Open Forum with Prime Minister Stephen Harper – Building upon Our Vast, Untapped Natural Resources

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From coast to coast this vast country presents a seemingly unlimited and diversified source of potential natural resources on top of current exploration projects.  Heading into the future, tapping into those resources will be critical for the nation’s economic well being.  Of course there has always been that tricky balance between what’s good for government coffers and what is good for the environment.  While it’s fallacy to believe the two sides will ever truly work together in harmony, it’s essential that a common middle ground be determined. 

The fundamental categories within the resource sector are energy, minerals and forestry, with a fourth natural resource being water, with a number of enhanced technological developments in a number of water-borne hydro electric projects.

In early March, Prime Minister Stephen Harper became the first ever Prime Minister to attend and address the Prospectors and Developers Association of Canada’s International Convention, Trade Show and Investors Exchange, which plays host to nearly 30,000 delegates from 126 countries around the globe, making it the largest annual mineral convention in the world.  Among some of the other dignitaries on hand were the likes of Peru’s Vice President Marisol Espinoza. Glenn Nolan, President of the Prospectors and Developers Association of Canada representing 10,000 members, made the opening remarks as he always does.

“While we are perhaps best known for our convention, which is the largest event of its kind in the world, it also injects about $80 million into the local Toronto economy while supporting more than 1,000 jobs for that time period.”

Nolan was also quick to point out that the federal government’s contribution to developing the natural resources industry has been instrumental.

“It plays a critical role in helping the mineral industry succeed in contributing to the economy of this country,” he says. “It supports taxation policy including investment incentives like the Mineral Exploration Tax Credit that encourages Canadians to invest in exploration and allows many early stage projects to find the financing they need.

Through Parliament, it develops legislation and regulations that effect resources and land management. It also responds to constitutional obligations with respect to Aboriginal and treaty rights and encourages economic development through training initiatives and investment in infrastructure and geoscience research.”

Harper’s participation in speaking to delegates at the convention went a long way in showing just how important the resources sector is in Canada. Under the constitution, responsibility for the natural resources sector belongs to each of the provinces and territories, but the federal government does have jurisdiction over offshore resources, trade and commerce, statistics, international relations, and boundaries.

Throughout the four day event in downtown Toronto there was definitely a stronger feeling of optimism in the air, likely due to the upswing in stock prices and equity financing compared with a year ago when there was a whole lot of doom and gloom.  Recent mergers and acquisitions have also picked up substantially, providing a shot in the arm.

But despite the recovery is tenuous and hundreds of companies are still struggling to survive.

It’s expected the mining and minerals sector will require an additional 100,000 skilled workers into the labour force in the next decade, which represents about one third of today’s entire total workforce. Labour market bottlenecks have been, and will continue to be, a constant economic challenge and an impediment to growth.

“We as the federal government are not primarily responsible for education and training but we do important investments and make large-scale transfers to the provinces and have undertaken programs to encourage apprenticeships, including the Canada Apprenticeship Loan.”

Building for the Future 

The minerals sector provides billions of dollars to the Canadian economy through 300,000 jobs and taxes forwarded to the federal government. Harper was asked to assess his view on the importance of the industry.

“When we talk about superior performance in the Canadian economy this sector is a big part of Canada’s success story. It has been a growth sector not only for itself but also drives other sectors that supply this industry and it’s unique because of its geographic spread right across the country.”

Exploration companies are often referred to as the research and development arm of the natural resources industry, and especially with respect to mining and minerals.

There are thousands of these companies raising large amounts of money so that projects can come to fruition. This has been extremely challenging during the past five years, especially for some of the juniors, who have found it difficult to raise capital because of their dependence on the stock markets, which of course haven’t been nearly so charitable in their support during the global economic downturn. Harper was asked point blank if there is anything his government can do to provide support to these companies during this particularly difficult period.

“We’re fortunate in this country to have one of the strongest banking and financial sectors in the world, but there are other things that we have been trying to do, in particular renewing the Mineral Exploration Tax Credit. There are other things we are doing as a government that we think are undertaking such as the geo-mapping programs that we funded particularly in northern Canada. We know that this particular business is like finding needles in a haystack – those minerals in very large geological areas so one of the things we’ve been doing is making sure that we map the most promising areas in very detailed ways. We may not be able to find the needles, but we can point the industry towards the haystacks.”

“We want to build long-term growth in this country. We’re trying to move forward on every front, not just on tax measures for this and other industries.  What can we do for research and infrastructure and innovation and skills training?”

Harper was non committal on whether the Mineral Exploration Tax Credit would become a permanent staple, saying he’d leave that up to the ministry of finance, which at the time was still headed up by the late Jim Flaherty, and now led by former Natural Resources Minister Joe Oliver, who always made a point of attending PDAC each and every year.

Maintaining competitiveness through advancements in technology and general infrastructure is essential for Canada to remain at the top of the leaderboard; something Harper acknowledges can be and will be achieved through responsible resource development. From the government’s perspective there are three key areas the prime minister believes will lead that mandate to success: the first being to keep business taxes down; the second would be the aforementioned responsible resource development; and third is skills training.

“Skills training is important to every sector,” Harper says.  “It won’t be that every project gets approved but it will be that each one undergoes rigorous evaluation. We have approved 26 of 32 mining projects since taking over as the government. We know that there are still too many people looking for work, even if it is much better than other developed countries.  At the same time we have many openings but not the properly trained people to fill those jobs.  That’s why training is so important.”

“We are absolutely committed to world class standards,” Oliver adds.  “If there is a jurisdiction that has more stringent standards that we believe are necessary to make us better we will of course move in that direction.”

Improvements in reporting standards are something that can always be improved not only here in Canada, but throughout the world, where transparency amongst certain governments is not at the level of where it should be.  This is something Oliver had been tackling for quite some time.

“We want a disclosure system for the extracted industry that is reflective of international norms and achieves the objective that was originally behind this policy which is to make sure that countries where money is received by mining and oil & gas companies, that in those countries there is adequate disclosure so the population understands what has been received that helps to ensure the money is being used for the public good,” he says.

Regarding the final decisions on whether a project moves forward, Harper notes there are many factors involved, including the need to cap pollution concerns.

“Our decisions are largely driven by the rigorous environmental assessments that we have undertaken by scientists and by experts,” he remarks. “We also always encourage companies to engage with local communities, both Aboriginal and non-Aboriginal Canadians and not just from the legal point of view of engaging, but because it’s always better to do business when all lines of communication are open when local people understand the advantages that are there for them.”

Despite the resources sector being one of the main driving forces of the economy, the percentage of real GDP has fallen steadily in Canada since 1998. This does not take into account the impact of price changes and the significant level of fixed investments needed to develop the resources. This share stabilized in 2010. Since then it has risen slightly, but it’s crucial the upswing continues.

Natural resource industries have accounted for 14% of real GDP in Canada since 2011. This compares with 18%, on average, between 1986 and 1996. That being said, the percentage, which is about the same as in Australia, is still significant.

In 2011, natural resources accounted for about 15% of nominal gross domestic product (GDP) and about 792,000 jobs. The ripple effect into other sectors is also quite noteworthy, such as: the purchase of goods and services from construction, machinery, professional services and transportation, which puts money into those areas of the economy as well. According to figures from Statistics Canada, the indirect contribution to nominal GDP was estimated at about $70 billion in 2011, or about 4% of Canadian nominal GDP. That equates to about 800,000 jobs in those other job sectors.

As of 2014, there are more than 600 major Canadian resource projects planned over the next decade, with a value of about $650 billion in investments. Some of those projects – about $150 billion worth – are already in the early stages of development.  The remaining projects are proposed investments over the next 10 years, including approximately $200 billion in major projects that have received approvals and secured financing, and $300 billion in projects which are in earlier stages of planning but must go through the prerequisite environmental reviews, feasibility studies and secured financial procurement.

First Nations

Canada’s new Natural Resources minister Greg Rickford has continued the theme set out by his predecessor Joe Oliver in stating that First Nations must be an integral part of the process for any new energy or mining project.

“We’ve seen that when those communities are involved in the environmental assessment process… they support these projects because they understand them and get an opportunity to put their essential input into the environmental aspects of responsible resource development,” Rickford says.

Rickford, who represents the riding of Kenora in Northern Ontario, has had a long and fruitful relationship in working together on issues of importance to First Nations citizens, including the huge mineral development project known as the Ring of Fire.  As part of an exclusive interview with CBJ earlier this year with former Prime Minister Brian Mulroney, he too noted a need for more collaboration on resource development between government, the private sector and First Nations.

Former NDP Ontario Premier Bob Rae spoke at PDAC, specifically on the topic of First Nations communities and the impact of the natural resources sector. Rae is representing the Matawa Tribal Council in their negotiations with the province of Ontario over the Ring of Fire project, which has been faced with enormous challenges over the past year.

He believes a number of changes still must happen to achieve further colonial development for First Nations. 

“We need institutions to accept change, and of course that’s not easy to do,” Rae says. “It’s a challenge we’re facing in The Ring of Fire and it’s a challenge we’re going to be facing in a number of others as time goes on.  From a practical point of view, what we’re trying to do with The Ring of Fire is to create a process of discussion around the environment, around infrastructure, around the well being in communities and also around revenue sharing.  Historically, Canada has not done very well on this issue of partnership and opportunity,” he says.

Going beyond that, Rae says it will be up to the individual companies, along with the federal and provincial governments to come up with a sensible approach in terms of moving this agenda forward, where the country can maximize its natural resources potential, but at the same time remaining true to environmental commitments.

“I hope that everyone understands The Indian Act is an act of the Canadian Parliament,” Rae notes.  “It’s The Indian Act that has created 650 First Nations, most of which are not in a sustainable condition at the moment.”

Specifically, many do not have stable public finances or social structure or economies, but they are the product of Canadian government legislation, which has been amended several times since 1867 but has never been fundamentally challenged. Because of that, it makes it very difficult to instigate any worthwhile regional discussion. The environment and infrastructure are both regional and the issues are largely regional, so getting the various members on board is essential in taking the next step towards further development.

“Training, be it for Aboriginals or  non-Aboriginals is an opportunity for Canadians to develop skills and enhance their way of life,” Harper says.  “Do that and local business can service the industry. We’ve seen it happen in some energy and mining projects.  These are opportunities that have never existed before, because they are not near large population centres.”

Increased Aboriginal participation is welcomed in the sector and inroads have certainly been made over the past decade. The First Nations Education Act is a recent addition made by the government and is something Harper expects will reap just rewards.

“This is about fundamental reform to K-12 education,” he notes. “The reality is that much of the education in First Nations’ communities today does not have any real legal framework around it. The schools may have a curriculum but not necessarily portable to other school systems and accepted standards of training. We want to give Aboriginals much greater control within their communities. We believe in the next generation we will have an Aboriginal workforce that will be ready to train for a number of expanded opportunities.  They currently lack basic education skills and we want to change that.  I think this is great innovation, but it needs to be done in partnership.  We don’t want to impose plans but work together on something that is beneficial to everyone.”

Oilsands and Pipelines

Just prior to taking over the finance portfolio, Joe Oliver , then Minister of Natural Resources, had made a trip to Houston, Texas, where he spoke at the 33rd Cambridge Energy Research Associates (CERA) annual executive conference. In his address, Oliver reiterated the Canadian government’s support for the Keystone XL pipeline, arguing that the project is an obvious “yes” for both Canada and the United States.

Oliver cited the U.S. State Department’s latest environmental impact statement, which confirmed that the pipeline would have no significant effect on the environment. He pointed out that if Keystone is rejected, alternative methods of transporting crude will be used, which would increase greenhouse gas emissions by 28–42% — making Keystone the environmentally responsible choice. Meanwhile, the project would support the employment of 42,000 Americans while putting $2 billion in earnings into the pockets of American families.

“Our view is in (on Keystone) and the U.S. State Department’s has been definitive that there will be no net increase in greenhouse gas emissions, which has been President Obama’s key criterion for approval under his national interest decision,” Oliver states. “The advantages of the project are very strong in terms of tens of thousands of jobs on both sides of the border and billions of dollars in economic activity.”

There was further emphasis that Canada makes no compromise when it comes to the environment. Oliver says the federal government’s plan for Responsible Resource Development ensures the continuous improvement of Canada’s environmental performance through better enforcement and compliance.

While in Texas, Oliver also met with workers and delivered remarks at TransCanada’s Houston Lateral Pipe Yard. The Houston Lateral project is designed to minimize impacts to the land, environment and local landowners. It currently supports 650 construction jobs for Quanta employees and subcontractors.

Quick Facts

The oil accounts for about 97 per cent of Canada’s 173 billion barrels of proven reserves, the third-largest reserve in the world.

The oil sands account for 0.1 percent of global greenhouse gas (GHG) emissions.

Emissions per barrel have been reduced by 26 percent between 1990 and 2011.

According to the International Energy Agency, oil will remain the dominant fuel globally for decades to come, even under its most stringent GHG reduction forecast.

Canada’s oil sands are expected to contribute $2.1 trillion to the Canadian economy over the next 25 years.

While Oliver did a tremendous job in moving the natural resources agenda forward to a success level never before seen, it’s also hoped that Rickford will be able to smooth over some bad blood which has developed between pro energy and environmental activists.  Case in point, in 2012 an open letter from Oliver referred to environmentalists as “radicals” using foreign money to hold up Enbridge’s controversial Northern Gateway pipeline project’s review process.

While taking a less hostile line with opposing groups or individuals, Rickford insists that exporting Canada’s natural resources, including energy which accounts for nine per cent of Canada’s gross domestic product, is crucial to support the economy and hundreds of thousands of jobs.

In Quebec, the new provincial government under Philippe Couillard has already expressed desire in bringing back its northern development strategy and said the process that led to the approval of Enbridge’s 9B pipeline reversal is a model for other projects and will help wean Quebec off foreign imports.

Rickford believes the public will rally behind the Keystone XL project if environmental analysts reinforce that pipelines are safe. As I noted in previous edition of CBJ, some groups and individuals have maintained they will never accept new projects such as the Enbridge Northern Gateway Pipeline and have made their unwavering views known to the public – which is their right. But the word “never” doesn’t leave much room for dialogue and possible compromise. Seldom, if ever, does one side get 100 per cent of what it seeks.

Forestry

The lumber and forestry industry has provided a way of life for Canadians, not only for domestic use but also exporting our wood products to our other countries.  By far the strongest regions for this industry have consistently been British Columbia, Ontario and Quebec – and it’s a pattern not likely to change any time soon.

A major factor for the increase in exports is the U.S. market, where a recovery in the housing market has resulted in a marked increase in the need for wood.

“Canada has been diversifying its export markets away from the United States for several years, and gains in export sales will be responsible for industry growth in the next few years,” said Michael Burt, Director, Industrial Economic Trends with The Conference Board of Canada during a previous interview with CBJ.

Since the Softwood Lumber Agreement (SLA) took effect eight years ago, Canadian wood exports south of the border have declined more than 60 per cent. Through the first nine months of 2011, total wood exports to the U.S. were down 11 per cent, or almost $500 million, compared with the same period in 2010.

The Canadian economy is largely driven by exports and so the damage elsewhere would definitely impact on us here.  This would impact on the housing market, bringing down housing starts as well as domestic and international demand for wood products.

Demand is expected to increase in the U.S. but arduous, ongoing battles over softwood lumber have played a significant role in convincing Canadian producers to find other markets to sell their products.

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