On October 23, 2008, the B.C. government, (the "Province") announced its new Resource Revenue Sharing Policy (the "Policy") for the mining sector.
The Policy is unique in Canada, and may have a profound effect on how Aboriginal groups view new mine developments.
The concept of resource revenue sharing was a cornerstone of the New Relationship document that emerged in early 2005 as the foundation of provincial Aboriginal policy. However, this is the first significant attempt to incorporate revenue sharing into the mining sector in the majority of the province where no treaties exist.
The Policy is being implemented now. The Province is carrying on discussions with a number of Aboriginal groups in connection with several new mining projects. No agreements on revenue sharing have been announced yet, but that is likely to happen soon.
Ontario is planning a Resource Revenue Sharing policy as well, but that appears to be quite a different model than the B.C. Policy. In Ontario, the proposal contemplates the setting up of a Trust Fund, with 1% of all gross revenues from new mines and expansions throughout Ontario going into the Trust Fund for later sharing with Aboriginal groups in a manner yet to be determined.
In B.C., the Policy contemplates agreements between the Province and specific Aboriginal groups – likely the same Aboriginal groups who might be expected to have entered into MOUs, IBAs, or other similar agreements with the mine developers. One result of this very direct connection between the particular project and an economic benefit is that it may lead to a greater level of support for mining projects from Aboriginal groups, since they will have a very significant economic incentive to see 'their' mine succeed as soon as possible.
The Policy allows for a great deal of discretion on the part of the Province, to be exercised based on many factors. It is fair to say that the Policy is much more grounded in affirmative action than Aboriginal rights and title. The discretion under the Policy will apply both to which Aboriginal groups may participate, and how much they will receive.
The money for the sharing under the Policy will come from one source – the Mineral Tax that operating mines pay to the Province. This is significant for a number of reasons:
- The revenue stream potentially available for sharing under this Policy is very considerable – for a new major mine the amount of such taxes can be expected to be more (and perhaps much more) than $100 million over the life of the mine.
- The revenue stream will only commence once the mine goes into production.
- The revenue stream will vary from year to year, generally relating to the profitability of the mine.
Although it is not stated to be part of the Policy, one anticipated result is that revenue sharing will no longer be a part of IBAs and other private arrangements between project proponents and Aboriginal groups, since revenue sharing will now be addressed by an agreement between the Aboriginal groups and the Province. This should lead to a much more consistent approach to revenue sharing, as well as removing a significant source of friction in the relationship between Aboriginal groups and project proponents.
The Policy does not mean that there will be no more MOUs or IBAs between project proponents and Aboriginal groups, but the subject matter of those arrangements will be focused on training, jobs, contracting opportunities and environmental considerations, as well as other topics appropriate to the particular circumstances.
Initial concerns of Aboriginal groups that they may be "losing" a source of revenue from project proponents are expected to be answered once the amounts of the revenue sharing agreements under the Policy become known. This writer anticipates the amounts that Aboriginal groups will be entitled to under the Policy will be measured in the tens of millions of dollars over the expected life of a new major mine, and will be in excess of what the project proponents might have been prepared to pay to Aboriginal groups before the Policy.
In summary, this is an exciting new policy that should be considered by every company involved in a project in B.C. that may result in a new mine, or a major expansion of an existing mine.
A paper that was delivered in June 2009, and describes the Policy in greater detail, is available on the writer's webpage at: http://www.langmichener.ca/UnderstandingBCRevenueResourcePolicy/