Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue 17 - Evidence - March 15, 2012
OTTAWA, Thursday, March 15, 2012
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 8:03 a.m. to study the current state and future of Canada's energy sector (including alternative energy).
Senator Grant Mitchell (Deputy Chair) in the chair.
[Translation]
The Deputy Chair: Welcome to this meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources.
[English]
I am Grant Mitchell, deputy chair of this committee. I am from the province of Alberta and am chairing this meeting today on behalf of Senator David Angus, who unfortunately cannot be with us today. You will have to make do with me.
I would like to welcome all members of the public who are watching us this morning, or late at night when CPAC re- televises this. It is excellent viewing, I am sure.
I am surrounded by staff and senators, whom I would like to introduce. We have two very able analysts from the Library of Parliament, Sam Banks and Marc LeBlanc and a stand-in but stand-out clerk, Ms. Labonte with us today. Senators present are Senator Peterson from Saskatchewan, Senator Neufeld from B.C., Senator Seidman from Quebec, Senator Wallace from New Brunswick and Senator Bert Brown from Alberta, who was the first and now one of two elected senators. Also present are Senator Daniel Lang from the Yukon and Senator Dennis Patterson from Nunavut.
Today we are continuing the examination of an energy strategy for Alberta and for Canada. We are nearing the end of an almost-three-year study. We have heard from as many as 250 witnesses. This has been a very complex, challenging, extremely interesting and, we believe, very important study of a very significant issue for Canada at this time in our energy, economic and environmental development.
People who are watching can get some good information on this study from a website that this committee set up specifically for this study. It is at www.canadianenergyfuture.ca or www.avenirenergiecanadienne.ca.
This morning it is my pleasure to welcome two distinguished witnesses from the Government of Nunavut. They arrived in Ottawa at 4:30 this morning. That is dedication, and it mirrors how much we appreciate their effort to be here.
Appearing is the Honourable Peter Taptuna, MLA, Deputy Premier and Minister of Energy for Nunavut. He was elected to the Legislative Assembly of Nunavut in 2008. He represents Kugluktuk, the most western constituency of Nunavut, so he is probably no stranger to long-distance travel. He was appointed as Minister of Economic Development and Transportation in 2008. He also serves as Deputy Premier and Minister responsible for Nunavut Development Corporation, Minister responsible for Nunavut Business Credit Corporation and Minister responsible for Mines. He was born in Cambridge Bay and spent most of his life in the area that he now represents. He attended residential school in Inuvik, Northwest Territories. He has had experience in the oil and gas and mining industries and was employed for almost ten years with the Kugluktuk Hunters and Trappers Organization. Mr. Taptuna has had a very distinguished career.
Also appearing this morning is Robert Long, Deputy Minister, Department of Economic Development and Transportation. I unfortunately do not have Mr. Long's biography, but I expect that it is every bit as distinguished as that of Mr. Taptuna.
Hon. Peter Taptuna, MLA, Deputy Premier and Minister responsible for Energy: Thank you committee members and Mr. Chair. I am pleased to be here today to address the Standing Senate Committee on Energy, the Environment and Natural Resources. I thank you for the invitation.
I will speak today about Nunavut's unique challenges and opportunities with respect to energy, and I will provide a snapshot of our territory's energy situation.
Nunavut changed the face of Canada when it was created in 1999 by becoming Canada's third territory, an event that was brought about through the largest Aboriginal land claim settlement in Canadian history.
Nunavut is nearly two million square kilometers, covers three time zones and has 25 communities. The latest statistics put our population at 33,000. According to Statistics Canada, in 2011 the median age in Nunavut was just under 25 years, the lowest in the country.
Nunavut boasts the largest coastline in Canada. We are the northernmost part of Canada, and we occupy most of the Arctic archipelago. Needless to say, from the southern perspective, Nunavut is the most remote part of Canada. However, to Nunavummiut, it is our home, and we do not think of Nunavut as remote.
We have reasons to believe that the rest of Canada is beginning to recognize the North as part of the Canadian family. We hear new phrases used by Canadians lately, such as "from coast to coast to coast."
Despite our growing political and economic integration into Canada, because of our isolation from the road network and our small population distributed over a vast area, Nunavut's energy challenges almost make us seem like a foreign country. My counterpart from the Northwest Territories, the Honourable David Ramsay, spoke to this committee last month on his territory's energy issues. You will find that Nunavut shares many of the same challenges, only in Nunavut they are even more extreme.
Unlike our southern and even our northern neighbours, all of Nunavut's energy generation is by diesel plants. None of our communities are connected to a grid system. There are no cross-jurisdictional power transmission lines and only a few small experimental wind and solar energy projects. Although we are undertaking feasibility work for a hydroelectric power generation project, currently Nunavut does not have any hydro facilities.
Our residential energy costs average about 75 cents per kilowatt hour and range from 52 cents per kilowatt hour in the capital of Iqaluit to over 102 cents per kilowatt hour in Kugaaruk, a small and more isolated community. In 2010, our overall capacity was about 54 megawatts, which was generated by 27 plants throughout Nunavut. Under territorial legislation, the only organization permitted to supply electricity in Nunavut is the Qulliq Energy Corporation, which serves some 11,500 clients.
The Government of Nunavut pays approximately 80 per cent of Nunavut's energy costs, either directly or indirectly. Energy costs are subsidized in Nunavut through subsidy programs but also through underinvestment in the replacement and upgrade of our existing capacity, much of which is near the end of its life cycle. This is clearly not sustainable.
The Government of Nunavut completed an energy strategy in 2007, called Ikummatiit, which means "different forms of energy" in Inuktitut. It is aimed at creating an energy system that is affordable, sustainable, reliable and environmentally responsible.
Our strategy recognizes that difficult decisions must be made if we want to see real changes in our energy sector. We must change consumer behaviour and government operations, and we must educate about the environmental consequences of energy choices. We must also lay the groundwork for the development of energy resources in our territory, such as natural gas, oil and uranium. At the same time, we must develop renewable and alternative energy sources.
Nunavut's existing energy system results in the highest power rates in the country. This effectively lowers the bar on the business case for renewable energy. What we need to realize this is innovation, expertise and investment.
The first renewable energy source that we are likely to develop is, of course, hydroelectric power. Hydro is a proven technology in northern climates, and it is the best hope for reducing Nunavut's depends on fossil fuels quickly, sustainably and affordably. There are numerous hydroelectric power plants across the circumpolar world and in the Northwest Territories, the Yukon, Alaska, and Greenland.
Assessments for hydroelectric potential have been completed for various locations near Iqaluit on Baffin Island and throughout the Kivalliq region, which is on the west shore of Hudson Bay. These have mainly been desktop studies to date. The potential Iqaluit projects would serve domestic energy needs but, in the Kivalliq region, given the location just north of Manitoba, there is the possibility that a large project could be developed that could also serve southern energy markets if a suitable site were identified.
Iqaluit, the largest community in Nunavut, with a population of just under 7,000, will probably be the first to develop hydroelectric power, but the process has been slow, in large part because securing funds have been difficult. Capital costs for the one site near Iqaluit are estimated to be around $167 million. I should note that repeated attempts to secure federal assistance for these projects have failed. The Qulliq Energy Corporation has applied three times to the Green Infrastructure Fund to help advance the Iqaluit Hydro Project, without success.
At the same time as we move towards developing renewable hydroelectric power, we are also hopeful that more conventional energy sources, such as oil, natural gas and uranium, will help transform our developing economy.
Nunavut's vast oil and gas reserves could be the key to achieving our dreams of self-reliance. Our discovered resources amount to nearly 2 billion barrels of crude oil and 27 trillion cubic feet of natural gas. The development of these resources could greatly reduce our dependence on federal transfers and would bring significant benefits to different regions of Canada.
I have a personal understanding of this potential. I worked in the oil and gas industry for 13 years, mostly in the Beaufort Sea offshore sector. I was part of the first Inuit drilling crew, and I have seen the economic benefits this sector can bring to the North.
However, petroleum development is not without its risks. Even before the Macondo disaster in the Gulf of Mexico in 2010, many Nunavummiut had serious concerns about the risks of an oil spill in the Arctic. Inuit are a maritime people and our traditional activities are focused around the sea, so we are very conscious about these risks.
At the same time, we know that these risks can be minimized, even in northern environments. We also understand that some risks can be accepted because of the benefits they bring. Few people question the coming and going of ships delivering petroleum products to our communities during our short sealift season. We accept that the benefit of this activity is worth the risk that it carries.
For Nunavut, a big problem with the development of petroleum resources is that currently the risk-to-benefit equation is not acceptable. The federal government has full control of the regulatory process, and we must trust that they will manage the risk responsibly on our behalf. While we would benefit from employment and some economic activities stemming from petroleum development, the federal government will claim all the royalties. Nunavut must have a role to play in managing oil and gas exploration and development, and we must benefit directly from these developments.
Another barrier to petroleum development is the resource tenure system that is in place for oil and gas. This system has allowed petroleum companies to hold onto claims for decades, without fees or any requirement to demonstrate that they are working towards development of that property. This is unique in this modern world. Nowhere else do you see so few strings attached to the commercial tenure of geological resources.
We have done considerable work looking at the economics of developing natural gas resources in Nunavut. To produce this gas would require liquefaction facilities and year-round shipping. The key impediments are market, regulatory, technical and cost risk.
While the economics of the North American natural gas market would not support development, delivering this gas into the European market would be profitable. Our geography is in our favour. Shipping distances from Nunavut to Europe are almost identical to what they would be to a potential delivery point in North America.
The regulatory, technical and cost risks are similar to the oil sands prior to development there. We now have tens of billions of dollars being invested in the oil sands by the very same companies that hold the Nunavut resources and at margins that are not as attractive as development in Nunavut.
The difference is the oil sands developments have become very low risk. The federal and Alberta governments invested and worked hard to create a low-risk environment in the oil sands. We are ready to work with the federal government and of course with industry to address the regulatory, technical and cost risks of petroleum development in Nunavut.
While we are very motivated to work with the federal government, industry and our communities to see Nunavut's large petroleum resources developed responsibly for the benefit of Nunavut and Canada, we need the Government of Canada to devolve the jurisdictional responsibility for these resources to the Government of Nunavut so that we can address the issues that are preventing development and ensure benefits flow to Nunavut and Canada.
The other conventional energy resource I mentioned is uranium. Nunavut has one uranium exploration project currently in the environmental review process. This is AREVA Canada's Kiggavik project near Baker Lake. There are also a few earlier-stage exploration projects. Uranium development has been debated in Nunavut and we have carried out extensive public consultations and research on the subject. We have confidence in the regulatory system and we are supportive of responsible uranium development.
I will conclude by touching on the topic that is the focus of much of the committee's work and that many people have been talking about lately. Nunavut supports the development of a Canadian energy strategy. It is our view that this strategy must acknowledge Canada's energy divide which separates the on-grid and off-grid regions of the country. There are some 300 off-grid communities in Canada, mostly in the North, and this number includes all of Nunavut's 25 communities.
A Canadian energy strategy must address the unique challenges and needs of Canada's isolated, off-grid communities, including through support for innovation, efficiency and alternative energy.
Mr. Chair, at the same time, the strategy should lay out a framework for integrating Nunavut's plentiful energy resources into Canada's energy economy in a way that benefits the people of Nunavut. I hope I have helped the committee better understand energy in Nunavut, both the current reality and future possibilities.
The Deputy Chair: Thank you. You have helped greatly. We will impose upon you to help us some more by answering questions. We will start with Senator Patterson.
Senator Patterson: Thank you, Mr. Chair. I do appreciate the privilege of being here and asking some questions. I want to warmly welcome the minister, his deputy and his officials to the Standing Senate Committee on Energy, the Environment and Natural Resources.
I am happy that you are able to be here, Mr. Minister. I should acknowledge to my colleagues on the committee that, due to the vagaries of politics, Mr. Taptuna has only within weeks inherited the energy portfolio, so it is very much appreciated that he is able to be here today.
I was disappointed to learn that there has not been much progress in a partnership with or assistance from the federal government in dealing with the proposal to develop hydroelectric power in Iqaluit which, as the largest community, I believe consumes about 30 per cent of the diesel fuel that is burned in Nunavut to generate power. The minister pointed out that there are no alternative energy sources to diesel for electrical energy in Nunavut, which may make it unique in the country.
There is a project with 20 or 25 megawatts of power reasonably close to the capital city. Could you tell us a little bit more about that project and why it seems that attempts to tap into the Green Infrastructure Fund have so far not worked?
Mr. Taptuna: Thank you for that question.
Accessing funds from the federal government from this program has been very difficult. One of the reasons for that is that the Qulliq Energy Corporation is a for-profit corporation and it is very difficult to access funds for a profit company. In my new portfolio as Minister of Energy, we are hoping to take on the research part of that to make applications to the Green Energy Fund and work from that angle rather than through the Qulliq Energy Corporation.
Senator Patterson: I realize there are some high capital costs to this project, and you have indicated a significant figure of $167 million. Canada is extensively subsidizing Nunavut's operational costs through annual grants. I think the ratio of Canadian support to Nunavut is over 90 per cent of the $1 billion-plus budget, so it is probably in Canada's interest to reduce the cost of energy.
Could you talk a bit more about the project itself, where it is located and what the time frame is for making it operational?
Mr. Taptuna: The project it is around the James Inlet area, which is just a few kilometres outside of Iqaluit. We have been trying to complete the feasibility study. I will let my deputy minister supplement that information.
Robert Long, Deputy Minister, Department of Economic Development and Transportation, Government of Nunavut: I believe the transmission line would be about 45 kilometres. A glimmer of good news is that the power company has applied to Candor, and I believe a contribution of $4 million is being considered that will move this the next step along the way towards planning. I think there is some consideration being given to thinking of this as a P3 project. We are in the midst of doing our first P3 project on the Iqaluit airport, so we are gaining some experience and expertise in that area, and optimistically this would be the next project to be looked at in that way.
Our finance department has been discussing our debt cap with the federal government. Our ability to finance any part of this through debt is very challenging at the moment. Our debt cap is not large enough to allow really any infrastructure development to take place on a large scale beyond what we currently have underway with the Iqaluit airport.
We would probably need the debt cap to begin to come closer to $1 billion. I believe it has now been doubled from $200 million to $400 million, something in that neighbourhood. That would be insufficient to finance projects like this. Perhaps the federal government, in the future, will be able to think of our debt cap in a different way, beyond just perhaps one limit for financing the cash flow of government and another limit for considering financing for infrastructure development.
The other thing I would like to say on this topic is that we look forward with some optimism to one of the diamond mining projects that is in the advanced stages of exploration. If their business plans says it will be a financial success, then their need for power may create an opportunity where we can joint venture with industry as well. That would be helpful for us and all concerned.
I am not sure I answered your question, but those are some points around that hydro project.
Senator Lang: I want to welcome our guests here. Mr. Minister, I was looking at your biography, and it is very interesting to note that you spent 13 years on the Beaufort Sea actually drilling for oil, so you have more expertise than anyone around the table here, hands on.
There are a few areas I would like to explore a bit. The first one is the question of the offshore drilling up in the Arctic that you are looking at possibility down the road with the reserves that you talk about, which are quite massive if they prove to be true. My understanding is that there is one or two if not more environmental groups looking at perhaps creating a park or reserve of some kind in that part of the area, specifically referring to the polar bear and their possible depletion. I am wondering whether you would like to comment on that. Would that affect your plans in the area, and have you taken any position?
Mr. Taptuna: I will try to answer your question and add a few comments. There is an application for a national park on Bathurst Island north of Baffin Island by one of the Inuit association. There has been a lot of work done in the last 20 years on that particular subject. They want to include an island there, Cameron Island, which in the past has been the only producer of oil in Nunavut. There is a producing well there, oil that was used at the project site there and at Resolute Bay, that produced about 3 million barrels of oil. I believe the last date that any oil came out of there was in 1996, somewhere in that time. There is still about 4 million barrels of oil in that well. One of the things that is a huge concern to the Nunavut government is that it is just not sustainable to provide and subsidize these smaller communities. I mentioned 102 cents per kilowatt hour, and that is mainly subsidized through our bigger regional centres and, of course, by the government.
As the years go by, the sustainability of doing that is just not very good. As oil prices go up, so do our costs. It is getting to a point where we have to really take a step back and consider developing our known oil reserves. I believe there was a call for nominations in the past. Once an organization put in an application to include one of the islands that did not go through the MERA process, that kind of forced the federal government to pull back their nominations for looking at exploration, drilling and whatnot.
Senator Lang: I wanted to get a sense of how you see this affecting the area that you are speaking of. My understanding is that it is Coca-Cola, in conjunction with I believe the World Wildlife Fund, looking at creating a park or a reserve or an ocean park in that area. I was wondering, from your perspective and the government's perspective, how do you view that? That is obviously a reserve or resource out there that could be of benefit to your part of the world. Do you have any comments on that?
Mr. Long: Our government, like every government in Canada, obviously has the give and take between the environmental concerns and the need for economic development. We debate this very vigorously in committee and between departments, and we have reached the position where we are very supportive of economic development and resource development at the same time as trying to be as respectful as possible to wildlife and to natural reserves like parks.
In terms of this particular park we are talking about, Cameron Island is a small corner of it, and so we are having a little squabble over one little island in a much larger park. That is identified as the area that has some economic potential through the Bent Horn Oil Well and other potential development in that area. We are not in complete agreement at this point on that issue in that one spot, but we support the park going ahead. It is simply that one small island as part of a much larger development that is causing us some concern. We have not totally resolved that at this point.
Senator Lang: I would like to move to another area. You mentioned in your opening statement about the regulatory process and working with the federal government. My understanding is that the Government of Nunavut and the federal government were working on putting into place a regulatory process similar to what we have in Yukon. It is basically a one-window approach between the federal government and, in this case, the government of Nunavut and other stakeholders. I thought that was coming to a conclusion and decisions were going to be made in respect to moving ahead and putting that in place. Perhaps you could update us on that.
Mr. Taptuna: I probably need clarification on the question. Are you referring to the Nunavut land claims regulatory system there or off shore, oil and gas?
Senator Lang: On shore, devolution.
Mr. Taptuna: There has been some forward motion on devolution. It is the premier's office's responsibility to move the file forward. Just like in any other jurisdiction, we understand it takes time. Our population growth is one of the fastest in Canada, even though we have a small population in Nunavut. We still do need 2,500 jobs in four years, just to keep up with the population growth. In eight years, it will be 3,500 new jobs we have to create for our people. In 10 years, it is 4,500 new jobs. With the development, when it comes to exploration and mining for minerals, that is one of the key things we focus on. For oil and gas exploration, we pay close attention to what is happening with the newly tabled publicized national board's review on Arctic oil and gas drilling.
We play a part in that, but when it comes to devolution, the Premier's office is more involved in that particular file and issue.
Senator Lang: What timeline are we looking at for this regulatory process to be put in place? Do you have any idea? That is obviously a major concern to the Government of Nunavut, I am sure. Will it be within the next six months or a year? Do you have any idea?
Mr. Long: I will try and shed some light on that. We understand that the Premier's discussions with the Prime Minister have been very positive in the past few months. We are optimistically looking forward to an announcement from the Government of Canada that they will appoint a negotiator. At this stage, the devolution process does not begin until both sides begin negotiations. Up until this point, the federal government has not had a negotiator in place, so the process cannot begin.
Once the process is under way, we would anticipate probably 10 years or more before all I's are dotted and T's are crossed in a devolution process.
That would be somewhat similar to the timeframe for the Yukon and the Northwest Territories. At this point, there is a devolution arrangement with the Yukon, and the Northwest Territories are well on the way. They are anticipating they will have that settled within the next couple of years. They are in the final steps and we want to start. That is as clear as I can make it.
Senator Wallace: I was interested in hearing, and I guess it is not surprising with the population in Nunavut, about trying to provide infrastructure to that area. It is a massive area with a sparse population, which is a challenge, as well as to get funding to do that. Obviously, if your government had greater access to the natural resource revenues and the potential that Nunavut has, it could obviously provide that source of revenue.
You mentioned, minister, this resource tenure system that I am not familiar with, and you indicated that it is a barrier to enabling the Nunavut government to, I would take it, realize the economic benefits of the natural resources in Nunavut. Apparently, it gives private companies unlimited control over vast areas of Nunavut without any requirement to do anything within reasonable periods of time.
Could you expand upon that? I am not familiar at all with that system, but it seems to be one that I could see being a source of concern for you.
Mr. Taptuna: Yes, it is a procedural thing within the regulatory system. Once a company has oil and gas work permits for a certain location like that, there are no requirements after they clean the area and do some work on it. There are no other requirements in any kind of time frame to further develop the property.
Unlike in minerals, where once you obtain a property, you do have to do some work on it in order to develop it within a certain time frame. With oil and gas, the company has no requirement to develop; they just sit on the property and it belongs to them. There is no real stipulation that they have to work on the property.
Senator Wallace: Would that apply to offshore and on-land development of oil and gas? Does it apply to both areas?
Mr. Taptuna: I am not 100 per cent certain about offshore, but on land, once a company has ownership of the property, they can sit on it and not make any commitment to further develop it. Offshore, I believe, is the same thing.
Senator Wallace: Do they own the land, or does is just give them the right of exploration over the land?
Mr. Taptuna: It gives them the right of exploration.
Senator Wallace: Would that cover vast areas of Nunavut, or is it just isolated areas where property would be tied up under this resource tenure system?
Mr. Taptuna: The known resource is out there. With respect to potential areas where work has been done in the past, in the 1970s, there are known areas with high potential for oil and gas. We are not familiar with how that really works, but most of the land tenures go down in oil and gas drilling, as opposed to across the field for exploration of minerals.
I am sure there are a lot of hectares claimed out there by the companies, but for the most part, there is multiple ownership of linear property straight down. For example, the first 100 metres is owned by one company, and the next 200 or 1,000 metres going down is owned by a different company.
There are all these hoops we have to go through for these companies, and they have to come to an agreement to develop. When you have five or six companies owning only a piece of linear property going into the ground, it makes it very difficult for them to come to an agreement on how to develop that property.
Senator Wallace: Is your government looking at making changes to the rights that would exist today to perhaps restrict them, compel companies to do certain work within a reasonable period of time?
I am also thinking about as far as any future rights that would be given to exploration companies. Are you looking at creating new rules that would apply to them so it does not go on indefinitely and tie up the natural resource? For the people of Nunavut, that does not currently work in their interests.
Mr. Taptuna: We are hoping to get some response from Aboriginal Affairs Canada to look at the issues we are facing there. I would like my deputy minister to supplement my response.
Mr. Long: At this point, control is federal; we have no control over those oil leases. Many of them have been in place with some wheeling and dealing among oil companies, as goes on all the time. I believe at this point Suncor is one of the largest owners. We do not really understand why the federal government has chosen to waive any responsibility for development or fees being paid to hold those leases over the years. I think that is quite unique in Canada and other areas; this does not normally happen.
This is sitting dormant, and we are not sure what the reason for that is. Certainly, as we go through the process of devolution over the next decade or so, our approach to that would be different and certainly more aggressive in terms of expectations of development in a reasonable and responsible way.
Senator Wallace: As this point, the Nunavut government has no ability to do anything with that system as it resides with the federal government?
Mr. Long: No, we do not have the ability to do anything, not much more than complain.
The Deputy Chair: I would like to welcome a new arrival to the meeting, Senator Nancy Greene Raine. Thank you for joining us.
Senator Neufeld: Thank you for being here, minister. We appreciate your remarks and certainly agree that you have huge hurdles when he it comes to servicing so many communities in such a vast area with a small population. I can understand that.
When you spoke to Senator Lang with regard to the park that is proposed, can you tell me how large that proposed park would be? Can you also tell me what percentage of land mass in Nunavut are now parks or protected area? You do not have to be exact, but if you could give me those numbers, I would appreciate it.
Mr. Taptuna: I do not have the figures off the top of my head, but for Nunavut, we do have more national parks, territorial parks, protected areas, management areas and sanctuaries than the rest of Canada put together. We have many square kilometres of protected area.
Senator Neufeld: I appreciate that. I know in my province about 18 per cent is set aside for parks and protected areas. You do not have to do it now, but could you inform the committee via our clerk what percentage or how much park and protected area and sanctuaries exist where no development can take place? Also, what is the size of the proposal?
I will go on to uranium. You say that you can produce uranium there. Is it close to somewhere you can ship it from? As I understand, everything is frozen there in the wintertime. Given it might be difficult to get in there with ships to ship things out, how do you propose to move uranium out? This is my ignorance, actually, and you can help me a bit. I live in northern British Columbia, but it is still a long ways south from you. I understand that a little bit, but can you help me there?
Mr. Taptuna: One of the most advanced uranium projects is with AREVA. I believe it is 70 kilometres outside of Baker Lake. Baker Lake is smack-dab in the middle of Canada.
With the length of time it has taken this company to do their exploration work, it is going through the process now with the Nunavut Impact Review Board. They submitted their environmental impact statement and that process is going through.
However, transportation is from the site through Baker Lake. There are alternate sites they have talked about, such as going via ship around the Rankin Inlet area. However, some of these things depend on hour the environmental impact review goes. I am sure they have ultimate plans at this stage.
I will let Mr. Long supplement my response.
Mr. Long: I would like to broaden that out a little bit and speak about our need for roads, which is another infrastructure issue that is important for the development of Nunavut. We will be handing out the statement our Premier gave to the Arctic Oil and Gas Symposium yesterday. She made reference to following up on John Diefenbaker's Roads to Resources Program from the 1960s. In the Kivalliq region, along the coast of Hudson Bay — our central region — we see that as being a very necessary thing. It is a linkage between Nunavut and Manitoba, the port of Churchill, the rail line and all that that implies. We are actively studying that with the Province of Manitoba.
The intent would be that the road would run up the coast to take in three of the communities along the way as far as Rankin Inlet, with the potential also to branch off to Baker Lake. AREVA would probably build its own road to link into that, just as a matter of efficiency.
If I can just thump that drum for a minute longer, we also see great hydro potential there for the future, as well as to reduce our dependency on diesel-generated power. It would be beneficial if we had that road and could link into the Manitoba grid. They are constantly building more hydro projects at the north end of their province, and it has considerable potential for sales outside of Manitoba. Cheaper, cleaner energy could be provided by linking that road to those communities. Four or five communities would benefit from that. That would significantly lower our need for diesel-generated power.
Again, at some point in the future, the development of hydro there and feeding that into the Manitoba grid is very valuable in its own right, but it also opens up better economic opportunities for mining development. In this case, specifically, we are talking about a couple of gold mines and the uranium mine that AREVA is discussing.
That is a sort of centrepiece to one of our dreams.
Senator Neufeld: Thank you for that. How large is the hydroelectric project that you just spoke about? What is anticipated?
Mr. Long: What was the potential there; was it 30 megawatts?
Mr. Taptuna: Is that for Iqaluit?
Senator Neufeld: No, not Iqaluit; rather, the one you just spoke about, Mr. Long.
Mr. Long: There are several there. I would say the potential is between 30 and 50 megawatts, but I am guessing.
Senator Neufeld: You say that the Government of Nunavut pays approximately 80 per cent of Nunavut's energy costs, either directly or indirectly, and you subsidize. I understand the rate of $1 per kilowatt hour is significant. How much is subsidized? Is it subsidized across all of Nunavut by a certain percentage to the people, or is it different in different communities? What happens there?
Mr. Taptuna: Thank you for the question. When we talk about subsidization through our territorial government, the cost of bringing fuel into these smaller, remote communities are substantially higher than bringing it to the regional centres like Iqaluit, Rankin Inlet, and Cambridge Bay. The rates are subsidized to make it more affordable for the smaller communities to have power. Without that, most of the smaller communities will not be able to own homes or much of anything else. It will be quite drastically higher than 102 cents per kilowatt hour that I mentioned before.
As the government, we subsidize the corporation to keep the utility costs down. I believe a year and a half ago, we subsidized by about $13 million to prevent the rates from going up by 31 per cent for everybody. We kept the rates down by subsidizing the corporation to make it more affordable for our people in Nunavut.
Senator Neufeld: How much does a residential person pay per kilowatt hour in Iqaluit?
Mr. Taptuna: About 52 cents.
Senator Neufeld: It would be higher than that if it were not subsidized by the process you just spoke about, is that not correct?
Mr. Taptuna: It would be quite a bit lower if it was not bringing the cost to be subsidized for some of these smaller communities. As I mentioned, it is 102 cents in one community.
Senator Neufeld: Thank you. If there is a second round, I will go on that.
Senator Seidman: Thank you, minister, and thank you, Mr. Long. There is no question that you have portrayed a rather challenging picture, to say the least.
I will follow up a bit on Senator Neufeld's line of questioning. You have said that Nunavut is almost exclusively dependent on the high cost of fossil fuel to generate energy for homes, businesses, government and industry. Clearly it is not sustainable. You pay 80 per cent of those costs — ever increasing — and that is not sustainable. You also mentioned that the government in 2007 completed an energy strategy aimed at creating an energy system that is affordable, sustainable, reliable, and environmentally responsible. You mentioned in your presentation how you must develop renewable and alternative energy sources.
I would like to know what kind of research is being conducted into the much-needed and less-costly alternative sources, say, of wind, tidal, and solar energy. Also, please tell us whether federal program funding, or funding from other sources, is available for this kind of research.
Mr. Taptuna: Thank you for that question. We have done a little bit of research through our corporation, Qulliq Energy Corporation. I must mention that they have been refused thrice in the past to access funds from their Green Energy Infrastructure Fund. Again, the reason is that they are a for-profit corporation. Having gained the new energy portfolio just recently, we are hoping we can become more active on that type of research for alternative energy. We all know for a fact that it will take lots of money to come up with sustainable alternative energy.
Again, I mention that probably hydroelectric power generation is one of the quickest and more affordable ways to create cleaner energy for our territory. At the same time, it takes a lot of money. I mentioned an estimated $167 million just for the one small project for Iqaluit alone. We know that Labrador is preparing for a megaproject in Muskrat Falls, I believe it is, to build hydro there.
In Nunavut, we want to get to that stage, too, but we understand it takes a lot of money. That is why we want to develop our oil and gas resources in Nunavut and have royalties and money to start looking seriously at alternative energy. At this time, the Nunavut government gets most of its funding, 90-odd per cent, from Ottawa. We have no means of creating any real revenue for our government, so we have to depend a lot on Ottawa. That is why we are looking at oil and gas development, and we are looking at that seriously, because without that we are at the status quo; we cannot move anywhere to alternative energy. We know alternative energy costs a lot of money.
Senator Seidman: I am sure I have asked this question many times before to other witnesses who have appeared here. How much sharing is there of best practices and innovation among the northern regions of the country? We have a vast northern area in this country and a need for the kind of development you are talking about. It is very expensive. How much sharing is there across the northern regions of the country of practices and innovations that work?
Mr. Taptuna: There is some sharing of information between the three territories. At this point, I cannot really tell you exactly how much is shared on energy. We do have the same problems as the other territories. We want to develop our oil and gas energy resources, to get to a point where we can actually do things and come up with alternative energy projects or cleaner projects.
At this time, I will let my deputy minister supplement that.
The Deputy Chair: You come from a very civilized legislature where you do everything through the chair. It is very refreshing, but it is not necessary. You can just go back and forth with the people. I admire it, as a chair. I am quite impressed. Feel free to jump in.
Senator Seidman: You can argue directly with us.
The Deputy Chair: Absolutely. Go ahead, Mr. Long.
Mr. Long: I guess that is the compelling argument for consensus government.
As we look at these alternative energy sources, we come up against some unique problems. We have a tide in Frobisher Bay that is almost as big as the Bay of Fundy. They do not have giant ice cubes floating around in there, trying to scrape everything off the bottom. We are very interested in the innovations that they are trying to do there. If they work, perhaps there will be some application for us, with the added challenge of how to deal with ice.
Wind energy is working very well in the rest of Canada. It does not really like our climate much. Historically, the system simply has not held up. There is an encouraging thing. In one of our neighbours, the Northwest Territories, the Diavik diamond mine has just invested about $25 million in a wind system that they will use to supplement their remote location. I believe the four windmills each stand 300 metres high, so they are quite impressive. They have the potential to generate slightly over ten megawatts, and the probability will be somewhere in the neighbourhood of four to six. It is encouraging to see things like that happening. Certainly, if their technology works, we will be looking at it seriously, again with wind being something that has matured over the last 20 years, and in this case I believe it is German technology that they are using. If it is successful, it really gives us some hope and reduces some of the risk we may have in attempting to do something similar.
Looking at solar, we have a couple of issues there, too. Total darkness does not seem to help much in the winter, when you need the power the most. We have some small experiments that have gone on with solar. Again, as a hybrid system, they do add to the equation. Again, the technology has matured. It is very common now, including on my sailboat. It works fine most of the time when there is sun and at least daylight. As those costs drop down, that is something that we will attempt to encourage people to use more of in the future.
Senator Seidman: Is there research being done on how to use it as a supplement? Obviously, as you say, in the winter it is dark; you cannot use solar power. The fact is that you could use these alternative sources to supplement, and use them at times when they are usable. I would like to know whether there is research being done to look at the opportunities you have in these alternative sources.
Mr. Long: As we have just taken over the portfolio, our intention is that we will be doing that more aggressively than has been done in the past. We have some enthusiasm for it. The energy secretariat has been somewhat dormant over the past few years and we have intentions of revitalizing it and moving it in that direction.
Senator Brown: I was in Iqaluit four years ago with this Energy Committee. There was a slight chill in the air when we got off the plane. It was minus 47 degrees centigrade, I believe. We went to a diesel plant and they told us that if they run short of diesel coming in from Frobisher Bay before the freeze-up of the bay itself, it has to be flown in by airplane.
You said you had 27 diesel plants. You also said on page 5 that you have 27 trillion cubic feet of natural gas that has been discovered. Has there been any attempt to see if it would be possible to put natural gas conversions to the diesel plants and use some of that 27 trillion cubic feet of natural gas? It is a lot of natural gas, if you can liquefy it in some way. Is it too far away from Iqaluit, or is there any place where it can be used for conversion?
Mr. Taptuna: As I mentioned earlier, the rights of the leases are held by companies with no obligation to develop. We do have our resources there, but the companies that hold the rights and own whatever is in the ground have no obligation to develop further, so they sit there.
Being the minister responsible for mines as well, there is an exploration company out there that is interested in looking at liquefied natural gas for fuelling their power stations. We are also working with private industry to see how we can move that forward.
Senator Brown: I would commend you on that attempt, because it seems that hydroelectric is wonderful, but it takes a long time to build a hydroelectric plant, in years. This could be a bridge from where you are now to where you would like to be in terms of using natural gas. You would be able to use it year-round once you got some company to agree to it. I cannot imagine why we cannot use the federal government to pressure one of those companies into letting some natural gas go to the market. If they have not got a market for it, maybe they would be willing to use some of it as a market right there.
Mr. Taptuna: I agree. The North American market for natural gas is very low. For the most part, it is not profitable for these companies to produce natural gas. In other parts of Europe, Japan and Asia, the market price is around $10 per met cube compared to North America, which is just under $2. It fluctuates between $2 and under $2. With other markets opening up, including Asia and England — which is around $8, I believe — it would make it very profitable for companies marketing their natural gas out there. With the potential of opening up these markets for that, I am sure there would be the possibility of establishing a liquefying plant up North somewhere for all the 27 trillion cubic feet of gas that is available out there.
Senator Brown: One last question on that. I wonder, if the distances are not too far apart, is it possible to travel a pipeline? Is it possible to travel by tanker trucks to bring from a plant that would come to Iqaluit? How far away would that kind of testing be?
Mr. Taptuna: In the past, there was tanker travel to Bent Horn on Cameron Island — the island we spoke of earlier — shipping 3 million barrels of oil in 10 years. The technology is there. The profitability for these companies to move their developments forward is the key thing. At the same time, we have lots of what we call "easy oil" in other parts of Canada that the companies are more focused on, where they make more profit from these other projects throughout Canada. With the scientists indicating that sea ice is going into these straits up North, it opens up the possibility of even making better profits to Europe and Asia for natural gas.
Senator Brown: One last question, if I may. Are any of the natural gas deposits that have been discovered pure natural gas? In other words, do they come up just when you get a drilling thing and you have pressure of natural gas, or do you have an oil well that has natural gas pressure underneath the oil? Do you have natural gas wells that actually produce nothing but natural gas?
Mr. Taptuna: Once you find a well that can produce, whether it is oil, gas or condensate, it varies. If there is more natural gas, of course, it will be called a natural gas well. If there is more oil, it will be an oil well. For the most part, there are all types of gas — condensates and light oil in some of these wells — but the majority of what is in the well will determine what it is called.
Senator Brown: I wondered if you have access to whether they have tested wells that are just pure natural gas, so you would not have to try to get rid of the oil in order to get down to the natural gas. That is my question, because then it would be a lot easier to get natural gas liquefied and use it for heating, your plants, your power, everything.
Mr. Taptuna: Yes, absolutely. In some wells that is possible, but for the most part there are all different types of products that you come across.
Senator Brown: I know. I am from Alberta.
Mr. Taptuna: I believe my deputy minister wants to supplement the question.
Mr. Long: I have a couple of points, Senator Brown. First, there are no roads, so if this stuff is going to be moved, it will be moved by boat. Second, is a note of encouragement on the liquid natural gas; All of our diesel-fired plants are old and by necessity we are replacing them as required. The last couple that are being installed actually have the capacity to be converted over to LNG. We are considering that as a possibility for the future.
Senator Brown: It is a possible stopgap?
Mr. Long: Yes, absolutely.
Senator Peterson: Thank you, gentlemen, for your presentation.
Going back to the royalty situation — which appears it is 100 per cent to the federal government — you talked about this potential mine that is close to starting. You get none of the royalties, but I presume you would be expected to provide all the infrastructure to support that. Is that correct?
Mr. Taptuna: To a certain degree. We are expecting that any kind of development out there by private industry will be building their own infrastructure, whether it be marine facilities or roads to their projects.
Senator Peterson: The workforce requires a lot of people to work. You will be expected to provide the infrastructure for that, I imagine. You get the benefit of the jobs, but there are a lot of costs involved here too. I do not understand where the wealth creation will be. You talk about oil and gas. You want to do that, but you do not get any of the royalties of that either. With those exploration licences, companies can go in there, determine what reserves are there and then just sit on it. Many of them just want to beef up their revs for their balance sheets. I do not understand how anything will happen until you can get that sorted out a bit. Where are you at on these royalties, so that you can start participating in that? Is it still 10 years out, as you indicated earlier?
Mr. Taptuna: We still have a lot of work to do with the federal government when it comes to devolution of royalties. However, for any kind of development out there — whether it be mining development or oil and gas — Ottawa has subsidized and partnered in most of the major developments in Canada, including the oil sands. We hope they will build some infrastructure to attract more investment companies to enrich our economies, for the territory and of course the rest of the nation. By doing that we look at sharing arrangements, especially for oil and gas. A good example is Newfoundland, where they have the opportunity to expand their economy. It is going very well there and in Saskatchewan. We hope to be doing the same in Nunavut, although we do have a small population and no infrastructure. We do have one port on the longest coastline of Canada, and that is in Pangnirtung. We have no other marine facilities in our territory. Newfoundland has over 300 that the federal government built. In our territory, we have one that is still in the completion mode. It will be done by this summer.
With infrastructure, whether it is built by Ottawa or with assistance from private industry, that attracts all kinds of economic activity. That is why our premier is talking about the road to riches that Diefenbaker talked about 50-some-odd years ago.
Senator Peterson: Did you have to sign off on a mine development like this diamond mine you are talking about? Does Nunavut have the final sign-off, or can Ottawa just go ahead on their own and say they will approve it?
Mr. Taptuna: In Nunavut, we do have the land claims agreement, and the regulatory processes go through the Nunavut Impact Review Board, NIRB. The territorial government does not have that authority. We do not permit or license any of these developments, whether it is mining or oil and gas. NIRB gives out the final project certification, and, of course, the licensing and permits do come from the federal government.
Senator Raine: Thank you very much. This is very informative for me.
I am curious about the Qulliq Energy Corporation. It was a for-profit corporation. It failed to get federal government grants in the Green Infrastructure Fund. How is that corporation set up? Is it sort of like a partnership, a private-public partnership?
Mr. Long: It is a Crown corporation.
Senator Raine: It is a Crown corporation for profit?
Mr. Long: Yes.
Senator Raine: Fully subsidized?
Mr. Long: Yes.
Senator Raine: Or quite subsidized?
Mr. Long: Yes.
Senator Raine: That is a different kind of model for me.
Is that energy corporation responsible, then, for delivery of diesel fuel to all the remote communities? How does it work?
Mr. Long: Originally, another part of the government — one of the departments — delivered the fuel, including theirs, but now the whole responsibility has been transferred to Qulliq Energy Corporation. They buy and provide fuel for all of the petroleum products that are needed in Nunavut. Again, this arrives by tanker ship during the summer, and it is a full year's supply.
Senator Raine: As the population in the remote communities is growing, are the demands on their services also growing?
Mr. Long: Yes.
Senator Raine: The biggest challenge facing Nunavut is the transition from a culture that did not depend on fossil fuels for their heat to one where you do depend on it now, but there is not really the revenue to support it.
Mr. Taptuna: That is an excellent question. As the government, we are at the mercy of the market prices that are out there. We do have a buy a year's supply of fuel at the day's market price. We make attempts to find ways to lessen the impact. At one point, the market price was over $130 per barrel, which drove up the cost substantially.
Mr. Long: There are some interesting consequences to this. Today, I believe, gasoline, here in Ontario, is probably $1.22 or $1.23 a litre at the pump. I think, in the last month, I have seen it as high as $1.27. Right now, we are at $1.16 because we bought ours a year ago. We were lucky enough to pick good points in the annual cycle of ups and downs in the world market of fuel, so we actually have a pretty good deal at the moment. It may be a disaster next year. It is not always that way, but, at the moment, our fuel is relatively cheap in comparison.
Senator Raine: All the fuel comes in on one tanker?
Mr. Long: Many tankers.
Senator Raine: It is all delivered in the summer?
Mr. Long: It is all delivered in a period from July to the end of September, more or less, or October.
Senator Raine: It is delivered to the different communities?
Mr. Long: Yes, and the government owns tank farms that are big enough to hold a year's supply. It used to be two years, but as we grow and the tank farms do not, it is definitely a year's supply.
Senator Raine: That is exactly the question I was going to ask you. As the population expands, obviously you need to have more tank farms. Just the pure supply of the fuel is a big infrastructure challenge.
Mr. Long: That is true. Having the tank farms is not our biggest infrastructure challenge, but it is one that we have to keep up with because, if we do not, we have a disaster, a crisis.
Senator Raine: I have a huge respect for the ingenuity and the talent to survive of the Nunavut people. I wish you success in moving forward because those are big challenges.
Senator Wallace: Your deliveries come once a year, of course, because of ice conditions. You have to bring it in in that way. Do you have a hedging strategy so that you are not left to pricing all of your cargo in one day? I know oil companies have that concern as well, so they have hedging strategies and price the cargo over an extended period. It balances out the peaks and valleys as the markets adjust day to day. Do you use a hedging strategy in pricing your cargo?
Mr. Taptuna: Thank you for that question. We did take a look at that. It was not in our best interests. We took an alternative route there. We found a storage facility where we can pre-buy the fuel and store it somewhere down south at the lowest possible market prices of the year. In the past, all the fuel that was bought was bought at the day's prices. We did look at hedging, and it was not to our greatest benefit. Therefore, we went the alternative route.
Senator Wallace: Even when you are buying it and storing it, trying to pick that point in time when you believe the market is right is difficult. We all know, for the stock market, that if anyone can figure that day out, they need to tell all the rest of us. The oil companies have those same concerns, and that is why they try to spread the risk over an extended period of pricing days when they price the purchase. It might be something you might want to have another look at. It might help you.
Mr. Taptuna: One of the things we pay attention to is all the scientists out there saying that the ice packs are getting smaller and that the open-water season is getting longer. It could be to our advantage; rather than just getting one whole year's supply of fuel at one market price, we may have an opportunity to actually do two with the extended open-water season.
Senator Lang: I just want to go back to the opening remarks by the chair. The purpose of this committee, for the last number of years, has been to look at going towards and making recommendations towards a national energy framework for the country. What is the federal government's responsibility versus those of the territorial and the provincial governments? What role do we or can we play, respecting the jurisdictions of the provinces and the territories, but, at the same time, recognizing that the federal government has a role.
You may not be able to answer this today, but it seems to me that we really have certain categories, if you like, of various responsibilities, both in the provinces and the territories. There are those in the more populated areas that can pay for some of the infrastructure that has to go in and be able to meet those obligations, yet we have in the northern part of the provinces and in the territories these isolated communities where there are few options available at the present time vis- à-vis the ability to go somewhere else for available sources of sustainable energy — without some assistance by the Government of Canada in working with, in this case, Nunavut, the Northwest Territories, the Yukon or in the northern provinces where these communities are isolated.
I am wondering if you have given any thought, or if you will give thought, to how the federal government can help and assist in this area, recognizing that you have to take on some responsibilities, as well.
I see a real problem here. The Government of Canada is paying through the back door transfer payments to pay Nunavut, and Nunavut subsidizes all these communities. The individual that lives in one of those communities, if the subsidy is high enough, has no initiative to conserve or to find an alternative source of energy. However, at the same time, you are paying this exorbitant price but no one sees it because it is coming through the back door.
It would seem to me we will have to work out some sort of a relationship with the federal government and the provinces — and territories, in this case — to say "We are subsidizing over here; we can save this money if we do this over here, and we meet our conservation principles and the question of environmental responsibilities."
Do you have any comments about what the purpose of our committee is? Perhaps you could write in some recommendations regarding what you think we should be recommending as a committee from the point of view of the federal government's responsibility versus yours as a territory.
Mr. Taptuna: Thank you very much for that question. I would like to comment on the very issue.
In Nunavut, we do want to purchase faith in the economic development of our territory. We know it will create economic activity, employment for our people, and brings up the standard of both education and living. We do have a lack of housing in our territory.
More economic partnering with industry will build up the infrastructure in our territory, which will bring more companies' investment in the natural and non-renewable resources that we are endowed with in Nunavut. We want to participate in going down that road; we do not want to depend on Ottawa for transfer payments for a long time. We want to become independent. That is not independent in a political way, but we want to be self-reliant and self- sustaining.
We have a lot of resources in minerals, as well as oil and gas, in our territory. We understand there are environmental risks. We understand that we have to move forward in developing our resources because the status quo is not good enough. We want to be a partner in bringing up the economy for our people, not only in our territory but for the rest of the nation.
Once we get assistance in building infrastructure, it would be marine, roads, and airports where involvement will come in from private industry. For the most part, we see partnerships with the government and private industry to move our economic future forward. Without that, the status quo is not good enough.
Senator Patterson: I know you are Minister of Mines. Following on from Senator Lang, I wonder if you could give the committee a snapshot of mining, exploration and development activity in Nunavut. Let us know what is going on and what the potential is, please.
Mr. Taptuna: There is a lot of activity happening in our territory. Last year almost $400 million was spent on exploration activity. For the most part, the projects are happening on Inuit-owned lands formed under the land claims agreement, and these Inuit-owned lands are owned by the regional Inuit associations, which include NTI, Nunavut Tunngavik Incorporated. They manage their lands there, and the territorial governments have little say on these developments happening on Inuit-owned lands.
We support any sustainable, beneficial project that is environmentally friendly and safe for our people. For the most part, it has been very difficult at times dealing with these private companies, because they are on Inuit-owned lands and they have to abide by the rules, regulations and whatever is negotiated in the Inuit Impact Benefit Agreement that the company has to do with the land owners.
For the government, we are not privy to that type of information regarding what they negotiate, so we have difficulty in trying to leverage some benefits for our residents of Nunavut. We do have a development partnership — what we call a development partnership agreement — with some of these mining companies. However, that only takes effect after the project certificate is given to the proponents of the company that is ready to produce. We are quite limited that way.
About 16 per cent of Nunavut land mass, both surface and subsurface, is owned by Inuit, and the proponents have to negotiate IBAs with them.
The Deputy Chair: Is that 60 or 16?
Mr. Taptuna: One six.
Senator Neufeld: I will go back to the generation of electricity, the discussion about alternative energy, and those types of things. Collectively, in your remarks, you say your capacity was 54 megawatts in 2010 out of 27 plants. When you look at alternative energy, whether it is wind or solar — or natural gas, though it is not alternative, but it creates less pollution than diesel fuel — you still need to have the firm energy there to keep the lights on, because alternative energy does not keep your lights on 24/7. I think all of those things, when taken into account, make it that much more difficult for you folks to try and figure out what you are going to do.
Can you tell me what your greenhouse gas emissions are out of those 27 plants for 54 megawatts of electricity? If you do not have that, you can get that to the clerk.
The second question I have is in relation to your statement about the economies of developing natural gas resources in Nunavut. "To produce this gas would require liquefaction facilities and year-round shipping." Do you have year- round shipping now?
Mr. Taptuna: Not at this time, no.
Senator Neufeld: How do you anticipate that will happen? Climate change?
Mr. Taptuna: That is what the scientists talk about every day. We see global warming in the news every day.
Senator Neufeld: In a sense then, global warming opening up that year-round shipping so you can liquefy natural gas would be beneficial — just on that front. There are many negatives, too, but on that front, that is what you are looking at for developing your natural gas resources. I kind of thought that was what you were saying, but I wanted to confirm that global warming, in some areas, is a benefit to these folks.
One moment, please, Senator Mitchell. If you read their report, they are hinging a lot of their economic development on that.
I wanted to get that on the record. I appreciate it. Unless you want to say anything more, I appreciate what you have already said.
Mr. Taptuna: You are absolutely right. There are both negative and positive outcomes for global warming and climate change. I mentioned earlier, to a committee member, that we are hoping down the line that we will get two shipments of fuel into our community. That will enable us to play the market.
Senator Neufeld: And not have to purchase so much at one time.
Mr. Taptuna: Absolutely. Of course, with less ice out there and with our vast resources, we will become more attractive to investors.
Senator Neufeld: It is not only oil and gas; it is mining your resources, from uranium to whatever other minerals you have in Nunavut.
Mr. Taptuna: Absolutely.
The Deputy Chair: It turns out that, if you wait long enough, most of your questions are asked. I have just a couple of quick questions.
You mentioned, Mr. Minister, that the federal government has just recently either appointed or said it would appoint a negotiator. It has been a long time not to have these negotiations start. There does not seem to be a sense of urgency, at least on behalf of the federal government. What has been the delay in negotiating devolution? So much hinges on it — royalties, infrastructural potential, development potential, and so on.
Mr. Taptuna: I cannot really answer that, but there are a number of things that have potentially played into the negotiating situation. At this time, I really cannot say exactly what it is. However, Nunavut territory is 12 years old, so it is considered new, although it has been here for —
The Deputy Chair: Billions of years.
Mr. Taptuna: A long, long time. It is considered quite new, as a territory. We understand there is a lot of time and effort being put into some of these negotiations in other jurisdictions. Northwest Territories being one of them. We are expecting and hoping that we can move forward. I have to say that we cannot stay at the status quo. Our population is growing. In four years, we need, as a territory, 24 to 2,500 new jobs. Without this kind of resource development activity happening, we are just not sustainable.
The Deputy Chair: Is the resource development stalled because of the economics of developing the resources and/or because the devolution has not occurred and because there is some sense of reluctance on the part of your government to proceed until you get some money from it?
Mr. Taptuna: Absolutely. There are a number of things that come into play. The world market prices for minerals is one. In the north of Baffin, the Mary River project will be a megaproject once a company decides to develop it. The potential is over 100 years of mining the iron ore there. It will be a mega-project once it is developed into production.
The Deputy Chair: If the devolution was negotiated and if you were entitled to royalties, it would at least precipitate some of this. It would be a catalyst.
Mr. Taptuna: Again, with the Nunavut land claims agreement, Nunavut Tunngavik Incorporated and regional Inuit associations are the beneficiaries of that project. It is on Inuit-owned land. In the past, we have been rated, by the Fraser Institute, on mining, and we were ranked fairly low because of lack of infrastructure compared to southern jurisdictions. When a discovery is made of minerallization, of deposit, it takes an average of seven years, from discovery to development, in southern jurisdictions where you have access to roads, ports, railroads, and whatnot. In our territory, it takes quite a while longer. We do not have the infrastructure to attract investors and keep things moving forward. That is where global warming comes into play again. There is only two to three months of construction season, which makes it even less attractive to investors. With the onset of the extended open-water season, it is becoming more attractive to investors.
Senator Peterson: Sixteen per cent of Nunavut's land mass is owned by Inuit groups that have both surface and subsurface rights. What is the rationale? Why is it just 16 per cent?
Mr. Taptuna: Land claims negotiations took a number of years, and I believe, Senator Patterson was heavily involved in negotiating and being involved with the negotiations. The 16 per cent of Inuit-owned land, both surface and subsurface, was selected by the negotiators of the Inuit, for the three regions. Nunavut is divided into three regions. Kitikmeot is the western side of the territory; that is where I am from. Kivalliq is central, and Qikiqtaaluk is Baffin. These are the three regions, and each region has a regional Inuit association that manages and negotiates Inuit impact benefit agreements with developers on these Inuit-owned parcels. That is stipulated right in the land claims agreement, so it is a constitutional right.
Senator Raine: The 16 per cent, though, had the most resources. It is 16 per cent of the land mass, but it was the choice 16 per cent with regard to economic development. Am I correct?
Mr. Taptuna: Yes, absolutely. The Inuit did a good job in negotiating these Inuit-owned parcels, and they selected the known deposits out there.
Some of these deposits go back to the 1920s, when they were discovered, but no further development took place because of the lack of infrastructure in the past. It is good for the Inuit organization and good for the Inuit beneficiaries, but they can only become good for the Inuit beneficiaries if they are developed and royalties start coming into the Inuit organizations and beneficiaries.
Senator Raine: The rate of development is really reliant upon world market prices and the attractiveness to investors to put their capital there and get a return on their capital.
Mr. Taptuna: Absolutely. Just like every jurisdiction and commodity, we are at the mercy of the world market prices.
Senator Patterson: Perhaps I can assist the committee. That was a very profound question from Senator Peterson. We are talking about the sustainability of the territorial government. It is interesting, the land claim was about lands that were unceded by treaty of any kind and covered an area of roughly 20 per cent of Canada. The Inuit did agree to accept less than 100 per cent of the land, about 16 per cent, but they had a pretty free choice of land. They selected, as Minister Taptuna said, the land on or around every major development in the Nunavut territory. They were quite strategic in the land they picked. On top of that — and this is an important thing to note — they acquired the right to 5 per cent of the federal royalty share on any development anywhere in Nunavut. Even if lands are developed outside of what they selected, anywhere in Nunavut — and their settlement area is the entire Nunavut territory — the Inuit are also guaranteed a royalty stream.
With respect to the Mary River project — the Baffin Island iron ore project — it is projected that the Inuit royalties for that mine, in the first 21 years, would be over $2 billion, which is about twice the cash settlement given for surrendering their lands in 1993. The territorial government is kind of saying, candidly, to the committee, "We have no control over our natural resources. We have no royalties from natural resources. The Inuit have royalties, and we do not. This is what the devolution agreement is all about. In principle, it is the way to go because the territorial government bears the social costs of development, the impacts, and the responsibility for providing social services — health, roads, et cetera. In principle, it makes sense to have devolution and give the territorial government its share of this resource bounty.
It is quite staggering in scope, from base metals to diamonds to uranium and precious metals. In principle, that is unfinished business for nation building in Canada.
Senator Peterson: You say "they." There are Inuit people and then the Nunavut people? Why "they?" Who is "they"?
Senator Patterson: Sorry. The population of Nunavut is about 85 per cent Inuit, so non-Inuit, the balance of the population, are about 15 per cent of Nunavut's population.
Mr. Taptuna: That is exactly what I wanted to say. The royalties that benefit the Inuit from these mining projects on these Inuit-owned lands go to the Inuit organizations, and the territorial government does not get a cent out of them.
The Deputy Chair: Even when that is developed and they hold most of the development potential, at least at the time that they settled the land claims, the government will not get money from that?
Mr. Taptuna: No.
Senator Patterson: Just the taxes.
The Deputy Chair: That is devolved, and it will be.
I thank you both very much. I want to also thank Senator Patterson for making a special guest appearance in honour of your appearance here. You were extremely efficient answerers and in fact, very quick, to the point and often shorter than the questions. That is quite a feat in these committees. We appreciate you doing all of this on such little sleep, an hour and a half, I think you said.
With that, I will adjourn the meeting.
(The committee adjourned.)