RNNR Committee Report

Dissenting Opinion from the Official Opposition

As Members of the Official Opposition, we would like to thank the witnesses who appeared before this committee to contribute to this study on the future of Canada’s mining sector.

While the committee enjoyed general consensus in acknowledging the importance of the mining industry to the Canadian economy, the recommendations as presented in the majority report fail to reflect the concerns expressed by many witnesses. On the contrary, many of the recommendations have no basis in testimony but seem to have been drafted to conform to pre-existing government policy. For example, the term “pan-Canadian strategy” was never uttered by any witness, but was used in a recommendation on carbon pricing in the majority report.  

It is out of respect for the witnesses who testified to this committee and to the thousands of hard-working middle-class families whose livelihoods depend on the success of our mining sector to put food on their tables, that we submit this dissenting report.  

We urge the federal government to consider the following recommendations:

1 - The Government of Canada should conduct a comprehensive economic impact assessment of a federal carbon tax on the mining sector and release it publicly before imposing this tax on this emission intensive trade exposed industry.

The Natural Resources Committee heard from numerous witnesses and stakeholders who held varying points of view on the issue of a federally imposed carbon tax. Although some witnesses were open to the idea of a carbon tax, many others voiced their concerns. Several witnesses stated that the new carbon tax could have a detrimental impact on the industry and could mean the difference between some projects proceeding and others not. This could mean substantial loss of economic development in Canada and the loss of many well-paying jobs. The implementation of a carbon tax could make Canadian industries – particularly the natural resource sector – uncompetitive on the global market, meaning investment and jobs could head elsewhere.

For instance Pamela Schwann of the Saskatchewan Mining Association stated: “As an industry, particularly with potash and uranium, we are not able to pass on to the markets any carbon taxes that we might be incurring. It’s just not possible, so we need some protection of trade-exposed sectors, like we have with Saskatchewan.”[1]

Further to that, Mike McDougall of the Klondike Placer Miners’ Association stated the following: “[w]e can’t pass our tax on since we sell an international commodity. Our gold is sold and always priced on the international [market] and we can’t pass any costs on. Any costs accrue to our bottom line.”[2]

It is clear from the testimony we heard, the federal government must conduct a comprehensive economic impact assessment of a federal carbon tax on the mining sector and release it publicly before imposing this tax on this emission intensive trade exposed industry.  For a government supposedly committed to evidence based decision making, they should accept this recommendation based on the expert witness testimony we heard over the course of the study.

By refusing to undertake a comprehensive economic impact assessment, the government either knows what the economic impacts will be already and is keeping it secret, or it does not know what the impacts will be and is putting billions of dollars of economic activity and tens of thousands of jobs at risk. 

If the government does know what the economic impact will be, then this data should be made public. However, if they refuse to do an economic assessment, then they are breaking their promise of making decisions based on evidence. This decision would be irresponsible and risk billions of dollars of investment which could flow elsewhere if Canada becomes uncompetitive. This would hurt the families, indigenous communities, and other communities that rely on the success of the mining sector.

As Iain Angus, Vice-President of Northwestern Ontario Municipal Association pointed out in response to a federally imposed carbon tax, “some of the mines that we hope to see come to fruition, they're really challenged... The ongoing expense of operating costs will actually contribute to the decision of whether or not they will put a shovel in the ground.”[3]

2 - The Government of Canada should conduct an analysis to determine how Canada’s mining industry can remain competitive in the global marketplace, especially with a federally imposed carbon tax.

Ross Beaty of Pan American Silver Corporation who stated, “[F]or export industries in Canada such as mining companies, there should be some kind of offset to a carbon tax that makes the products more competitive internationally in places where there are no carbon taxes.”[4] Furthermore, responding to the federal government’s carbon tax announcement, Sarah Fedorchuk, Senior Director, Public Affairs of Mosaic pointed out, “I think our biggest concern right now for our market is competitiveness. The Russians can produce potash a lot cheaper than we can because of where their currency is at. Anything that gives Canadian potash producers a competitive advantage is seen as a positive at this stage… but we are concerned about the competitiveness of Canadian potash.”[5]

Mining is an extremely capital intensive industry, and the capital necessary to fund major projects is fluid and will flow to jurisdictions that can provide certainty. Projects will only proceed when costs are predictable and competitive.

U.S. President Donald Trump has promised to cut corporate taxes, eliminate red tape and regulations in the energy sector and will not impose a federal carbon tax.  Canada must ensure we do not drive away major investments because of our burdensome approval processes and increasing costs through carbon pricing.

It is our recommendation that the federal government conduct an analysis to determine how Canadian mining companies can remain competitive in the global market.  

3 – The Government of Canada should make permanent, effectively immediately, the Mineral Exploration Tax Credit (METC) and Flow-Through Share Financing.

Exploration and prospecting continue to be a high risk investment, but global demand for minerals will continue to grow exponentially in the years to come.[6] Canadian policy makers, and mining professionals, need to work towards discovering new resources for global sustainability, security, and growth within the sector. 

Junior explorers –thousands of small, entrepreneurial companies across Canada –often take the highest level of risk. Data shows junior mining companies also take in the larger share of discoveries, while getting 30% more value per dollar expended than larger mines. 

The Canadian minerals industry has faced an ongoing downturn in exploration investment over the past 10 years. Lack of investment threatens the sector’s continued ability to generate benefits, which includes 375,000 jobs created across Canada and nearly 3.5% of national GDP. Global trends indicate financing for mining and exploration is decreasing. Between 2007 and 2015, financing for mining has dropped 40%, while financing for exploration fell over 90%. 

Flow-through shares account for more than two-thirds of all exploration-focused financing on Canadian exchanges over the last decade.[7] In the past, Finance Canada has estimated the flow-through share system stimulated 3 dollars in exploration for every one dollar in forgone tax revenue.[8] Supporting flow-through shares, along with the Mineral Exploration Tax Credit (METC), will keep investment dollars in Canada. Removing these important tax incentives at a time when the industry is still recovering from the worst down-cycle in decades, could have a crippling effect on the industry’s recovery. 

Canada has an opportunity to learn from successful initiatives around the globe. In 2016, Australia adopted the METC program and rolled it into their flow-through system.[9] This has led to Australia becoming a global leader and top jurisdiction for exploration in the world. Historically, flow-through played a critical role in the discovery of key deposits, such as the Ekati Diamond Mine. Combining METC and flow-through will ensure a continued and diverse mining sector in Canada.

The METC has played an important role for small and medium sized mining companies here in Canada. Industry needs stable regulatory and tax conditions in order to plan for the long term.

The Government should implement tax cuts, instead of tax increases, as means to encourage further development. That is why Conservative members of this committee recommend the government make flow-through shares and the METC permanent, effective immediately.

4 – The Government of Canada should ensure that mining exploration and prospecting companies continue to have reasonable access to land, especially in Canada’s north.

Recent court decisions and government actions could severely limit the ability for small mining companies and prospectors to discover valuable minerals which will provide revenues and thousands of jobs to Canadian workers. The Government should ensure mining exploration and prospecting companies continue to have reasonable access to land, especially in Canada’s North.

If Canada is going to foster a favourable environment for exploration, firms need to have fair access to land, as well as security of tenure.  Exploration activities not only generate economic activity and employment, but they are also low-impact to the environment and temporary in nature.  The environmental impact of current mining activity ranges from .005-.03% of the land nationally, which is a small in comparison to the level of employment and revenue that they generate as well as the necessity of the raw materials that are extracted. Exploration is short-lived and it has low environmental impact.)[10][11]

The Government must remove roadblocks to global exploration investment in Canada such as secure land tenure and accessibility by reducing land withdrawn from exploration.

5 – The Government of Canada should take into account the accumulative effect of human and other industrial activities in a given region rather than assess only large clearly defined projects such as mines. It should also reduce duplication in provincial processes and federal intrusion into provincial jurisdiction.

Mr. Pierre Gratton, President and Chief Executive Officer, Mining Association of Canada testified that under the Canadian Environmental Assessment Act, 2012 mining projects are often the only projects that fall under federal jurisdiction and the sole opportunity the federal government has to assess the environmental impact of development projects on a region. and As a result these projects are put under greater scrutiny than other projects in other sectors.

As an example, Mr. Gratton pointed to the Sisson mine project as one example of “the federal government concluding that this project can have a significant adverse effect on the region, even though to our point, it’s a tiny dot in a broader landscape. There’s a lot of other activity going on around it. Whether its natural gas exploration, forestry, or logging, these have impacts that are much greater with respect to the land base…It may be that a mine should not proceed, but you can’t just look at the mine; you have to look at the broader issues. That’s the problem we’re now facing under the Canadian Environmental Assessment Act, 2012, which is a pretty significant one.”[12] 

Several witnesses affirmed if there’s one thing the mining industry values most, it is certainty in the regulatory environment. There has been a lack certainty from this government. Constant review of environmental legislation is challenging for the sector.[13]  The committee heard from witnesses who told us about the impact this uncertainty has had on their projects. These witnesses talked about projects that did not have any environmental impact issues, but Environment Canada decided that there could, in fact, be issues down the road. This was based on research that ‘may’ be conducted in the future. As a result, Environment Canada decided they were not prepared to give a no adverse impacts ruling that would allow mining to proceed.[14] The Committee was told of projects, which had a conditional go ahead from Environment Canada, but were told the department reserved the right to come back years down the road, looking at future evidence, and potentially impose operational conditions on their mine sites. Not surprisingly, given the responsibilities those in the private sector have to their investors and shareholders. This type of uncertainty undermines confidence and the ability to get projects built.

Uncertainty in the approval process is an increasing challenge for exploration and mining projects in Canada. Federal oversight of mining is greater than ever, intrusion into provincial jurisdiction is growing, duplication with provinces remains, and coordination with provinces in environmental assessment has deteriorated.

Conclusion

This committee heard from a number of witnesses who expressed concerns with the growing international competitive pressures facing Canada’s mining sector. We urge the federal government to implement the common sense recommendations outlined in this dissenting report to ensure the long-term competitiveness of Canada’s mining sector.