4047 hectare) on the land for the first two years, then $2 per acre for each subsequent year, up to ten years total. The claim gives its holder the exclusive right to prospect and explore, but not to go into production. For that (and for holding ground for more than ten years) a mining lease is required. Mining leases are issued for 21-year periods, are renewable, and require the payment of royalties on production.

An alternative for reconnaissance and exploration is a permit to prospect, for terms of three years (five in the far North), in areas ranging from 20,000 acres to 71,000 acres (8094 to 28,734 hectares). The permit gives exclusive rights to explore and to locate claims to be held for a longer period.

Exploration activities are subject to the Territorial Land Use Regulations.3 Most work of any substance requires a Class A or a Class B permit issued by the Department of Indian Affairs and Northern Development (DIAND), but staking a claim and related basic activities do not require any land-use permit.

The system under the Canada Mining Regulations is called free-entry system because of three elements:

• Right of Entry. A miner has a right to enter most lands for mineral purposes

• Right to Acquire a Claim. A miner can stake a claim and acquire mineral rights by his or her own actions. No government official decides whether a claim can be issued, and the Recorder must record a claim on receipt of a proper application. Free entry involves self-initiated title or unilateral appropriation of title.

• Right to a Lease. When a claim holder applies in proper form and has the claim surveyed, he or she is entitled to a lease. The government has no choice in the matter.

2.  The Present System Plus: Modified Free Entry

A group of modifications would make slight but significant changes to the existing free-entry system:

• Map Selection. Claims could be acquired by designating them on a map rather than by staking on the ground. Map selection is already in use under free entry systems in parts of Manitoba, Saskatchewan, Quebec, and Newfoundland.

• Improved Withdrawals and Land-Use Planning. The Cabinet power to withdraw land from mining could be made more open, predictable, and flexible and could be linked with new land-use planning systems as they emerge. This would make withdrawals a more efficient and less intrusive instrument.

• Clearer Relations with Environmental Law. Rights under the Canada Mining Regulations could be more clearly subject to environmental law- which we should understand includes law relating to land use, pollution, rehabilitation, wildlife protection, etc. At present the Regulations are not clear and there is a risk that regulators will agree that mining legislation confers a right to mine that cannot be denied by action under environmental legislation. In addition, specific changes could link prospecting licences, representation work, and leases with environmental requirements.

• Agency to Have Discretionary Powers in Specified Cases. Powers could be accorded an agency to impose terms or conditions, or even to decline to issue claims. Such powers may be constrained by high standards or criteria to be met before the agency exercises them. It is an important general issue that discretionary powers in legislation can be written either in a broad and vague way or in a closely structured way that narrows the purpose for which they can be exercised, the standards that must be met, and matters that must be taken into account.

3.  Administrative Title

Under a system of administrative title, the legislation would provide for exploration and mining tenures with specified rights, procedures under which one applies for them, and a power for the minister or an official to grant or refuse applications or to grant them subject to terms. An administrative title system may be elaborated by stating criteria that the decision maker may, or must, take into account. Such systems are the norm in Australia where, in most states, environmental and land-use matters must be taken into account. A similar system is in effect in Alberta.

4.  Mineral Leasing

Under a leasing system, a company asks for land to be posted. If the department agrees (it may take environmental and land-use issues into account in deciding), competitive bids are invited for the land; a lease or other disposition is issued to the successful bidder. The most common form is cash bonus bidding, reflecting the premium that companies are prepared to pay the Crown to obtain the ground. Other forms of bidding are by work commitment, royalty, or profit sharing. The system provides some predictability for mining companies. It is most common in the oil and gas industry.

5.  Mineral Concessions

Mineral concession agreements are fashioned to meet individual needs and are negotiated separately for each proposal. They may be negotiated under statutory authority and take effect when signed, or they can stand outside the ordinary statutory regime and take full effect when they are ratified by a special act of the legislature. Once ratified, an agreement provides a separate legal code for a project, covering mineral rights and a range of subjects such as environmental control, water rights, taxation, royalties, local benefits, and infrastructure. Such ratified concession agreements have been used often in Australia.

Evaluation

These five mineral-title systems may be evaluated under seven criteria:

1. Security of Title

Legislation for the disposition of Crown mineral rights should function effectively, provide legal clarity about the status of the disposition, and suit the natural resources in question and the methods used to explore for and develop them.

2. Efficient Procedures

Procedures for the acquisition and maintenance of mineral title should cost the government or the private sector no more than necessary. Waste, delay, and complexity should be minimized.

3. Proper Return to the Crown

Different systems offer the Crown different opportunities to obtain revenues from its natural resources; i.e., to collect economic rents from mineral development.

4. Minimal Disturbance of the Environment

The process of acquiring and maintaining mineral title should muum~ze env~ronmentaHmpact.

5. Appropriate Decision-making Powers

To pursue sustainable development, mineral development should not compromise the ability of future generations to meet their own needs. Because we expect the state to safeguard such values as the environment and the needs of future generations, it is reasonable that a system of mineral title include effective government powers. We expect government to have power to act at the key decision points and to have powers that are flexible enough to respond suitably in different situations. The legislature must allocate discretionary powers carefully; it should state purposes and principles clearly and must make policy choices. Explicit criteria and procedures are needed to reduce uncertainty. Policies should be articulated, proclaimed, and enforced in plain view.

6. Integration of Legislation

The relationship between mineral-title legislation and environmental and land-use legislation should be clear, should not be contradictory, and should not raise false expectations. Environmental and land-use decisions should not be controlled or restricted by the mineral-title legislation.

7. Local Benefits and Other Societal Purposes 

There is significant support in the North for local-benefits agreements in connection with mining projects. Different mineral-title systems can be evaluated in relation to the opportunities they present for such agreements.

Application of these Criteria to
Different Systems of Mineral Title

Decisions about mineral title and environmental management in the Canadian North are made under conditions of uncertainty that are greater than those in comparable regimes. While the mining industry maintains "minerals are where you find them," others counter with "so are ecosystems, endangered species, and critical habitat." The nature and concealed character of the mineral resource, the lengthy process of mineral exploration and development, and the environmental and land-use constraints appropriate to a particular site contribute to high levels of uncertainty. This demands careful allocation of discretionary powers between developers and regulators at the different stages of mineral exploration and development.

Legislation should send consistent signals; such consistency is not apparent in the relationships between mining and environmental law. The free-entry system presumes that mineral activity is a permitted-in fact a priority-use of land, and present legislation permits entry on land for staking and for low-level activity without any land-use permit. This assertion of primacy influences regulators and fosters an assumption that, in any individual case, mineral activity can be constrained and regulated but not prevented. It leaves land-use managers open to legal claims of regulatory taking.4 It sends signals that compliance with the mining law confers a right to explore and to mine that puts mining law and environmental law into an uneasy and unsatisfactory relationship if one believes that decisions under mining law should not control environmental law outcomes.

The free-entry system embodied in the Canada Mining Regulations offers the virtues of speed, simplicity, and connection with the land itself. Its deep historical roots have been modernized considerably in Canada. While it may be particularly appropriate to mineral exploration, it may not reflect current values in its relations with other land-use needs. Free entry affords government agencies no discretionary power over the occurrence of mineral exploration, the location of claims, or the procurement of mining leases for production, except by withdrawing lands from mineral entry altogether.

Title to a recorded claim is not secure. It is difficult to stake a claim exactly in accordance with the law, and regulations give only moderate protection for bona Ode errors. "Claim jumping," where another explorationist overstakes a claim and challenges it for deficiencies in the staking or representation work, is quite legal and common. It is not easy to give an assurance to a lender or investor that there has been absolutely no error in the staking of a claim.

There is a tradeoff between the speed and simplicity of the free-entry system and systems that may be slower and more complicated but offer greater clarity in environmental and land-use outcomes. The process under an administrative title system may be slower, but it could give an explorationist a full (or partial) clearance on environmental and land-use matters as well as on mineral title. The ratified mineral concession agreement offers great flexibility and comprehensiveness, but may carry too high a price in uncertainty and opacity. Minor modifications to free entry may be something of a compromise, but carefully focused reforms may actually be able to deliver most of what is needed.

The different options vary considerably in structuring discretionary powers. Mining legislation can be improved in its procedures and in stating the proper considerations to be taken into account and the possible outcomes. Both mining interests and environmental and other land-use interests would benefit from increased certainty. It demands legislative commitment; we as a society would be obliged to decide more clearly the general principles that should govern the allocation of mineral title and the balancing of mineral interests with other interests.

Barry Barton is Associate Professor of Law at the University of Waikato in New Zealand.

Notes

1. C.R.C. 1978 c. 1516, made under the Territorial Lands Act R.S.C. 1985, c.T-7.

2. The full version of this paper is available from CARC's Yellowknife of lice: "Reforming the Mining Law of the Northwest Territories." ISBN: 0-9 1 9996-78-7. 3. C.R.C. 1978 c. 1524. 4. Under British Columbia v Tener [ 1985] 1 S.C.R. 533.

Summary of Application of the Evaluation Criteria

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