North

N.W.T. wants public input on royalties. MLA says even that process is opaque

The Northwest Territories government is seeking public input on its mining royalty regime, but Frame Lake MLA Kevin O'Reilly said the industry department needs to first publish an analysis of the royalties the territory has taken since devolution.

Kevin O'Reilly wants the gov't to publish an analysis of royalties taken since devolution

Industry Minister Caroline Wawzonek, centre, said the N.W.T.’s royalty regime is affected by the high operating costs of bringing mines to life in the North. (Avery Zingel/CBC)

The Northwest Territories government is seeking public input on its mining royalty regime, but Frame Lake MLA Kevin O'Reilly said the industry department needs to first publish an analysis of the royalties the territory has taken since devolution.

"There is no actual financial performance or totally up of what we got from the mining industry post-devolution versus the value of the commodities that have been exported," said O'Reilly during a committee meeting Monday.

He said that information will be useful as the territory creates regulations for its Mineral Resources Act, departing from the same rules used by the federal government for 60 years.

Industry Minister Caroline Wawzonek said detailed modelling on regime options, like calculating royalties based on the value of what leaves the territory, will come in the future and be reviewed by a third party.

"That actually is the heart of what we're trying to inform folks about," said Wawzonek, who noted the current system is profit-based and a value-based system has yet to be modelled. 

Frame Lake MLA Kevin O'Reilly. (Avery Zingel/CBC)

Right now the N.W.T. collects royalties based on a company's profits, and subtracts operation costs which are high in the territory. 

The government is considering a new regime that could include payments based on the weight of minerals mined, the total value of minerals leaving the mine site, a mine's income, a resource rent regime taxing a portion of income, or a profit-based model, which the territory currently uses.

According to the International Monetary Fund, governments should collect between 40 and 60 per cent of the before-tax cash flow generated by a project.

O'Reilly said the documents for public engagement suggest the territory is currently getting a fair share of royalties, but that by his calculations, the N.W.T. is capturing just five per cent of mineral values.

The public can make comments on the mineral resource royalty review until July 29, 2022, and access documents on the department's website

O'Reilly said that public website should be updated to include critical background reports including one authored by Andrew Bauer, Many Ways to Lose a Billion by Don Hubert, and a report on generating benefits through socioeconomic agreements.

Committee chair Katrina Nokleby said she wanted her dissenting opinion to Hubert's report posted to the public website if Hubert's report was to be included.

Transparency top issue in royalty debate

Wawzonek said her department will be meeting with three producing mines, the Chamber of Mines, exploration companies and the federal government, which still collects 50 per cent of royalties from the N.W.T.

They will also meet with a council of Indigenous governments signed on to devolution.

Both O'Reilly and department officials said transparency is one of the top issues surrounding the resource royalties debate. 

O'Reilly said a report commissioned by the territorial government details for the first time a breakdown of royalties in a way that has never been disclosed publicly before. 

Royalties paid in the N.W.T. between 1966 and 2019. Since 2014, $11 billion in diamonds has been produced in the N.W.T., and of that $250 million in royalties have been paid. (GNWT)

Since 2014, $11 billion in diamonds has been produced in the N.W.T., and of that $250 million in royalties have been paid. 

Since 2015, the territory has collected $90 million on average each year. 

Of that, 37.5 per cent goes to the government of the Northwest Territories and 12.5 per cent goes to Indigenous governments that signed on to devolution, said Menzie McEachern, assistant deputy minister for the N.W.T.'s minister mineral and petroleum resources division.

ABOUT THE AUTHOR

Avery Zingel

Reporter

Avery Zingel is a reporter with CBC North in Yellowknife. She is a graduate of the Carleton University School of Journalism and Political Science. Email her at avery.zingel@cbc.ca or follow her on Twitter @averyzingel.

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