Bob McLeod: Presentation to the Parliamentary Standing Committee on Finance

Delivered on April 4, 2017

Thank you for the invitation and opportunity to be here before you today. I appreciate Committee’s interest in seeking the views of the Government of the Northwest Territories on matters that affect the daily lives of our residents. Our Government is one of partnership and consensus building. In order to serve the people who elected us we must be able to fully participate in the decisions that will impact our people, our territory and our future.

To begin, I would like to give you some context around the 1.1 million square kilometers that make up the Northwest Territories. 

Our residents live in 33 communities, ranging in population from less than 100 to 22,000.  The population of the NWT is about 44,000 people, and about half that population is Indigenous: First Nations, Inuit, and Métis.

There are significant differences in economic and social indicators between the larger and smaller communities, and between Indigenous and non-Indigenous populations.

The average income in the 327-person community of Paulatuk, on the coast of the Beaufort Sea is $31,000 a year, compared to $71,000 in Yellowknife. Education attainment shows serious discrepancies as well. More than 2,000 indigenous residents over the age of 15 do not have a grade 9 education. In stark contrast to that only 195 Non-indigenous residents over the age of 15 do not have Grade 9. As many of you will know, Grade 9 level literacy and numeracy skills are considered the most basic skills required to find success in daily life.

The current Gross Domestic Product of the Northwest Territories is $4.8 billion, with the resource development sector which includes mining, oil and gas directly and indirectly accounts for nearly 40% of our GDP.  Our economy is extremely inter-dependent, with industries like construction, transportation, wholesale trade, and professional, scientific and technical services being significantly impacted by the resource sector.

When we talk about our economy we are talking about the ability of our government to support our residents, That support comes in many forms, through programs and services, through decent employment opportunities and perhaps most importantly, the ability to provide hope for a future for themselves and their communities.

Tourism, technology, culture and traditional activities make up a very small portion of our economy today and we are looking to bolster those sectors to help diversify our economy. By way of comparison to the resource development sector, tourism accounts for 3.5% and fishing for .01%. Diversifying our economy is critical to providing opportunities for our residents, and the lack of access to supply management for our budding agriculture industry proves challenging.  To bridge the gap between these sectors we will need significant investment.

A continuing challenge for achieving sustainable growth of the NWT economy is one foreign to most of the rest of Canada, the significant lack of public infrastructure. What many Canadians take for granted, Northerners must live without. Only 12 of our 33 communities have uninterrupted access via the all-weather highway system and only 33 percent of the land area of the Northwest Territories is within 100 kilometres of all-weather road. Not only does this impact our residents in terms of a high cost of living, but it also creates challenges for economic growth.

I want to provide you with some context around government finances in the NWT. The Government of the Northwest Territories has planned spending of $1.66 billion on operations and $266 million dollars on infrastructure in the 2017-18 fiscal year. Our total revenue is expected to be $1.86 billion dollars in the same year.

Federal transfers comprise a significant portion of revenue – 66%.  Other portions include taxes, other transfers from Canada, and resource revenue. The Government of the Northwest Territories, unlike provinces, operates under a federally imposed debt limit, which for the NWT is $1.3 billion.  Our total borrowing is expected to reach $990 in 2017-18.

While the GNWT does have a fiscal strategy to manage our infrastructure investments within the federally imposed borrowing limit, Committee should be aware that current debt service payment levels are affordable and only account about 1% of total annual revenue.

In order for the NWT economy to grow, it will have to rely less on Canada for revenue to deliver programs and service. Federal investment in required infrastructure and flexibility in our borrowing limit will allow our government to invest today, to sustain tomorrow’s economy for our children and grandchildren.   

The Northwest Territories economy has not fully recovered from the 2008 global recession.  The two largest diamond mines, who employ thousands directly and indirectly, could face closure within 10 years.

The Snap Lake mine closed in 2016, while another diamond mine, Gahcho Kų́é, opened earlier in 2017 with an expected life of approximately a decade.

The Norman Wells oilfield is temporarily shut-down due to the pipeline that carries the crude oil to Alberta needing repairs.  This oilfield is not likely to operate beyond the next 5 to 10 years as production declining significantly.

Given the current and projected prices for both oil and natural gas, we do not expect any significant exploration or production in the NWT for the next decade even though the NWT holds 16.2 trillion cubic feet of marketable conventional natural gas and 193 billion barrels of oil.

There are opportunities in exploration and mining related to minerals such as lithium, bismuth and other rare earths, which are key components to emerging green technology and digital sectors.

In fact we have 2 mines for these commodities that have received their environmental regulatory permits but cannot secure the required financing to commence operations. We also have base mineral and gold projects that may be developed should the commodity markets continue to improve.

In my view, and the view of Indigenous Government leadership in the Beaufort Delta, the unilateral decision by Canada to impose a 5 year moratorium on oil and gas exploration in the Beaufort Sea flies in the face of the GNWT’s and Indigenous government’s right to self-determination.  This unilateral decision has quelled any hope for oil and gas exploration in the region, and has sent a message of uncertainty to all resource sectors across the NWT including mining. The moratorium has all but closed the door on the approved Mackenzie Valley Natural Gas Pipeline, which will sunset in 2023.

As well, we are faced with the implementation of a carbon pricing system that will make the exploration and development business-case harder to make.

What message has this sent to our youth about their future? We encourage them to stay in school, to make good choices and to contribute to their communities. How can we expect them to make that commitment if at the end of their schooling there are no economic opportunities for them?

Self-determination is crucial for the NWT for both public and indigenous governments. Although there are land and resources agreements to be concluded, most Indigenous people in the NWT have settled agreements and are working towards implementing self- government. Similarly the GNWT continues to pursue the transfer of the legislation that governs most of the NWT, the Mackenzie Valley Resource Management Act. This is our right under the Devolution Agreement between the NWT and the Government of Canada. It is extremely frustrating that the agreement is not being implemented.

Northerners see the impacts of climate change on a daily basis. Whether it is low water levels impacting our water ways and hydro system, or shore erosion in the Beaufort Sea washing away buildings in remote communities, or the shocking decline in our caribou herds, Northerners are attune to the changing environment and the need to adapt.

Investment in economic infrastructure, people, and sustainable communities is essential to address the future of our territory. NWT residents have the same aspirations as other Canadians and a robust northern economy is a critical component of achieving those aspirations.

A strong partnership with the Government of Canada is essential to ensuring Northerners can achieve their social, environmental and economic goals. By working with our Federal counterparts, the Government of the Northwest Territories will help create an NWT where all people can thrive and be healthy, where a strong economy provides jobs and opportunities for all our communities, and where a well-managed environment contributes to our economic well-being and quality of life.

Opportunities currently exist that will help address our medium-term economic and financial challenges.

Expanding our all-weather roads system will provide immediate economic benefits and facilitate economic growth. Developing transportation infrastructure is critical in supporting economic development that benefits northerners and all Canadians, increasing social and economic opportunities for Northwest Territories residents, and building resiliency in the face of climate change.

Recent projects include the Inuvik-Tuktoyaktuk Highway, which will be completed in 2017, and the Tłįchǫ All-season Road, a project being undertaken with funding from P3 Canada and the Government of the Northwest Territories.

Two additional priorities are development of the Slave Geological Province Access Corridor and the Mackenzie Valley Highway. The Slave Geological Province Access Corridor opens important access to this mineral-rich part of Canada both in the Northwest Territories and Nunavut.

The Mackenzie Valley Highway is a major project to connect several communities to the public highway system and provide reliable access to petroleum and mineral resources on the heart of the NWT. The business case and substantial planning has already been completed and submitted to Canada.

Reliable and affordable energy is essential for economic development and providing services in our communities.

A key area for investment is the expansion of the Taltson Hydro facility. This project, in partnership with Northwest Territories Indigenous governments, will create economic opportunities, connect the NWT to the inter-continental energy grid, and reduce greenhouse gas emissions by 360,000 tonnes in southern Canada. The third key infrastructure investment is three smaller scale renewable energy projects to reduce reliance on diesel-generated power. Collectively, these projects reduce greenhouse gas emissions, lower the cost of living and demonstrate innovative solutions for off-grid diesel communities.

These investments can help to ensure that the Northwest Territories maintains a strong economy and healthy environment that provides jobs and opportunities for our residents and communities and where our youth can be confident there will be employment and economic opportunities for them well into the future. Infrastructure is an important area for investment, and partnership with the federal government is required.

As I said at beginning of my presentation, the Government of the NWT wants to fully participate in all decisions that affect our residents. When new policies and strategies are being considered, we must be involved in a meaningful way, far in advance of implementation.

We want to work with Canada and we appreciate your interest in the NWT. Thank you.