Wednesday, February 26, 2014

Scratching the Surface: 21st Century Realities Can’t be Ignored by Ring of Fire Developers - Part 1

As we find ourselves getting deeper into the 21st Century, it’s becoming increasingly obvious that the old ways of doing business just aren’t workable in the “new” realities of today. Yet, business and industry leaders, along with governments, continue to muddle through, largely clinging to economic models which are starting to be unworkable. Here in Canada, this is becoming glaringly obvious to all who are closely watching developments of resource extractive industries. The 21st Century challenges to tar sands industrial expansion may be the best known, but certainly other non-renewable resource-based industries are also finding traditional ways forward to be increasingly difficult, in part due to a lack of desire to acknowledge or address new realities.

First Nations

These “new” 21st Century realities include a change in relationships between governments and First Nations. Decisions made by the Supreme Court of Canada reasserted the rights of First Nations to be treated on a “nation to nation” basis with regards to negotiations with the federal and provincial governments. What we have seen has been a fundamental shift in the starting point of any discussion regarding resource extraction in Canada. Yet, largely, this new reality hasn’t yet sunk in with industry and government representatives, who continue to want to dive into business opportunities without first consulting with nations on whose traditional territory the resource is located.

Industries are used to dealing with one or two governments, and have little or no experience in dealing directly with aboriginal peoples as “nations”. Our governments, too, are used to telling First Nations what’s best for them, and at most, sitting down to draw up agreements about how the benefits of resource extraction will be shared. What is new is the notion that Frist Nations might have their own idea about the starting point – whether extracting the resource makes sense from their point of view. Recently, the Elsipogotog First Nation in New Brunswick made national headlines when members came together in a decision to tell the provincial government and industry that they were not interested in having resources fracked within their traditional territory, and no number of benefit-sharing agreements were going to change their mind.

Carbon Economics

Another new reality of the 21st Century has to do with the economics of carbon, and fossil fuels which are the primary power source for much of our global industrial infrastructure. The international community, through the Copenhagen Accord, has committed to holding global warming at a 2 degrees Celsius threshold. Maintaining this commitment will require substantial carbon reserves to stay safely sequestered in the ground. Coal, bitumen and natural gas reserves cannot be exploited to their full potential – not if we are to keep warming below the 2 degree C threshold.

Yet, even with conservation measures, our energy needs will still be significant. In the new reality, it is essential that we begin building the infrastructure which transitions our economy from polluting fossil fuels to clean renewables. This isn’t just a semantic argument about the need to meet an international obligation – it’s a necessary initiative in order to stave off long-term economic collapse. The costs of ignoring climate change will be a burden which our children won’t be able to afford to pay.

In broader terms, these two 21st Century realities form part of larger pictures around “social license” and “sustainability” – two concepts which development of any sort must address if it is to be successful.

The Ring of Fire

Here in Ontario, a large deposit of chromite exists in the remote James Bay Lowlands, in an area known as the Ring of Fire (ROF). Chromite is the primary ingredient of steel, and while chromite itself is not a fossil fuel, significant amounts of energy are required to mine and process it so that it can be used to make stainless steel. The remote location of the ROF also means that there are significant infrastructure challenges to resource extraction, as transportation and utility connections don’t currently exist. And of course, First Nations in the area have their own ideas about what resource extraction might mean for their interests.

Ontario’s Liberal provincial government has been the subject of a lot of criticism by opposition Progressive Conservative and New Democratic parties regarding what appears to be the glacial pace of development in the ROF. Yet, calls for putting the cart before the horse, so to speak, are not going to assist with moving this important development project along. Too often, political and business leaders have fallen into the trap of ignoring the 21st Century realities we are currently living with. Their proposed solutions appear to be mined from policy papers written decades ago, at a time when First Nations weren’t empowered, and climate change was a fringe issue.

“Beneath the Surface”

Last week, the Ontario Chamber of Commerce, in conjunction with the Greater Sudbury Chamber of Commerce, released with much fanfare a proposed “way forward” for development of the Ring of Fire. Entitled, “Beneath the Surface: Uncovering the Economic Potential of Ontario’s Ring of Fire”, the report has been long in the making. In developing the report, the Chambers of Commerce consulted with industry experts, government officials, business leaders, First Nations and mining experts. The report is written in a very accessible format, and highlights the importance that this industrial enterprise represents to all of Ontario (and not just the north).

The report’s economic analysis leads to the conclusion that development of the ROF will generate up to $9.4 billion for Ontario’s GDP in the first 10 years, along with nearly $2 billion in government revenues. Over a 32 year period, the report indicates that the ROF may contribute as much as $27 billion to GDP, and generate as much as $6.7 billion in tax revenue for governments. The report looked at two scenarios, one labelled “conservative” which assessed the impacts of only the two projects which have been leading the way (Cliff’s Chromite Project, and NorOnt Resource’s Eagle’s Nest), and the other “optimistic”, which included a number of other currently identified commercially viable projects. However, it may very well be that even the “optimistic” scenario might not prove optimistic enough, should investments in infrastructure mean that additional deposits can be commercially exploited.

In short, there is clearly a lot of money lying dormant beneath the surface of the lowlands.

I’m not an economist, so I’ll accept the Chambers findings related to direct, indirect and induced economic activity and the multiplier effect they’ve used to calculate their figures. Generally speaking, the Chamber’s analysis appears to be in keeping with other projections regarding economic benefit which have been floating around out there in the media (and if anything, the Chamber’s numbers might be on the low side). That there is a tremendous amount of wealth residing in the ROF is clear, and that the extraction of this wealth could lead to significant economic benefit for First Nations, Ontario and Canada.

Finding a Way Forward

Yet, for the past several years, the development of this industrial enterprise has gone badly wrong, and little progress has been made to move the ball forward. One of the major players, Cliffs Natural Resources, has even suspended operations in the ROF, leaving their project in limbo. While Cliffs has been quick to cite a lack of action on the part of the government for idling its chromite project, there may be more at play internally with Cliffs own economic situation. Nevertheless, Cliffs is certainly not alone in suggesting that governments, and particularly Ontario’s Liberal government, instead of carrying the ball forward, has fumbled it significantly.

Things have started to change, though. Last year, the government of Ontario appointed former Supreme Court of Canada Justice Frank Iacobucci to work with the Matawa First Nations negotiator, former Federal Liberal Interim Leader and MP Bob Rae. Why it has taken so long for serious nation-to-nation consultations to occur remains a bit of a mystery to me, but I suspect that a lot of it has to do with the notions of the past continuing to influence the actions of stakeholders, rather than acknowledging the realities of the present.

The Conservative Federal Government and the Lost Years

Development of the ROF really was off the rails from the moment it began. While the Province of Ontario might have been taking steps towards facilitating resource development through the adoption of the Far North Act (which lays out the specifics for regional planning and development), the Conservative government of Canada’s intransigence towards working with First Nations and the environmental community led Cliffs down a windy, tortured passage where they eventually ended up in front of a court, listening to lawyers argue the merits of one process over another.

Cliffs Chromite project is subject to a federal Environmental Assessment process which, thanks in part to anti-environmental omnibus budget legislation passed by the Conservatives during the first years of their majority mandate, has proved to be a disruptive endeavour. The EA process has never been inclusive when it comes to First Nations – and indeed, it was the wrong place to start for that very reason. Further, the EA process as authorized by an anti-environment government, allowed Cliffs’ project to proceed in isolation of other planned ROF projects, which has meant that the overall cumulative environmental impacts from ROF development would never be comprehensively assessed.

What the Conservatives did was to choose a puzzle off the shelf (without first consulting First Nations partners as to whether the puzzle itself was a good choice, or even if they wanted to help put it together), and then commit to looking at individual puzzle pieces only, rather than the picture that those pieces would create when put together. This kind of backward-thinking on the part of our federal government was the primary reason that years were lost to the development of the ROF industrial enterprise.

What’s the Problem with Wealth-Creating Development?

In our 21st Century reality, nation-to-nation consultation ought to have been the starting point of any discussion around the Ring of Fire. Up until recently, First Nations have largely been treated as an important afterthought – a primary stakeholder for the project’s success, beyond doubt, but still a secondary consideration for the project. But the question of whether or not the project itself was a worthy one to pursue was just never one that was asked by industry and government. The assumption has always been that if a case can be made for economic growth, any resource extractive opportunity must, therefore, be a benefit. Why would anybody not want to create wealth?

And those same parochial points of view continue to be held by many in government and business. Whether it’s pushing a pipeline through an area to facilitate the transport of raw bitumen, or the development of fracked natural gas wells, as long as base environmental issues can be addressed, the question about “what’s the problem?” is never asked, time and again.

But whether wealth-generating development really makes sense in the context of 21st Century realities is the fundamental question that the developers of all non-renewable resource extraction initiatives should be asking themselves. Importantly, they should be asking First Nations as well in the form of nation-to-nation negotiations. Sometimes, making money in the short term simply isn’t a good enough reason for a project to move forward – at least not for all impacted parties. The failure to recognize both the economic value of natural capital and the will of indigenous peoples to play a significant role in the decision-making affecting their traditional lands and resources located within has led to many of the issues today being experienced by extractive resource industries. Whether it’s Enbridge’s Northern Gateway pipeline, fracking in New Brunswick, or Ontario’s Ring of Fire, these issues are coming up time and again. Why not try to address them rather than to pretend that they aren’t legitimate issues?

(continued in Part 2…)

(opinions expressed in this blog are my own and should not be interpreted as being consistent with the views and/or policies of the Green Party of Canada)

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