Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue 1 - Evidence - November 19, 2013
OTTAWA, Tuesday, November 19, 2013
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day, at 5:01 p.m., to examine the subject matter of those elements contained in Divisions 7 and 14 of Part 3 of Bill C-4, A second Act to implement certain provisions of the budget tabled in Parliament on March 21, 2013 and other measures.
Senator Richard Neufeld (Chair) in the chair.
[English]
The Chair: Welcome to this meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources. My name is Richard Neufeld. I represent the province of British Columbia in the Senate and I am chair of the committee. I would like to welcome honourable senators, members of the public with us in the room and viewers all across the country who are watching on television.
I'm going to ask the senators to introduce themselves, but first I will introduce Deputy Chair Grant Mitchell, from sunny Alberta. I would also like to introduce Ms. Sam Banks and Mr. Marc LeBlanc, from the Library of Parliament, and Ms. Lynn Gordon, our able clerk.
Senator Patterson: Dennis Patterson, Nunavut.
Senator Wallace: John Wallace, New Brunswick.
Senator Massicotte: Paul Massicotte, Montreal.
Senator MacDonald: Michael MacDonald, Nova Scotia.
[Translation]
Senator Boisvenu: Pierre-Hugues Boisvenu from Quebec.
[English]
Senator Seidman: Judith Seidman, Montreal, Quebec.
Senator Frum: Linda Frum, Ontario.
Senator Sibbeston: Nick Sibbeston, Northwest Territories.
The Chair: Today we begin our pre-study hearings on Bill C-4, A second Act to implement certain provisions of the budget tabled in Parliament on March 21, 2013, and other measures introduced in the House of Commons on October 22, 2013.
As you are likely aware, we are one of six committees in the Senate separately authorized on November 5 to examine the subject matter of particular elements of Bill C-4 and report our findings back to the Senate no later than November 29, 2013. For our committee, these particular elements are: Part 3, Division 7, having to do with the Dominion Coal Blocks; and Part 3, Division 14, having to do with the Mackenzie Valley Gas Impacts Fund Act.
This evening we will look at, in particular, Part 3, Division 7, having to do with the Dominion Coal Blocks. I am pleased to welcome officials who will guide us through this for the first portion of our meeting.
In the second portion of our meeting, we will welcome from Cranbrook, B.C., by videoconference, Mr. John Bergenske, Executive Director of Wildsight.
Honourable senators, your offices have received a couple of memos from the clerk distributing an electronic copy of the bill, the briefing binder from the Department of Finance, and the Library of Parliament briefing notes. If you do not have these documents, just let the clerk know and she'll get some for you.
I'm pleased to welcome to the first segment of our meeting, from the Department of Finance Canada, Ms. Leah Anderson, General Director, Economic Development and Corporate Finance Branch; Mr. Soren Halverson, Senior Chief, Corporate Finance and Asset Management; and from Natural Resources Canada, Mr. Tim Gardiner, Director, Petroleum Resources Branch.
Officials, it's in your hands. Who will begin?
Leah Anderson, General Director, Economic Development and Corporate Finance Branch, Department of Finance Canada: I'd like to thank the committee for the invitation to appear before you as a witness on the subject of Division 7 of the proposed Economic Action Plan 2013 Act No. 2, which relates to the Dominion Coal Blocks.
The Department of Finance has been leading work on the Corporate Asset Management Review, which was announced in Canada's Economic Action Plan 2009. This review process generally assesses whether continued public ownership of a given federal asset remains relevant and also examines opportunities for transferring assets to the private sector with the objective of stimulating additional economic activity and as a means of ensuring tax dollars are spent wisely.
[Translation]
In 2009, the government indicated that the portfolio of the Minister of Natural Resources would be examined, and it is in this context that Canada's ownership of the Dominion Coal Blocks was reviewed.
The review concluded that there was no policy reason for continued federal government ownership of the Dominion Coal Blocks, and that a divestiture of this asset could stimulate significant economic activity for the Kootenay region and the province of British Columbia.
The potential sale of the Dominion Coal Blocks, which is the topic of Division 7 of the Economic Action Plan 2013 Act No. 2, stems from these findings.
[English]
The Dominion Coal Blocks comprise two parcels of federal Crown land known as Parcel 73 and Parcel 82 located in the Kootenay region of British Columbia. Parcel 73 covers an area of approximately 2,000 hectares, and Parcel 82 covers more than 18,000 hectares.
These lands were originally acquired by the Government of Canada in 1905 in exchange for a subsidy used for the construction of the Crowsnest Pass railway line linking British Columbia and Alberta. Since the acquisition, the Dominion Coal Blocks have remained largely unutilized, supporting limited forestry operations and recreational activities.
Federal officials from Natural Resources and Finance Canada are currently engaged in consultations with First Nations and discussions with key stakeholders regarding a potential sale of portions of the Dominion Coal Blocks. I say that portions of the Dominion Coal Blocks are being considered for sale because the government has stated that the area of the southern parcel, Parcel 82, which overlaps with the Flathead River Watershed, will not be sold. This area represents roughly one third of the southern parcel.
In 2011, British Columbia passed legislation that placed a moratorium on the development within the Flathead River Watershed. The federal government is also committed to protecting this area from development. The Government of Canada is in discussions with the Province of British Columbia to determine the best approach to ensure the ongoing protection from development of the entire Flathead River Watershed.
[Translation]
Other areas of the Dominion Coal Blocks are believed to contain high-quality metallurgical coal, a resource that is found in relatively few places around the world, and which is in demand by steel producing nations.
Along with countries such as Australia, the United States, and Russia, Canada is a world leader in metallurgical coal exports. In 2012, Canada accounted for 10 per cent of the seaborne coal trade, supplying overseas markets with metallurgical coal from mines in British Columbia and Alberta.
Like other current coal development projects in the Kootenay region, the Dominion Coal Blocks have the potential to sustain commercial mining operations that provide well-paid jobs, generate significant economic activity, and maintain Canada's status as a world leader in the metallurgical coal trade.
[English]
None of these economic benefits are possible while the property remains under federal ownership. It is for this reason that Division 7 of the Economic Action Plan 2013 Act No. 2 provides the Government of Canada with the authority it requires to sell the Dominion Coal Blocks should it decide to move forward with a sale following consultations and discussions with stakeholders.
The government is committed to ensuring that any sale of the Dominion Coal Blocks is in the best interest of Canadians and would only proceed with a future sale to the extent that it provides value to taxpayers.
The authorities contained in Division 7 of the Economic Action Plan 2013 Act No. 2 provide the government with the flexibility to structure a potential future sale in the most advantageous way.
The Chair: Thank you.
Is that the only presentation? Okay. We'll go to questions.
Senator Mitchell: In the latter part of your presentation, Ms. Anderson, you said that none of these economic benefits are possible while the property remains under federal ownership. Why would that be?
Soren Halverson, Senior Chief, Corporate Finance and Asset Management, Department of Finance Canada: I think we can say empirically that the property has been under federal ownership since 1905, and no economic development has taken place over that period. To proceed with economic development within the context of federal ownership, what you're really contemplating is a model where either the federal government is involved in the direct administration of mineral rights in the province of British Columbia or the federal government in and of itself is pursuing mining activity. Both of those models don't really have great appeal because the federal government does not have significant experience that would see it as having a competitive advantage, either as a regulator of mining activity or as a direct proponent.
Senator Mitchell: Maybe this is so obvious that it is not necessary to say, but it seems to me that its value would be in the fact that it has coal. One of my first summer jobs as a student was painting natural gas pipes on coal facilities in that area. There seemed to be lots of coal there then. Is there a shortage of coal now? The reason I ask is because if there isn't and if the value of this land is based on the value of the coal, maybe it's worth waiting until there's more demand for that coal.
Mr. Halverson: Metallurgical coal, as my colleague alluded to, is a global commodity, so the consumer for that commodity is typically overseas. It is true to say that the Elk Valley region of British Columbia has a relatively abundant resource of high-quality metallurgical coal, but it's also true that, taken on a global scale, that resource is a scarce resource.
Senator Mitchell: Do you have any idea what kind of money we're talking about here? Is it millions?
Mr. Halverson: It's too early to speculate on the potential value.
Senator Mitchell: Is there some minimum to which we would aspire before we would sell it when you talk about being sure it's in Canadians' economic interests?
Mr. Halverson: It's important to note that a number of economic benefits would accrue from this divestiture. In the first instance, there would be the proceeds of sale, then the economic activity that comes as a result of the development of the mineral resource, and then the associated tax revenues, both to the province and to the federal government, from the mining activity. It really is too early to be putting numbers around that.
[Translation]
Senator Massicotte: I would like to ask two quick questions. Section 244 terminates all obligations in liabilities of Her Majesty. Why include this section? Which liabilities are we talking about? What attracts your interest? Why is this needed?
[English]
Mr. Halverson: The divestiture legislation is really speaking to authorities that were in place in the Crow's Nest Pass Act to acquire the parcels in the first place, and there were constraints placed on divestiture within the context of that enabling legislation. An example of that is that a limit of $2 was placed on the sale of coal relating to the property. Clearly, the property isn't marketable with a limit like that as part of the condition of sale. This legislation would serve to remove those kinds of constraints.
[Translation]
Senator Massicotte: But it was one way. You had an agreement with someone, a third party, I assume. And here, you are saying that the government terminates all obligations, which are nonetheless our obligations towards this third party. I do not understand.
[English]
Mr. Halverson: To our knowledge, there are no commercial agreements relevant to this particular property at this point in time. We are dealing with constraints that were imposed over a century ago and are simply no longer of relevance. This would provide certainty with respect to what really are anachronisms in the law at this point in time.
[Translation]
Senator Massicotte: I will ask you my second question. Obviously, a coal mining operation is planned, because there is a lot of coal, if I understand correctly. Will this have an effect on aboriginal peoples? I would assume so. I see that you are holding discussions. Are they in agreement? Is there an arrangement with this community to ensure that everyone agrees with the direction that you are taking?
[English]
Tim Gardiner, Director, Petroleum Resources Branch, Natural Resources Canada: The Minister of Natural Resources has been given authority to lead the consultation process with First Nations potentially impacted by the contemplated action — the divestiture here — and the department has been discharging that responsibility and has been undertaking active discussions with First Nations, notably the Ktunaxa First Nation, since March 2013. Those discussions are ongoing. At this point, there's no expression of support for or objection to the action. It's an ongoing discussion to identify potential impacts on them and potential measures to minimize those impacts as well.
[Translation]
Senator Massicotte: That is a good discussion; I tip my hat to you. But if there is no agreement, you are going ahead with it regardless?
[English]
Mr. Gardiner: The intention of the government is to secure the support of the First Nation before proceeding.
[Translation]
Senator Massicotte: And if that is not possible?
[English]
Mr. Gardiner: We expect to be able to reach an agreement. There's no veto available to a First Nation, but the expectation is that we will be able to reach an agreement. That's the intention of the government.
Senator Black: Thank you all for being here. I appreciate that. You and your departments are to be commended for moving this forward because this is a productive use of an asset that I think has value.
I do have some questions by way of clarity. Is this asset owned by the Government of Canada in fee simple?
Mr. Halverson: Yes, it is. The surface rights, as well as the coal rights, are held in the form of indefeasible title to the federal government.
Senator Black: You mentioned that there's limited logging on the land now. Are there any residences, any Aboriginal communities or any towns?
Mr. Halverson: There are not.
Senator Black: It is completely virgin land, as you understand it?
Mr. Gardiner: There's limited activity currently on the DCB, no residences. There are some recreational activities, and that does include licences provided by the Department of Natural Resources to construct cabins to facilitate those activities. Commercial logging activity as well is occurring pursuant to a 25-year community forest agreement entered into between the British Columbia government and the Ktunaxa First Nation, which falls under an MOU arrived at between the federal government, the Ktunaxa Nation and the British Columbia government.
Senator Black: Has your department considered retaining a royalty interest in the product being sold if you were to sell?
Mr. Halverson: We have looked at a variety of models through which the property could be brought into economic activity. At present, I would say that the direction is contemplating a complete divestiture of the property.
Senator Black: I would suggest to you that you might look at that option because there could be more rent available for the Government of Canada if you were to divest but hold a royalty interest going forward. I would urge you to have a look at that; I'll just leave it at that.
If you can tell me, ever so quickly: In that area, are there other mining operations?
Mr. Halverson: At present, Teck Resources has five mines that operate in the region.
Senator Black: I assume there are rail lines as well.
Mr. Halverson: There are rail lines.
Senator Black: In terms of the protection of the Flathead headwaters, I want to underline that I heard Ms. Anderson make a clear confirmation that the Government of Canada understands that it is a key asset and will be protected.
Ms. Anderson: Correct.
Senator Black: Great. Thank you very much.
Senator Patterson: I have a technical question. There is a Federal Real Property and Federal Immovables Act on the statute books. Would that act apply? Maybe the question is: Why would that act not apply to the disposition of the Dominion Coal Blocks?
Mr. Halverson: There are two parts to the answer. The first is that, as I mentioned previously, legislation authorized the government to acquire the blocks in the first place, that being the Crow's Nest Pass Act, and so the Federal Real Property and Federal Immovables Act would apply in cases where there is no other legislation. In this case there is.
Going back to a point your colleague raised previously, in addition, certain constraints that are at present put on the property as a result of the Crow's Nest Pass Act would need to be lifted in order to proceed with a successful divestiture.
[Translation]
Senator Boisvenu: That is very interesting. I also think it is a productive initiative.
Before giving these lands over to the province, did you make an inventory of all the lands belonging to the federal government across Canada?
[English]
Mr. Halverson: This particular property is unique in terms of its attributes. To our knowledge, there is no comparable property under federal ownership in terms of the extent of its expected mineral resource, south of 60. We did not undertake a complete inventory, but this property is well known to individuals who have worked in the area of natural resources for some time.
[Translation]
Senator Boisvenu: To date, have there been any aboriginal groups or environmental groups who have expressed their opposition to the transfer of these lands?
[English]
Mr. Gardiner: Consultations we are undertaking now are primarily with the Ktunaxa Nation, given the special status they have. This is part of their traditional land and obviously there are constitutionally protected rights for Aboriginals. Again, that conversation is ongoing. They have not weighed in one way or another in terms of their support for the project, but there's no vocal opposition either at this stage.
[Translation]
Senator Boisvenu: Earlier, you spoke about an agreement that was signed a few years ago concerning these communities' use of these lands for hunting and fishing. Will that agreement be maintained even if the lands are transferred to the province?
[English]
Mr. Gardiner: The agreement I referred to before was a community forest agreement that provides the Ktunaxa First Nation with exclusive rights to conduct commercial forestry operations on the Dominion Coal Blocks — both parcels.
The plan going forward is evolving, but the intention of the government as announced by the government is to not sell a portion of the Dominion Coal Blocks — the portion overlapping the Flathead River Watershed — so presumably the commercial forestry operations could continue as before on that portion of the Dominion Coal Blocks. On other portions, ownership would be transferred to a new owner pursuant to an open, competitive sale process that's yet to be initiated let alone concluded. In those instances, decisions would have to be made by the new owners as to the types of activities that could continue post-divestiture.
[Translation]
Senator Boisvenu: Will the transfer of the lands be done on a nominal basis of one dollar, or according to its market value?
Ms. Anderson: Market value.
Senator Massicotte: To the province?
Ms. Anderson: To the province.
Senator Boisvenu: Will the land be transferred to the province?
[English]
Ms. Anderson: No. The intention of this act is to allow the government to initiate a sales process — an open, competitive process — to maximize benefits to taxpayers.
The Chair: Just a little clarification. The province tried to get that divested. I tried for years. We failed. This is plan B, and it's okay.
Senator Wallace: Mr. Halverson, as you were saying, the value of the property will be driven by the value of the metallurgical coal reserves as opposed to surface use. In preparing for this potential divestiture, has a recent assessment been done of the extent and the potential value of those coal reserves?
Mr. Halverson: Work has been done. To date, that work hasn't been made public, and so it's something that we're not really at liberty to discuss. But there has been technical evaluation relatively recently. In addition to that, there are many years of geological analyses on the properties.
Senator Wallace: There has been a lot of technical work done, but with the particular purpose, though, of enabling the federal government to determine what price it should receive for the property? Canadian taxpayers want to know that the government is going to get the best possible value — market value, as you say. Perhaps determining market value for a property like this is not the simplest thing; it's a bit more complicated.
Has that groundwork been done so that when the federal government prices the property, we'll have the comfort of knowing it is based upon realistic market value? Is that fair to say?
Mr. Halverson: That is fair to say. When the federal government moves towards a sale process — if and when it does that — then, absolutely, it will employ the best commercial practices to ensure that it is defending the interests of the taxpayer and the transaction.
Senator Wallace: As you said, other benefits would come from the actual development of the coal reserves and spinoff benefits for the province, federally, but there's no sense that the sale price will be a loss leader in order to accrue those other ancillary benefits?
Mr. Halverson: That hasn't been part of our thinking to date, no. There's really no evidence that we would need to take a loss in order to encourage those other benefits. It seems that the property is significant enough as a resource that it will drive interest on the part of private sector buyers who are capable developers of mines. Consequently it will lead to jobs and significant revenues for the region and for the country.
Senator Wallace: It's reassuring to hear that, because Senator Black raised the issue of royalties; the same thought was going through my mind. It would surprise me that the federal government would not be looking to receive royalties on reserves as extensive as this. Nonetheless, if it's reflected in the actual cash value at the time of sale, that is somewhat understandable.
Would the Province of British Columbia receive royalties from the coal as it is extracted?
Mr. Halverson: The province would have to speak to that. At present, the province does levy a royalty in the form of a mining income tax, and I expect that you would see similar treatment in this case.
Senator Wallace: Final question: Would the federal government insist upon any environmental safeguards as a condition of the sale to whoever the private enterprise purchaser would be, or is it left entirely to the Province of British Columbia to ensure those safeguards are in place?
Mr. Halverson: All applicable federal and provincial environmental regulations would be brought to bear on the eventual development of any project on these lands. There are frameworks in place, and those frameworks absolutely would be in effect for such development.
Senator Wallace: So there would be federal environmental safeguards, or would it simply fall to the province to look after those matters since it is within the province?
Mr. Halverson: I think to the extent that no project, as such, has been defined, it is too early to conclude, unless there's a change to environmental regulations. I'm probably going beyond the boundaries of my competence to answer this question. You need a project to evaluate whether there's a regulatory trigger, and there is no project to date. The action at present is the contemplated sale of land.
Senator Wallace: Right.
Ms. Anderson: There would be no exemptions from the full framework currently in place at both the federal and provincial level.
Senator Seidman: Both my questions have been asked, but I might just go back to them to get more information so that I understand a little better.
If I could go back to clause 244 of the bill, it provides that any obligations and liabilities the federal government has under the current act are terminated with the coming into force of this new clause. You mentioned one obligation in particular that would be terminated. My question to you is whether there are other obligations, liabilities or rights that exist which would also be terminated?
Mr. Halverson: There are no liabilities that we're aware of.
I can give you another example of a limitation. In the Crow's Nest Pass Act there is a limit that the coal would need to be sold to the Canadian public, and in the context of the time, it would have been used as an energy resource to fuel steam trains.
Today, all the coal developed in that part of the country is sold through export to countries operating steel mills, so there really is no relevant market to bring the coal to. That's another meaningful constraint. Those are the two key constraints in the act.
Senator Seidman: So no other obligations or rights will be terminated? No Aboriginal rights? Nothing else will be terminated with this agreement?
Mr. Halverson: Aboriginal rights are of course rooted in the Constitution, and this act would have no bearing on that.
Senator Seidman: The other question I have relates to Parcel 82 and the exemption of the piece that overlaps with the Flathead River Watershed. Is it possible that these pieces of land could be disposed of at a later date? They're being exempted now, but is it possible that they could be disposed of later?
Mr. Gardiner: That's a possibility, but the government was very clear in the announcement issued at the end of August that they're not for sale.
Senator Seidman: Now that they're not for sale, did you do any analysis on what effect, if any, mining activities could possibly have on the protected riverbed adjacent to the lands? As we all know, the mining does have an impact on the water. If I understand correctly, water is used to do the mining.
You are selling it and you are protecting the area around the riverbed, but has there been any assessment of the potential impact of mining in that vicinity?
Ms. Anderson: You wouldn't have an assessment until you have a project. At this stage we're just having a framework in place to effect a sale. So when a project is manifest, then the environmental assessment process would take place and all those impacts would be fully considered.
Senator Seidman: Are there any restrictions on the use of the water, for example, because mining coal does use water? Would there be any restrictions on the use of the water from the riverbed for mining in adjacent areas?
Ms. Anderson: That would be determined as a result of the assessment.
Senator Seidman: There's no pre-condition set at the outset?
Mr. Gardiner: My colleague makes a good point that there would be a thorough environmental review with any subsequent project to the divestiture.
The other point to make is that the delineation of the Flathead Watershed reflects the type of assessment you are referring to. For the portions falling within that, clearly there's to be no mining development. The portions falling outside of it are part of an overall assessment which suggests that mining is possible outside that area.
Senator Seidman: That's very helpful. I appreciate that.
Senator Ringuette: We used to have a protocol in this country that when the government didn't require an asset anymore, the first line of priority to buy or have that asset would be the province. The province would extend that same protocol with regard to their assets to municipal governments and so forth.
This is certainly not the case in this situation since the Government of British Columbia has already expressed that they would like to acquire this, and I guess that the answer was no. Am I guessing right because of this legislation?
Mr. Halverson: At this time, the action — I mean, I can't go into the province's perspective on the current contemplated action.
Senator Ringuette: No, but the protocol used to be that once a federal government asset was no longer required, the first line to offer that asset to was a provincial government. Is that protocol gone?
Mr. Halverson: What I would say is that in the particular case of the Dominion Coal Blocks, the expected value of this land is primarily determined by the metallurgical coal resource, and that resource is widely understood as primarily being a commercial resource. So the logic that might underpin circulating real property assets to other levels of government to fulfill potential policy priorities they may have is probably less compelling in this particular case where there's a widely perceived potential economic value, and there's no clear logic why that should be provided on a concessional basis to another level of government.
Senator Ringuette: But you indicated earlier that a mining company by the name of Teck was already mining some of the resources in that area. I'm assuming that some of the resources in that area would belong to the Province of British Columbia.
They're in that commercial development, in that area, with that particular mineral. I'm sorry, but the logic of the protocol in regard to government asset divestiture is not being followed.
My other question is this: Aside from Teck, is any other company coal mining in the area and are they in contact with your department, Mr. Gardiner?
Mr. Gardiner: Teck operates five open-pit coal mines in the area. They are the only mining company active in this particular area.
They have been in contact with my minister from time to time. They were just given the mandate of the department and do have an interest in participating in the sale process contemplated as part of the legislation.
Senator Ringuette: So they have already manifested, at past meetings with the minister, their interest in buying this piece of land from the Crown.
Mr. Gardiner: Those are privileged discussions, but it's fair to say that they have an interest in acquiring the parcel.
Senator Ringuette: You mentioned earlier that in regard to the market value or the evaluation of that Crown possession, it is not to be made public. When will it be made public — before, after or during the sale?
Mr. Halverson: I believe I made that comment, and what I was referring to was the resource evaluation. Those are essentially technical analyses of the geology of the property, and that is information that would likely be disclosed over the course of the sale process. At this point in time it's too early to really say anything about the timing of that process.
Senator Ringuette: On the issue of easement, I gather that there are easements already granted on that Crown property. Is the intention to increase the number of easements before selling?
Mr. Gardiner: I think the intention of that clause is to provide the Minister of Natural Resources a flexibility to make arrangements as may be required to facilitate the sale process.
Senator MacDonald: I have a number of questions, so I'll try to go through them quickly.
You mention that you are currently engaged in consultations with First Nations and key stakeholders. Who do you identify as key stakeholders?
Mr. Gardiner: I think primary among them is the Province of British Columbia.
Senator MacDonald: This next question was asked in a roundabout way, but this is obviously a Crown asset. Is it designated Crown land, or is it a Crown asset separately? Do you know?
Mr. Gardiner: I'm not sure I understand the distinction.
Senator MacDonald: I'm a little surprised. Knowing how Crown land is divested in Nova Scotia, the province almost always has first dibs on Crown land. I find it a little perplexing that the province wouldn't have an opportunity to at least have a say in it.
Mr. Halverson: Yes, I think it's something that we would need to follow up on.
Senator MacDonald: Are these two blocks of land contiguous?
Mr. Halverson: No, they're not. They're separate from one another.
Senator MacDonald: But they're obviously part of the same geological field of the present area that's being mined.
Mr. Halverson: That's correct. Both of them are located in the Kootenay region of British Columbia.
Senator MacDonald: You said there's limited forestry on the lands. Why is there limited forestry? Is there a limitation on the amount of forestry assets or is there limited forestry because there's been little opportunity for development of the forestry there?
Mr. Gardiner: The parcels are of limited breadth, so the forestry operations are commensurate with the size and extent of the forestry resource that's on the property.
Senator MacDonald: So it's tied in to the size of the resource itself. I assume we're looking at strip mining, if there is mining here?
Ms. Anderson: The project has not yet been determined.
Senator MacDonald: You said there's open-pit mining there in all the other areas.
Mr. Halverson: That's correct.
Senator MacDonald: I'm very familiar with mining. Being from Cape Breton, my grandfather and great grandfather were miners. The Government of Canada owned the coal fields there, took over the coal operation in 1967, which is why we don't have a coal operation today, because the government ran it. I have no problem with us getting rid of the land and get some development there.
Mr. Halverson: The expectation is that the areas of the property deemed to be most prospective would be suitable areas for open-pit mining, as is the case elsewhere in southeastern B.C.
Senator MacDonald: Would these two lots be sold together as one or would they be sold separately, bid on separately?
Mr. Halverson: It's too early to get into details about the sale process. That needs to be developed.
Senator MacDonald: Has the geological data you referred to been accumulated from core sampling in that area or is it geological data that's assumed because of the adjacent mining operations?
Mr. Halverson: It is primarily in the first category you mentioned.
Senator MacDonald: Because the difference in a coal field between the value of a coal field, whether or not it has metallurgical coal, is a huge difference in the value of that coal field, the percentage of coal that is metallurgical. I just hope these are all things that we will consider before this stuff is divested.
That second lot is 18,000 hectares, or about 40,000 acres. That's a big lot of land.
All right, thank you.
The Chair: Maybe I should have spoken up earlier. I want all of you to know I have spoken to the Minister of Energy and Mines in British Columbia, and they're not adverse to this sale at all. At least from what I've been told, there's no problem with this at all. They're fine with it. They will manage it like they would any other mine if, in fact, the application is made and it's sold.
Senator Sibbeston: I'm concerned about issues that have been raised by previous senators, but the area, the matter of land, I know that one of the witnesses indicated the land was in fee simple, yet they are lands held by the Crown.
Generally fee simple doesn't include all the resources beneath it, just the surface. So what is the situation? Have government officials figured out the way that they will dispose of the land? Will they sell the land, the fee simple, along with all of the resources underneath to any proposed developer? Have they thought of the process that would occur?
Mr. Halverson: The nature of the sale would be an assignment of the rights that the government has. Those are the rights that came about as the result of a railway land grant and have passed down from the B.C. southern rail to the Government of British Columbia and could, in turn, be assigned to a private purchaser. It would be a clear assignment of the indefeasible title, both to surface as well as to the coal rights.
Senator Sibbeston: So the land in question, you are dealing with a fee-simple property. Who owns the resources at the moment?
Mr. Halverson: At the moment — and this is in keeping with standard rights that you would see as part of the railway land grants — the coal resource is held in the same way that the surface resource is held, and would be transferred in the same way that the surface resource would be transferred.
Senator Sibbeston: I'm not familiar with what that is, so maybe you can just tell us. Is it held by the province or is it held by the federal government, the ownership of the resources?
Mr. Halverson: The resource would be owned by the purchaser, which is currently the federal government.
Senator Sibbeston: Would you say that's an unusual process? Generally, in the provinces, any fee-simple land is surface, and then the provinces own the lands and the resources beneath the surface. The province has control in terms of the resources and any fees, royalties and so forth that are being paid.
Mr. Halverson: It is exceptional, but it is by no means unique in the sense that elsewhere in British Columbia — in particular the Kootenay region — you will find other fee simple ownership of subsurface rights. Some of the properties that are currently under production as coal mines fit into that category.
Senator Mitchell: Just to be sure, the revenues from this projected sale are not calculated into this year's budget, are they? Are the projected revenues from this projected sale calculated into this year's budget?
Mr. Halverson: There was a provision, which you may have seen in the fall update, anticipating revenues from asset sales over the coming two fiscal periods, but nothing specifically attributable to this particular transaction.
The Chair: Thank you.
Senator Black: I just want the record to reflect that other than the province of Alberta, this is some of the most beautiful land in Canada. I'm sure you agree, Mr. Chair.
The Chair: I would actually correct that and have it just the reverse.
Senator Massicotte: Our next witness is going to tell us shortly about the disbursement of these lands and prior conditions being in place and that the future use of lands would be a significant loss to Canada's natural heritage and the globally significant wildlife value of Canada's Rocky Mountains. What is your response to that?
Mr. Gardiner: The intention to divest is coming with some conditions. I mean there's a clear statement by the government in a public release that occurred at the end of August that the Dominion Coal Blocks in their entirety would not be sold, that only certain portions that are highly prospective in terms of future development of the metallurgical coal mine would be subject to an open competitive sale. The portion overlapping the Flathead River Watershed would not be sold. That's a pretty significant condition associated with the planned divestiture.
The Chair: That finishes our questions to you folks.
Moving on to the second half of our meeting of the Senate Standing Committee on Energy, the Environment and Natural Resources, we will continue our examination of Bill C-4, A second Act to implement certain provisions of the budget tabled in Parliament on March 21, 2013, and other measures. This evening, we are dealing with Part 3, Division 7, which relates to the Dominion Coal Blocks.
I am pleased to welcome by videoconference from Cranbrook, B.C., Mr. John Bergenske, Executive Director of Wildsight.
Mr. Bergenske, please proceed with your opening remarks, and then we will go to questions and answers.
John Bergenske, Executive Director, Wildsight: I appreciate the opportunity to present to the committee. Hopefully everyone received a copy of my presentation.
I was able to catch the tail end of your previous discussions, which I found quite interesting. I hope we will be able to delve into some of the same subjects that you are covering as a result of my discussion. I'm going to quickly go through the discussion paper that I have presented. I look forward to actually getting into some of this a little bit deeper and your questions.
The Dominion Coal Blocks in the Flathead and Elk Valleys of southeastern British Columbia lie in a critical wildlife corridor between two world heritage sites: the Waterton Glacier International Peace Park and Canada's Rocky Mountain parks of Banff, Kootenay, Yoho and Jasper. Disbursement of these lands prior to conditions being placed upon the future use of the lands would be a significant loss to Canada's natural heritage and the globally significant wildlife values of Canada's Rocky Mountains.
Wildsight is working with its partner groups in the Flathead Wild coalition to expand Waterton National Park into the Flathead River Valley and to establish a wildlife management area connecting this area to Banff in order to maintain this corridor.
Over $32 million has been spent directly on land conservation in this area over the past decade, including the Canadian government's own contribution in support of the Flathead Watershed Conservation Act.
The UNESCO/IUCN mission to Waterton Glacier International Peace Park report of the reactive monitoring mission September 20 to 27, 2009, emphasized the importance of the corridor in which the DCBs lie. The report stated that:
Developments, along the east/west trending Crowsnest Pass Highway (Highway 3) north of the Waterton-Glacier and Flathead areas . . .
— which is where the Dominion Coal Blocks lie —
. . . constitutes a significant connectivity barrier. Investigations of this problem have recommended that urgent consideration be given to maintenance of core natural areas with a high level of security, and the development of a pro-active conservation plan providing for connectivity across and around the Crowsnest Highway. . . .
Steps should also be taken to minimize the barrier to wildlife connectivity due to mining, transportation and communication lines and associated developments in the Crowsnest Pass area of B.C., and where such barriers exist, appropriate mitigation measures should be planned and implemented. In particular, there should be a long- term moratorium placed on any further mining developments in south eastern British Columbia, immediately west of the Alberta border, in the corridor of natural terrain that creates vital habitat connectivity and allows the unimpeded movement of carnivores and ungulates between the Waterton-Glacier property and the Banff/Jasper NPs of the Rocky Mountains WH property in Alberta. Other measures should include minimising future infrastructure development and removal of unnecessary structures, maintenance of core natural areas and rehabilitation of degraded areas, and development of a pro-active plan for enhancing connectivity in the area.
Canada's responsibilities under the Species at Risk Act would be significantly eroded without provisions being ensured for endangered and threatened species recovery on these lands. Presently, listed endangered species, including white bark pine, badger, Rocky Mountain tailed frog and west slope cutthroat trout reside on the Dominion Coal Blocks, as well as threatened species including western screech owl. Iconic species that have received listing in British Columbia, such as grizzly bear, wolverine, bull trout and Gillette's checkerspot butterfly are also present.
British Columbia's failure to legislate protection of species at risk makes the federal government's responsibility all the more important. Any sale of Dominion Coal Blocks or portions thereof must guarantee protection of species at risk and ensure conservation management of the lands. This could take the form of conservation covenants on the lands or an order of the Governor-in-Council that extends provisions for no harming, killing and harassing, as stated in sections 32 and 33 of SARA and for critical habitat protection, section 58, to these lands in perpetuity.
The portion of Block 83, that's the southern block, that lies within the Flathead Valley is of particular interest. Concerns about mining in the Flathead Valley, which is a transboundary watershed shared with the United States, ultimately led to the Flathead Watershed Area Conservation Act in 2011, and British Columbia's ban on mining, oil and gas development within the valley. The Government of Canada announced its intention not to allow mining in the Flathead portion of the block at the same time that they announced their intention to sell the Dominion Coal Blocks. This was referred to previously by Mr. Gardiner. It is critically important that this commitment stands should a sale go forward. There has been overwhelming national and international support for the Flathead mining ban, including that of communities on both sides of the international border.
In April 2013, the Government of British Columbia established a process to create an Elk Valley water quality plan, the goal of which is to stabilize and reverse increasing concentrations of selenium, cadmium, nitrate and sulphite, as well as calcite formation in the Elk River. These pollutants are the direct result of coal mining in the valley. Teck Coal, which operates five open pit coal mines here, is engaged with the Governments of Canada, British Columbia, the United States, Montana and the Ktunaxa Nation in this process. Further development of coal resources would be subject to this plan, which includes commitments to over $600 million by Teck in new treatment facilities. Sale of the Dominion Coal Blocks, should they be developed for coal production, must include no allowance for further degradation of water quality of the Elk River. It would be extremely difficult, if not impossible, with available technology for new development to not increase selenium and associated loading if future mines were to be developed as open pit operations.
The Dominion Coal Blocks are accessed by Canadians, particularly residents of the region, for a full range of outdoor recreational activities. Access to public lands is important to Canadians. These lands play an important role in the quality of life of the region. Canada's publicly held and administered lands are part of the inheritance of all Canadians and should not be disbursed without full public consultation, particularly with people of the region who will be most affected.
Finally, the Dominion Coal Blocks are within the territory of the Ktunaxa Nation, which is presently engaged in treaty negotiations with the Governments of Canada and British Columbia. It is incumbent upon the Government of Canada to consult and reach accommodation with the Ktunaxa Nation before moving forward on changes to the status of these lands. Conservation management of the lands by the Ktunaxa Nation is an option that should receive consideration.
Those are my introductory remarks. As I say, hopefully you also received copies of three maps that we can refer to, maps 1, 2, and 3. The first one gives an idea of this whole piece of property in the sense of connectivity and the work being done, both in the United States and right up to the Banff area. The second map is one that locates the Dominion Coal Blocks within that context. The third one demonstrates some of the private lands that are presently held under conservation easements and that people in the region and actually nationally contributed to maintaining these important lands for the future particularly of wildlife resources in Canada.
The Chair: Thank you very much. We'll go to questions. The first question is from the deputy chair, Senator Mitchell.
Senator Mitchell: Thanks very much for being here with us by video conference.
I'm interested in the November 2011 B.C. government-enacted legislation called the Flathead Watershed Area Conservation Act, which is construed to be capable of preserving environmental values in the Flathead Watershed. I take it you don't subscribe to that view of the power of that act?
Mr. Bergenske: I think the act goes a significant way towards that protection, and it resulted also in the memorandum of understanding between the State of Montana and British Columbia to cooperate and to continue to work towards that protection. I do subscribe to the fact that it is a significant step and a significant piece of protection of the values of the Flathead, but in and of itself, it is not sufficient to fully maintain the values over time.
Senator Mitchell: In your presentation you make the point that any sale of the DCBs or portions must guarantee protection of the species at risk and ensure conservation management of the lands. Are you saying that that can be done, for example, through a condition of the sale, or would it require federal — I think you mentioned that because you're concerned that the British Columbia commitment to that kind of thing isn't sufficient. How would that be done? How could that be done?
Mr. Bergenske: There are several avenues. I'm not ruling out the possibility of British Columbia being capable of managing. What I'm saying, though, is that the responsibility that the federal government holds in terms of the conditions under the species at risk has particular importance, of course, on lands that are federal lands. Should those lands no longer be federal lands, what should be included in conditions are some form of either a covenant or a directive that maintains the protections that those lands presently have under SARA. This could in fact take place by the Government of British Columbia. It could also take place through a separate covenant held by an independent body, and that could be a conservation organization; it could be a First Nation. There are several means by which a covenant could possibly be attached.
Senator Black: Mr. Bergenske, I live in the Rocky Mountains, in Canmore, so I appreciate the type of initiative and undertaking that you are doing and the commitment of you and your group to the work you're undertaking.
I'm going to give a quick summary, and if I'm wrong, you'll let me know. I understand you to be saying that you would be supportive of the sale contemplated here by the Government of Canada if, first, species at risk, as you have defined them, are protected; and, second, if the Elk River is protected. Is that accurate?
Mr. Bergenske: I would say those would be two of the main conditions.
The other piece that's very important here, which I've mentioned, is a public consultation. I think everyone is aware that First Nations consultation is also critical.
For us, we're concerned about seeing that these lands move out of public lands into private lands if there are very clear conditions around conservation. The Elk River is certainly a high priority. Species at risk are also a high priority. But outside of those, I would have to say that that connective landscape — we happen to have a recent report that I just picked up in the last couple of days of a global assessment that shows that this region here, what is termed the crown of the continent, is rated as one of the globe's greatest opportunities for maintaining this type of wildlife corridor and protection. The whole corridor concept, to make sure we maintain the values on the land, the habitat values for a whole array of species, is critically important. It could be done with the proper types of conditions.
Senator Black: That's wonderful. Thank you very much.
You have communicated these concerns to the Government of Canada, have you?
Mr. Bergenske: I'm doing this right now.
Senator Black: Thank you very much. That's great. We'll make sure that's picked up.
Senator Patterson: Mr. Bergenske, I believe it is true that in 2010 no less than Prime Minister Harper committed to ensuring the sustained protection of the Flathead River Watershed. As you've pointed out, in contemplation of the proposed sale of portions of Block 83, the Government of Canada reiterated in August 2013 that it would not allow mining in the Flathead portion of the block. You say in your brief that it's critically important that this commitment stands should a sale go forward. We are certainly noting that.
Do you have any doubt that that commitment would not stand, given the Prime Minister's stated commitment to ensuring its protection?
Mr. Bergenske: I have no reason to suspect that it will not stand. It took us quite a while after the original announcement by the province to see a commitment come forward from the federal government around those particular lands, but once we've heard it, my assumption is that the government will be good to its word. I don't suspect differently in terms of the Flathead.
Senator Patterson: Thank you. I'm sure you deserve some credit for that commitment.
The Chair: Are there other questions?
Thank you very much, Mr. Bergenske, for your input. We appreciate it very much. I know you're a busy person, so we appreciate it.
Mr. Bergenske: I appreciate the opportunity.
If I could just add, I do think that the conversation in regard to surface rights and subsurface rights is a very important conversation that needs to be looked at seriously, because I think that may be a key to some of the opportunities moving forward. I just want to highlight that part of the conversation.
The Chair: Sure.
Mr. Bergenske: Thank you very much.
The Chair: Thank you.
We have one other housekeeping item. The clerk is passing it out.
You will recall that during our organization meeting on November 7, one of the agenda items was to adopt our first report, per rule 12-26(2), detailing the special expenses incurred by our committee in the First Session of the Forty-first Parliament. The clerk has advised me that the report needed to change in two minor areas.
With respect to number 3, the hydrocarbon study fiscal year 2013-14, the unused airfare credit was listed in the previously adopted report as one figure for Calgary. This was incorrect and had to be properly attributed to both Hamilton/Sarnia and Calgary — same overall amount between the two of them but now split up accordingly to more accurately and transparently reflect the reality.
With respect to the same number 3, hydrocarbon study fiscal year 2013-14, an additional expense was finalized by Senate Finance, resulting in an increase of some $4,082 for Activity 2: B.C. and U.S.A.
Do you have any questions with regard to the document? If you don't, I'm looking for a senator to move that we adopt that report.
Senator Black, thank you.
That concludes our meeting.
(The committee adjourned.)