Taming regulatory red tape key to investments in North

Taming regulatory red tape key to investments in North
Baffinland Iron Mines’ Mary River Project north of the Arctic Circle must deal with Nunavut’s unique regulatory regime.
If Canada wants to keep the investment community interested in the country’s natural resource sector it should find ways to better manage the red tape posed by regulatory regimes in this country.
As part of its Top 10 Business Issues with Legal Implications for 2012, Borden Ladner Gervais LLP cites the need to keep foreign investors interested in Canada’s Far North and specifically the need to address aboriginal consultation requirements and environmental regulations as potential hurdles.

In particular, Adam Chamberlain, the national leader and a partner in the climate change group at BLG, cited the special regulatory environment in Nunavut as an area with its own unique challenges. “You’re dealing with a regulatory framework that is substantially different than anywhere else in the country,” says Chamberlain.

He notes that Nunavut is the only territory that exists because of a modern land claim agreement. “It is distinct in that regard, and the processes that have been created and the different layers of regulatory requirements are different than you would find elsewhere.”

The regulator in Nunavut, the Nunavut Impact Review Board, was created pursuant to an article in the Nunavut land claims agreement. “In most provinces the province would be the regulator for environmental assessment with the federal government also involved. In Nunavut it’s the Nunavut Impact Review Board and it involves the federal government as well,” says Chamberlain.

There are several projects in the works for Canada’s north that face this review process, including an iron mine proposed by Baffinland Iron Mines Corp. Its Mary River Project is one of the largest mining developments currently planned in Canada, and considered the most significant development ever planned above the Arctic Circle.

“Just getting the materials up to the mine to prepare it to be built will require literally dozens of containers,” says Chamberlain. “Things like building a camp for the workers to live in have to be done from scratch. There are no deep-water ports in Nunavut, but if you’re going to build a mine like the Mary River mine they will have to build a deep-water port. This is all high risk — clients will only come if there is a significant upside to it.”

There has also been much discussion about the possibility of offshore oil exploration in Nunavut. In August 2010, a specialized ship from the German Federal Institute for Geosciences and Natural Resources that performs seismic testing to determine if there are oil and gas reserves below the offshore areas was scheduled to conduct testing near Nunavut. The ship was booked by the Canadian government to perform the testing in Lancaster Sound near Baffin Island.

The testing was scheduled to go ahead, but at the last minute the organization representing the Inuit of Baffin Island brought an application and was successful in getting an injunction from the Nunavut court preventing the testing from going ahead. Local communities argued they weren’t adequately consulted and they had concerns about the potential risk to wildlife in the area.

“The ship was a day or two away from the area when the court made its decision. By the time an appeal could have been filed the water would have been frozen solid,” says Chamberlain, adding the example provides “a bit of a warning” that appropriate consultation must be undertaken in all future projects.

“It’s not an indicator that every project is going to get stopped; it’s a matter of making sure your consultation is done properly or you will have some trouble,” says Chamberlain.

Canada’s Far North is not the only area where achieving appropriate consultation around aboriginal concerns on proposed developments is causing business to give careful consideration to future plans.

Greg D’Avignon of the Business Council of British Columbia says both provincial and federal governments need to have very clear, definitive timelines around adequate consultation. “Some First Nations are being inundated with licence renewals and permit renewals and review as well as project reviews and they don’t have the capacity,” he says.

On the other side, industry doesn’t have the capacity either. He predicts the tipping point is coming where projects will slow and/or operations will be interrupted because the cost of doing business will exceed a company’s ability to manage it either from a personnel or pure cost standpoint.

For more on the issue of how companies and First Nation groups are finding ways to get new resource and infrastructure projects off the ground, watch for the February issue of Canadian Lawyer magazine.

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