Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue 24 - Evidence - February 17, 2015
OTTAWA, Tuesday, February 17, 2014
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 5:37 p.m. to study non-renewable and renewable energy development including energy storage, distribution, transmission, consumption and other emerging technologies in Canada's three northern territories.
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'm chair of this committee. I would like to welcome honourable senators, any members of the public with us in the room, and viewers from all across the country who are watching on television. As a reminder to those watching these committee hearings, they are open to the public and also available via webcast on the sen.parl.gc.ca website. You may also find more information on the schedule of witnesses on the website under "Senate committees."
I now ask senators around the table to introduce themselves, and I will begin with the deputy chair, Senator Paul Massicotte from Quebec.
[Translation]
Senator Bellemare: Diane Bellemare from Quebec.
Senator Ringuette: Pierrette Ringuette from New Brunswick.
[English]
Senator Seidman: Judith Seidman from Montreal, Quebec.
Senator Patterson: Dennis Patterson, Nunavut.
The Chair: I would like to introduce our staff, beginning with the clerk, to my left, Lynn Gordon, and our two Library of Parliament analysts, Sam Banks and Mark LeBlanc.
On March 4, 2014, the Senate authorized our committee to undertake the study on non-renewable and renewable energy development, including energy storage, distribution, transmission, consumption and other emerging technologies in Canada's three northern territories.
Today I am pleased to welcome, in the first portion of our meeting, Brendan Marshall, Director, Economic Affairs, from the Mining Association of Canada.
Mr. Marshall, thank you for being here with us this evening. I believe have you some opening remarks, and then we'll go to some questions and answers.
Brendan Marshall, Director, Economic Affairs, Mining Association of Canada: Before I give my remarks, I would like to say that it has been about a decade, but my first real job was working for the recently retired Speaker of the Senate, Senator Kinsella. So I appreciate the work that you all do and the institution itself, as well as the researchers from the Library of Parliament. I thought it was an interesting connection. Since then, this is my first committee appearance back in the Senate.
Mr. Chair, senators, clerk and staff, and fellow presenters, thank you for the opportunity to appear before this committee to contribute to this important study. For the record, my name is Brendan Marshall, Director of Economic Affairs of the Mining Association of Canada.
Mining is Northern Canada's economic opportunity. The discovery, development and production of minerals and metals result in increased regional investment, employment, and taxes and royalties. Seven operating mines currently contribute significantly to territorial GDP, employing thousands and supporting the development of local businesses that supply the mines with goods and services. These activities benefit northerners, Aboriginals and all Canadians.
Recent data indicate that mining accounts for approximately 15 per cent of overall employment in the Yukon, N.W.T and Nunavut combined, with proportionally larger percentage contributions to territorial GDP.
According to the Northern Projects Management Office, 15 potential mines could start, or restart, production over the next 10 years in the three territories. Aggregated, these projects represent more than $17 billion in initial capital investment potential. This would lead to the creation of more than 7,100 full-time jobs — nearly double 2013 employment levels — and would bring significant opportunities for local communities and businesses. When total life of mine expenditure is estimated for these 15 projects, the investment potential approaches $35 billion — a sum that exceeds the 2013 total combined territorial GDP by more than 3.5 times.
As one of the primary private sector drivers of the territorial economies, enabling responsible mineral development is the best means the Government of Canada has to achieve several policy objectives identified in the Northern Strategy, the Arctic foreign policy, and the focus of Canada's term as Chair of the Arctic Council, including exercising sovereignty, promoting economic and social development for northerners and Aboriginals, and improving and devolving northern governance.
Developing and operating mines in the North is not easy, however. Companies face a unique set of challenges that more centrally located industries do not face by virtue of their proximity to both physical and non-physical infrastructure.
These challenges are inextricably linked to the characteristics that define northern regions: isolation, remoteness, undeveloped infrastructure and, in many cases, regions with sparse populations or no people for hundreds of kilometres.
In an attempt to cost these challenges, the Mining Association of Canada, MAC, has recently undertaken a study that compares the costs of northern mines to centrally located ones of similar scope. While the study has not yet been released, I can report that findings indicate that capital costs range from 2 to 2.5 times more expensive for base and precious metal mines in the North compared to the South. Infrastructure costs alone, of which energy infrastructure is included, account for roughly 50 per cent to 60 per cent of the cost differential. Operational costs were in the range of 60 per cent more expensive in the North. High northern energy costs contribute to the overall cost differential.
I will now focus on energy. From 1999 to 2012, energy costs for mining processes across Canada more than doubled, costing Canadian miners $2.4 billion in 2012. This cost increase can be explained in part by the increasing cost of diesel fuel. The recent drop in price aside, the average price of oil increased tenfold between 1998 and 2013, from roughly US $10 per barrel to more than US$100 per barrel on average.
While rising fuel prices account for part of the energy cost differential between northern and southern mines, most of the cost increase can be linked directly to the lack of transportation and power generation infrastructure in the territories.
Mining companies operating in the North have historically needed to absorb the costs to overcome the infrastructure deficit. Where hydro generation was available, for example, the dam and associated transmission infrastructure to access it needed to be built at company cost. Where no alternative power options have been available, diesel generation has historically been the default source of power, requiring the construction of power plants on site. With virtually no "just in time shipping" for fuel, companies must purchase, transport and store a year's worth of fuel on site. This storage adds costs for tank infrastructure and limits a company's ability to optimize fuel purchases off the market. Additionally, the rising cost of oil has increased the cost-per-unit of fuel delivered to the mine site, as the price of oil is a major function of the cost of procuring a ship. To facilitate shipping at all, the construction of port and ground transportation from the port to the mine site is required.
The interrelated nature of these costs has a tremendous impact on the economics of northern mining projects. Keenly aware of these challenges, miners have looked at alternative power generation options — both renewable and non-renewable generation — to make operating mines more competitive and to increase the viability of projects in the developmental phase.
Renewable power is appealing to miners because it has the potential to reduce energy costs and environmental impacts while enhancing energy security and strengthening a company's privilege to operate in communities.
The levelized cost of electricity for wind, solar photovoltaic, concentrated solar power and some biomass technologies has steadily decreased in recent years, enhancing their competitiveness relative to conventional technologies, particularly for off-grid generation.
While a positive trend, there are additional costs associated with renewable technologies in the North, and their value remains subject to the quality of the renewable resource being harvested. Just as miners need to go where the viable mineral deposits are located, renewable generation is contingent on the strength and reliability of the renewable asset available. Frequently, the two don't align. This restriction prevents renewable generation from becoming an industry-wide energy solution in the North, no matter how improved the technology is.
But for mines that have access to a viable renewable asset, diversifying energy portfolios with a reliable intermittent power source has benefits that merit the investment. Rio Tinto's Diavik wind farm is one such example. Glencore's Raglan wind turbine pilot project is another. These projects have increased their mines' energy security and are reducing both energy costs and emissions.
Recent developments in natural gas have also caught the attention of miners. Technological advances in gas extraction have boosted supply through new finds and increased access to known deposits. Due to market developments in North America, gas prices remain low on average, and the fuel has a smaller GHG footprint relative to diesel. This positions natural gas well as a means for miners to reduce both their energy costs and carbon emissions.
For many mines, however, there are other considerations. Given that natural gas prices are subject to volatility — such as the winter price spikes — questions over the viability of switching require detailed analysis. In many situations, miners face similar challenges in accessing natural gas as they do with other diesel-replacing alternatives. In the North, no direct transmission or distribution pipeline network exists, and building one would be a capital-intensive investment. Maritime transportation of natural gas is also expensive as it requires ships, ports, storage and generation facilities.
Natural gas technologies, however, continue to improve and incrementally enhance the fuel's usability for miners. A testament to this is MAC's recent partnership with the Canadian Gas Association on a feasibility study to assess the viability of three mining companies switching some aspect of their operation to be powered by natural gas. The modelled results of two of the three companies were positive. Further, some natural gas generation technologies have been designed to retrofit existing diesel systems, making a fuel switch less capital intensive. From an end-use perspective, progress has been made towards the development of liquefied natural gas engines for heavy vehicles. As well, partnerships have formed to co-develop natural gas technology for off-road equipment, such as mining trucks, enhancing the viability of fuel switching for mining vehicles.
The industry views the challenges of operating in the North in a holistic sense, one part of which relates to the procurement and generation of power. While increased fuel costs contribute to heightened energy costs, the lack of infrastructure is the major contributor to the heightened energy costs — and other costs, generally speaking — in the North. As the future of the mineral industry lies increasingly in the North, overcoming this barrier to enhance the viability of northern mining projects is essential if Canada wishes to continue benefiting from the industry's activities.
The Chair: Thank you very much. We'll now go to questions, and I'll defer to Senator Massicotte, the deputy chair.
Senator Massicotte: Thank you, Mr. Marshall, for your remarks today. Obviously, you now have a lot of studies indicating that a large factor in the significant higher costs operating up North is infrastructure and energy. What's the solution? You make the statement, "It is very expensive." What do you do with that? What do you recommend we should do?
Mr. Marshall: Thank you for the question. The study that I referenced in my notes has not yet been released. We're in the final stages of completing it at this point. We have included a suite of recommendations that we think the committee and the government, generally speaking, should take into consideration. Three are for producing mines in particular, one of which is a 10 per cent investment tax credit on eligible infrastructure expenditure.
The other tier is an additional 15 per cent tax credit specifically for infrastructure that could be construed as essential for the mine site. In the South, if you had access to a transportation hub, for example, the costs required to construct that and to get product to market or vice versa, get supplies to the mine site, would not be absorbed by the company. It would be available by virtue of public expenditure that went into building that particular transportation hub.
We are asking for another 15 per cent in recognition of the public value of northern infrastructure development that comes from private sector expense.
The third tier of the recommendation is what we're calling a conditionally repayable contribution of 25 per cent of the cost of eligible infrastructure. The reason why we're diversifying is because it's an either-or question. It's not the 10 per cent plus the 15 plus the 25. We're seeking a base 10 per cent and then either 15 per cent or the 25 per cent conditionally repayable contribution. The reason why is many companies aren't in a position to be able to take advantage of an investment credit. They're not in a revenue-generating position, so despite the fact that a 15 per cent tax credit for specific transportation infrastructure investment or energy infrastructure investment may be very generous, if you're not in an eligible position from a cash flow standpoint to use it, it's not going to help advance a project without a cash source in Canada at this time.
So we're seeking this flexible option to give companies that are both in and not in a cash flow position a little bit more assistance in building key infrastructure that will help increase the viability of mines and mineral projects in the North.
Senator Massicotte: Just to clarify, 10 or 15 per cent is a tax credit but not a refundable tax credit. It's deducted off of taxes otherwise payable. Is that right?
Mr. Marshall: That's correct.
Senator Massicotte: If we do that scenario, you're really asking the taxpayer to fund 30 to 35 per cent of the capital cost of the infrastructure. How do you convince the public to do so? You have to convince them; you're not going to do this project without it. If you can do the project without it, they should not subsidize you.
Mr. Marshall: Sure.
Senator Massicotte: How do you explain all of that? What is the deal for the Canadian taxpayer?
Mr. Marshall: That's a very good question. I don't have to convince this committee of the long history of mining in Canada — Thompson, Manitoba; Sudbury; Rouyn-Noranda. These towns didn't exist before there was a mineral development on site. The same questions that people were asking themselves at the time of costing out how much it would take to build this project, to build the infrastructure, to get it off the ground then are the same questions that people are asking about the North today. The remoteness factors are similar. They're comparable at least within a certain respect, but if you took the questions of what is the inherent value of investing in Nunavut, for example, in a transportation capacity or an energy capacity and then you translated that same line of questioning onto Sudbury, it doesn't add up. It doesn't compare. The reason is that it has become a transportation hub; it has become a mining town; it has become a community that has developed off of the industry.
The North is very comparable in that respect. If you look at the Northwest Territories, there is a very positive infrastructure legacy from the mining industry. When railways, hydro dams, transmission infrastructure and roads were first built, they may not have had the same public value and public use as they do today, but as the community and those regions continue to grow and expand, the relative utility of that investment becomes greater and greater.
So on some level, what we're looking at here is a nation-building investment. This needs to be a long-term vision for what investment today is going to bring for generations of communities in the years to come.
Senator Ringuette: I have a small question. I understand you are saying that you did a report on cost in terms of mining in the North and mining in the South. Are you talking about the Canadian South?
Mr. Marshall: That's correct.
Senator Ringuette: Have you done a similar study in regard to the difference between mining for a mineral in the Canadian North compared to Peru? You have members operating there. I've seen some operations go there. They have to build the roads, and we're talking about a few hundred kilometres of road. They have no access to energy, so they have to provide for themselves, too.
Are you able to provide us with a study so that we can see to what extent mining in the North, with its current infrastructure and energy situation, is competitive with what is going on, for instance, in Peru or in another Central or Latin American country?
Mr. Marshall: The short answer is no at the present time. It's possible to do something like that. The focus of our study was largely in recognition of what everyone around this table acknowledges and knows: It costs more to live in the North. It costs more to do almost everything in the North, but from an industry standpoint in the mining sector, we didn't know how much more. So the purpose of our study was to try to quantify what that cost differential actually is.
The framework that we thought relevant for that specific purpose was to model and compare what the cost differential would be for developing a comparable mine, the same mine model in the North versus developing that comparable mine in the South. We defined remoteness, I guess, in terms of access to transportation, to a workforce and to a power grid or a power source.
Senator Ringuette: The bottom line is that you have no comparison with regard to the capital requirement and operating costs for a mine in Northern Canada compared to south of the border. Is that correct?
Mr. Marshall: Not in the context of the current study that we've undertaken. Like I said before, senator, I think it's possible to do that. I think it would be possible with the right participation from members who have data to undertake such a study, but in the confines of the exercise that we undertook, we don't have that information.
Senator Ringuette: This is just my comment, not necessarily that of the members of this committee, but I think in order to increase incentive for northern mining, it would probably be very helpful to compare the different operations and determine that the current situation and the current tax breaks for mining in North America, Northern Canada, are a lot — or maybe not — with respect to disadvantages to your members operating elsewhere in the world. I think it would be quite an asset for you to have that.
If you do do that, could you share it with us?
Mr. Marshall: Sure. I mean, I can speculate a little bit. You mentioned in some remote areas in other jurisdictions where a company would have to build a longer road.
Senator Ringuette: And energy.
Mr. Marshall: Many companies that operate in remote areas but not in the North still have to build a tremendous amount of infrastructure just to get their projects off the ground. But the thing about operating in the North for the most part is that it's not just building a road. It's building a road that leads to a port. If you're going to build a base metal mine where the volumes of concentrate that you are shipping out require a vessel, it's a road or a railway and a port, and then you are going to need a shipping contract, depending on the season and the location. The level of investment is not just one piece of infrastructure. It's a package that's required.
If you look at the types of mines that are operating in the North predominantly at this point, they're mostly high-value, low-volume commodities such as diamonds and gold. One of the reasons for that is that you can have a gold-processing facility on site and fly out the finished product. With diamonds, you can fly out the finished product. With a base metal product, you can't transport it to market. You cannot bring it to market in the same transportation model that is currently available in the territories.
The Chair: I don't disagree with what you are saying. It costs more. I live in the North, so I understand that. You are comparing it North to South. To my knowledge, there are no diamonds in Southern Canada. They are in the North right now. It is not just making that comparison that it is so much more cost in the North than in the South because you can't move those mineral deposits around on the map and say, "Oh, boy we can do one in the South." I get what you are trying to say, but what I'm saying is what drives the company to go into the Far North and open a mine, knowing full well ahead of time, using your macro, that it costs way more. I bet the answer is because the ore is worth it, whatever it happens to be. Would that be correct?
Mr. Marshall: To the best of my knowledge, I don't think companies invest that amount of money for a non-profit venture.
The Chair: Exactly.
Mr. Marshall: I think that's a fair point, yes.
The Chair: They're up there to a degree now doing that with all of those costs. I would be interested in the South American countries, as Senator Ringuette asked, if we had a comparison to what it costs. For some of these mines in South America, Peru and some of those countries, the costs are huge. Just ask a couple of them. It takes a huge amount of money to build roads, facilities, docks and all that stuff. Did those countries give these kinds of tax credits and contributions and all those things to the infrastructure to do those mines? I would be interested in knowing a little bit about that. If there is some way you could give that to us, we would all appreciate that. I am not trying to say it doesn't cost more in the North.
The other thing that has changed dramatically from when you talked about communities that grew around mines is that we now have large camps that grow around mines, and we fly in and fly out. Would that be fair to say? There's no community other than a huge camp at Diavik, right?
Mr. Marshall: That would be fair.
The Chair: There is quite a difference there. People fly in and fly out, compared to all of a sudden you have a community. Would that be correct?
Mr. Marshall: I think it would be correct. As to how these types of projects unfold over the long term, I don't think anybody has a crystal ball in that respect. There's a tremendous amount of potential, and how that potential is realized or not realized is largely going to be a determining factor for the broader social and economic impacts on the North.
The Chair: Thank you.
Senator Black: I thought your presentation was fabulous. It thought it was very informed and knowledgeable. Where I'm having difficulty — and this is similar to the line of questioning you have heard here today, sir — is that in respect of the questioning of the chairman you indicated what is doing well today are the high-value assets. Gold and diamonds are what you pointed out. For base metals, there's not a lot of mining to speak of, for the reasons you have indicated. Do you think that the tax incentives and credits that you are suggesting or raising would actually make a difference to the generation of mines to do base metals in a world where it is extraordinarily competitive at that level for base metal production? Do you think that would actually make a difference?
Mr. Marshall: I think it would make a difference for certain projects. There is no magic bullet. The industry recognizes that. The recommendations that have been formulated are not being recommended under the auspices that here is the solution.
Senator Black: You are saying this would be helpful.
Mr. Marshall: We're saying this would be helpful. We also recognize that despite the incredible potential for mineral development in the North, it is not all going to happen at once. This is going to be something that happens incrementally and over time.
Senator Black: Okay.
Mr. Marshall: To be honest, we have seen quite a bit of development in recent years relative to the first mine that opened in the North some time ago.
Senator Black: Mr. Marshall, just building on that and your evidence that there are developments in gas and wind, and I presume there are some developments in geothermal and there are other energy sources that your members would be looking at, if you looked forward 10 years and we were hearing from you 10 years from now, do you see the energy mix for the mining industry in the North altered from today?
Mr. Marshall: It is hard to tell. That is really contingent, I think, largely on the state of technological development.
Senator Black: We know that is advancing rapidly. We know that.
Mr. Marshall: It is advancing, but the state of technological development doesn't automatically overcome the infrastructure deficit. That's the challenge, right? You have a mine site. It is a large industrial operation. It consumes an incredible amount of power. Use Diavik as an example. They deployed a 9.8-megawatt wind farm. I think it has offset their diesel reliance by 5 per cent. That was a $33 million investment. It is valuable to them for a variety of reasons, but you're not going to run a mine in the North on renewable generation. It is not going to happen.
Senator Black: You don't see that day?
Mr. Marshall: Not in 10 years.
Senator Black: That's what I wanted to know. Is there anything that we can do, in your view, to expedite that process?
Mr. Marshall: Sure. I think the biggest message I would leave with the committee is that the cost increase for energy is the same as the cost increase for every other aspect of mining in the North. That's largely a result of the infrastructure deficit. Barring major and significant innovation and technological breakthroughs in the area of energy specifically, it is still going to cost a significant amount of money to get fuel to the site in the volumes required to develop it.
In order to get that fuel to the site, you will likely need a port, a dedicated ship for a period of time, a tank farm on site; or, if it's natural gas, you will need some storage capacity on site. You will need a road from that port to the mine site and then you will need some sort of generation capacity on site. All of those additional costs are a direct result of the infrastructure deficit. All of those capital investments for each stage of that logistical supply chain to move the fuel from a supply source to the North add per-unit increases in fuel cost delivery, and it is all because of the infrastructure deficit. It is not because the fuel is really expensive, per se. Fuel prices go up or down. It is really expensive in the North because of the cost to get it there and everything that is required to consume it.
Senator Black: You are not suggesting we would propose infrastructure investments, the Government of Canada? You are not suggesting roads, ports, pipelines?
Mr. Marshall: The industry is in favour of investment in infrastructure. Do we remain inherently optimistic that that level of investment is going to come specifically to the North? Not necessarily.
What we're looking at here is where could we meet in the middle on this? And how can we, in meeting in the middle, try to increase the economic viability of some projects that allow the northern development agenda to be consistent with the policy?
Senator Black: That's very helpful. Thank you very much.
[Translation]
Senator Bellemare: I would like to talk about an issue that you did not address: hydroelectricity use. The statistics indicate that hydroelectricity represents 34 per cent of the electricity produced in the Northwest Territories. You did not talk about the use of this renewable resource. I am wondering about the cost of transporting hydroelectricity, particularly from eastern Canada to western Canada. Is it cheaper or more expensive than transporting gas? It is preferable, environmentally. I would like to hear your perspective on the use of hydroelectricity and why you did not talk about it, since it makes up 34 per cent of the electricity produced. Perhaps it is not enough? I would like to hear your thoughts on that.
[English]
Mr. Marshall: Thank you for the question. In my remarks, I briefly mentioned hydro, as there has been mining investment in hydroelectricity capacity in the Northwest Territories. The specific cost comparison for hydro to natural gas, I can't answer that question because I don't have that data. It is a very good question, and it would be illustrative from a cost-comparison standpoint.
Similar to other renewable generation, hydro requires a geographical feature that is proximate to where the mine site will be located. Historically, when you have companies that have access to that geographical feature — namely, a waterway — that has enough force to generate that type of electrical capacity, it has largely been a no-brainer for mining companies to develop hydroelectricity capacity. In certain instances, depending on the project — if it is a smelter, for example — it is built directly proximate to a hydroelectricity source, because of the reasons you mentioned: reduced cost, lower environmental impacts and also reliability.
But in the vastness of the North, for the same reason that not all mine sites are equipped to deploy a wind farm, miners need to, first and foremost, locate and go to where viable mineral deposits are. That's first and foremost.
Second, in the consideration of how they're going to build that project, they're going to do very detailed analyses of what their options are to power it. If there is a viable opportunity to develop a hydrological resource to power the mine site, then there is a familiarity with that type of power generation, and the company will make the decision to do that.
In my understanding, given the benefits from costs that are associated with developing hydro to fuel a mine site as opposed to using a more costly fuel, the benefits of choosing hydro, when it works, outweigh the consequences of deferring that type of power generation for another source.
It is high level. It is a question of when it works, it is the preferable choice, but unfortunately it is not always possible, by virtue of the geographical location of hydrological features around river hydro or lakes and where the mine sites are located.
[Translation]
Senator Bellemare: Have you ever considered — and perhaps my question was not exactly clear — but in Quebec, we are sometimes looking for markets to sell hydroelectricity and for opportunities to develop the transport of electricity to more remote regions. As far as you know, have studies already been done to compare the costs and benefits of such an option?
[English]
Mr. Marshall: Thanks for the question. To the best of my understanding, I think there is a great deal of discussion in the Northwest Territories of expanding the transmission grid from more central regions in the territory to industry sites, particularly the diamond mines. The state of those discussions and the extent of the analysis or studies that are currently or have been undertaken, I'm not intimately familiar with that. Again, if it's possible to do that and it makes economic sense to do that, then I think it is an excellent option.
I come back to this idea of nation building. If you think about economic sense and what the value of investment is, for a point of reference I always come back to think about John A. Macdonald and the Canadian Pacific Railway. When the decision was made to build that railway, you had someone come before cabinet and say, "All right. We're going to build one of the longest railways that's ever been built on the face of this planet, and the vast majority of it is going to be on track outside of our current country's borders." How crazy does that sound? But without that type of vision, Canada would not be what it is today.
When I think about what is going to be required, if it ever happens, to turn the North into what I think many people would like it to be — a thriving, prosperous part of this country that exercises sovereignty, has better economic and social opportunities than it currently does today — I think that some aspect of nation building will have to be factored into that understanding of the question, Is the investment worth it? It is going to have to happen incrementally over time. That's really important when you are striving big. Developing the North is a big project. It is not a one-time stroke of the pen.
[Translation]
Senator Bellemare: The way I understand it, if we adopt a vision to develop the North — of course that means that the governments have to get involved, not just private businesses — the governments can take part in various ways, not just in terms of taxation. This could help build energy infrastructures.
That is why I asked the question about hydroelectricity, because it is not necessarily through taxation that we are helping mining companies; it is also through infrastructures for transmitting energy.
Along those same lines, have you considered nuclear reactors that could help develop mines at a lower cost and seeking government support in favour of this type of energy?
[English]
Mr. Marshall: Thanks for your question. It is an interesting proposition, particularly in the North. I came from an energy conference earlier this afternoon, and one of the representatives on one of the panels spoke about nuclear as a generation capacity. He said that while we're not there yet, one of the potential directions it could go is to develop and deploy micro-nuclear-generation units.
There are a couple of questions surrounding that, one of which is ensuring that the technology is sound, fundamentally. Sound, safe and secure. The other essential piece is building a social licence around that type of deployment.
If those two things can be achieved, then that may be one of those game-changing energy source technological developments, particularly for remote and northern regions. It would have to occur on a project-by-project basis. I am, as part of my responsibilities at MAC, following some of those developments.
To answer your question, we will have to cross that bridge when we get there, but I think that it is a direction in which the nuclear industry is moving.
Senator Seidman: I would like to ask you about MAC's sustainable mining program or initiative. My understanding is that it is mandatory for all of your members and that it establishes targets, protocols and reporting structures. In fact, it has been in effect since 2004. So that's a significant amount of time.
I would like to know if you could tell us something about that program, how effective it is and what it tends to focus on in the sense that sustainable mining is a huge issue.
Mr. Marshall: Your introduction to the program was correct. TSM, Towards Sustainable Mining, is what it is called. It's in its tenth year; it began in 2004. Over the course of the development of the program, six protocols have been developed. These protocols deal with various areas, one of which is tailings management, one of which is energy management and greenhouse gas emissions and another of which is biodiversity management. Each of the protocols has a series of principles. All MAC members are required, by virtue of their membership in MAC, to adopt TSM for all of their domestic mines.
Some of them do it voluntarily for international sites, but all sites in Canada from MAC members are subscribed to TSM as a program.
It is a performance management program, and, in accordance with each of the six protocols, members set targets and management plans to achieve those targets across the six indicator areas. Each year, they're audited. Every three years, the audits are verified publicly, and the results are made public.
Over the course of the program's history, what you see is a company's performance across these six areas, and that information, in turn, is made publicly available. Generally speaking, we have seen a very positive level of accountability and a greater level of trust develop between the public and civil society and the industry, relative to its commitment to performing well in these key areas.
Senator Seidman: It brings forward some questions on my part. First, you are saying that this helps with social licence in a way. It helps communities to understand what you are doing and why and gives them a sense of confidence, perhaps, that you have standards. Is that correct?
Mr. Marshall: I think so, yes. Generally speaking, TSM is an opportunity for companies to demonstrate that they are improving across a variety of indicators. You may start out anywhere along the spectrum of performance, but, because the results are publicized, there is a strong desire to perform well. When it is audited by an independent third party and you go to a community of interest or to a stakeholder and say, "This is what we have done. This is what our performance is. Here is an audited, third-party, credible evaluation of what our performance is," that does go quite some way in demonstrating that the company is committed to these principles, as well as building a greater level of trust between that company and the communities in which they operate.
Senator Seidman: How do you develop the standards or the protocols? Are they international best practices? How does it get developed?
Mr. Marshall: Within MAC, there is a management framework. I am not going to get too into the weeds on that simply because it is not my area of focus at MAC. A colleague of mine, Ben Chalmers, is responsible for managing that program. I would be happy to forward any questions that the committee has to him or to put him in touch with the chair or the clerk in the event that you would like to have him come to give you a more fulsome or thorough presentation of TSM. I just wouldn't want to pretend to have a level of expertise that I don't in this area.
Senator Seidman: One of the reasons I'm asking is because of the very recent report of the B.C. government on the tailings-dam failure at Mount Polley Mine. It is my understanding that, as a result of what happened there, there has been, and perhaps even continues to be, a reevaluation of the standards that were developed specifically in the tailings area.
I am curious about how you develop the standards right at the outset and then what problems may occur and how you reevaluate and change them if you have to. In this case, of course, you have to; it is pretty serious.
Mr. Marshall: You are right; it is a very serious incident. The industry takes its responsibilities for tailings management very seriously. It has been watching the development of events following the breach very closely and will engage with authorities based on recommendations that come from reports as a result of government or other investigations into the cause of the breach.
Senator Patterson: You have very correctly identified infrastructure as the key barrier to mineral development in the North, although it is quite amazing what has occurred despite those barriers. I think it's really a good-news story that somehow companies have managed to invest without the kind of infrastructure that the rest of Canada has.
You mentioned John A. Macdonald. My hero is John Diefenbaker, who had this Roads to Resources theme and built the Dempster Highway from the Yukon to the Arctic Coast, extended the railway to Hay River, built hydro dams in Yukon and N.W.T., which stimulated developments like the Pine Point Mine.
Our current government did invest in extending the Dempster from Inuvik to the coast, but there was a community at the end of that road, Tuktoyaktuk, that road is being built right now. The stated policy of our current government is that given that mines have a limited life, major infrastructure investments from Canada will also have to benefit communities so that there is a long-term legacy. As you said earlier, unfortunately mineral deposits don't locate themselves near communities. In any event, most northern communities are small.
I wonder if you would comment on this stated policy, that a road or infrastructure won't be built to nowhere, to a mine that has a finite life, but rather it should also have a legacy component. What's the industry view of that?
Mr. Marshall: I think that one of the recommendations, namely the 25 per cent conditionally repayable contribution — we shaped that recommendation in accordance with the belief that there is a public value to the investment in infrastructure in the territories, anywhere, for that matter. The potential is there.
How we've shaped that particular recommendation is for the loan to be pardoned at the end of mine life in exchange for the company's handing over the infrastructure to the Crown. For regions that are quite remote, is there a guarantee that the piece of infrastructure will be used as readily as it was used when it was built by the mine? There is no guarantee. What we do see is that in many instances the development of communities in those regions has followed pathways where infrastructure was built and enabled a type of development that without that infrastructure would never have happened.
Again, is it a perfect solution? No. Is it something that provides the potential? Yes. Is there risk involved in that, from a public investment standpoint? Yes. But there's an incredible amount of risk involved from a private sector investment standpoint as well. When we think about Canada's Northern Strategy, or when we think about the Arctic foreign policy, and we think about Canada's being Chair of the Arctic Council, focusing on the northerner, focusing on development for the northerner, our view is that there's a reasonable argument to be made that part of that risk can be shared because much of the benefit that results helps northerners, helps Aboriginals and helps Canadians overall in the long run.
The Chair: Thank you very much, Mr. Marshall, for your comments. They were very interesting. We had some good questions and great answers. I appreciate you taking time out of your busy schedule to come here and share with us your thoughts.
Mr. Marshall: Thank you.
(The committee adjourned.)