The Legal and Constitutional Basis for Benefits Agreements: A Summary

by Janet Keeping

When deciding whether, when, and how a particular mineral deposit should be developed, it is important to consider the impacts on local communities. People living in the vicinity of mineral developments often benefit little from mining projects-in fact, their communities often suffer. Fortunately, there is now significant widespread support for the principle that local communities should benefit from developments and be protected from-or at least compensated for-damage caused by them. Nowhere is this more important than in parts of the country where there are few other promising opportunities for economic development, for example, the N.W.T.

In the body of law applicable in the N.W.T. there are provisions requiring the negotiation of agreements to ensure that local people benefit from mineral development. These requirements establish both industry and government obligations regarding local benefits. Law sets out only a minimum standard, however, and other factors influence the level of benefit that will be extended to the local community. For example, public perception can lead to a greater sharing of wealth with local people: When project economics are favourable, companies and governments can be convinced that local people should receive a greater share. An appreciation of the advantages to the company of using local labour, goods, and services can have the same result, as can simple decency.

Requirements that benefits agreements be negotiated with local people can be found in two areas of law applicable in the N.W.T.: in the statutes governing the development of minerals in the North and in the various agreements resulting from the settlement of land claims. As well, the land-management regimes put into place pursuant to land-claims agreements require the negotiation of benefits with local people.

Whether a benefits agreement is required in a particular instance depends on the project's land-claims settlement region and on whether the mineral is a hydrocarbon (oil or gas) or of the hard-rock variety. Although the land claims differ in approach, every settled claim has some provisions for local benefits from mineral development. The oil and gas legislation applicable in the North requires that benefits plans be agreed, but mining legislation does not.

The Canada Petroleum Resources Act regulates the disposition of rights to explore for and work Crown-owned oil and gas in the N.W.T. Although this statute does not impose benefits requirements, it refers to the Canada Oil and Gas Operations Act, which does include such a requirement:

Although there is no requirement in the Canada Petroleum Resources Act that benefits be negotiated, or even discussed, before the issuance of rights, the "Call for Bids" document issued by the Northern Oil and Gas Directorate of the Department of Indian Affairs and Northern Development (DIAND) serves notice that the bidder will have to comply with the "Northern Benefits Requirements." In the opinion of the directorate, the statement of principles in these requirements "constitutes an obligation which is contracted upon submission of a winning bid." But the wording of the requirements is so vague and the reluctance of government to void licences for failure to fulfil such commitments so great it is unlikely they have any practical import.

Section 5.2 of the Canada Oil and Gas Operations Act repeats the prohibition on carrying out work before the approval of a benefits plan. The section defines "benefits plan" to mean

The section also addresses the matter of preferential treatment of certain categories of Canadians as follows:

COGOA applies to all oil and gas operations in the N.W.T., not just to those exploiting Crown resources. But where Aboriginal peoples own the oil and gas, they will establish the terms and conditions under which others will be allowed to extract minerals. In such cases, there should be no need for a government-approved benefits plan to ensure that "disadvantaged individuals or groups" participate, and it seems likely that the minister would waive the requirement for submission of a benefits plan.

Rights to explore for and produce hard-rock minerals in the N.W.T. are acquired pursuant to the terms of the Canada Mining Regulations. There is no imposition-or even mention-of a requirement that Canadians, northerners, or Aboriginal people benefit directly from mining activities authorized by the regulations. Nor is there any other explicit statutory or regulatory source for such a requirement.

Nevertheless, as a matter of political reality, any mining project of significant size is likely to be required to demonstrate that local benefits will flow from it. A settled land claim may impose such a requirement. Where there is no settled land claim, other means may ensure benefits to the local community. For example, in connection with BHP's diamond mine, the federal government tied the issuance of a water licence under the Northwest Territories Water Act to the achievement of significant progress on the negotiation of benefits agreements.

The land claims settled in the N.W.T. have given beneficiaries title to some subsoil parcels and to greater amounts of surface lands. Where Aboriginal people own both the subsoil and the surface rights involved in a proposed mineral development, they may, within limits specified in the claim and generally applicable law, set the terms and conditions for the development, including the extent to which local communities benefit from it. An exception would be where mineral rights were granted by government before the signing of the claim. In this case, special provisions of the land claim will guide the actions of the rights holder. The Inuvialuit Final Agreement, for example, provides for such circumstances in the section on Participation Agreements.

As owner, the Aboriginal group may formulate rules and procedures to govern management of the lands. Through their Land Administration, the Inuvialuit have developed a detailed set of such rules and procedures, as have the Inuit. Although there has been less activity in the Gwich'in and Sahtu regions, these groups have developed some procedures to handle requests for the use of their lands for various purposes.

Since the Crown still owns the vast majority of minerals in the North, often only surface indigenous lands will be required for a development. Each of the claims addresses this state of affairs. The Inuvialuit Final Agreement requires that participation agreements be negotiated where the use of the surface is more than casual or temporary. The Nunavut claim requires the negotiation of Inuit impact and benefits agreements in conjunction with what are called "major development projects." The Inuvialuit and Nunavut agreements detail provisions on the content of participation and Inuit impact and benefits agreements, respectively.

The Gwich'in and Sahtu agreements rely upon the Canada Mining Regulations, which do not require benefits agreements for mining projects. These two agreements and the Nunavut claim require consultation in anticipation of mineral developments, and local benefits are among the matters considered suitable for consideration in such consultations.

The provisions of the various land-claims agreements are protected by s. 35 of the Constitution Act, 1982. They are therefore part of the "supreme law" of the country and override inconsistent laws. Each land-claim agreement is enacted by statute; each statute states the land-claims agreements are to prevail over conflicting laws.

Aboriginal peoples' experience with mineral development has not engendered confidence that they will benefit from future developments. In April 1997, The Globe and Mail reported the views of local people about the mining developments at Voisey's Bay, Labrador, as follows:

The legal requirements for benefits agreements show that some steps have been taken to try to improve upon the past, but grave deficiencies remain: There is no statutory requirement for local benefits from hard-rock mining projects; oil and gas legislation does not impose benefits requirements until after rights have been issued; benefits requirements vary from land claim to land claim in a way that is difficult to justify; law (on the fiduciary duty of the Crown) that might offer some protection to Aboriginal people living in areas where a claim has not yet been settled is vague and poorly understood and leaves them more vulnerable than those in an area where a claim has been finalized.

This list of deficiencies raises questions about the development of this body of law: Is this piecemeal approach yielding satisfactory results? Do the bilateral agreements between local people and industry produce fair arrangements that ensure appropriate benefits for local people? What is the proper role of government in this process? If bilateral agreements are to remain the primary tool for assurance of local benefits, should they be negotiated within a legislated framework that applies across the N.W.T. and to all developments of consequence?

It appears that the law could do more to ensure that mineral development brings substantial benefit to northern communities.