B.C. cuts deal with natives to share mining revenues

Vancouver — From Wednesday's Globe and Mail Published on Tuesday, Aug. 24, 2010 11:16PM EDT

For the first time in more than a century of mining in British Columbia, the provincial government has agreed to share the taxes it collects from a new mine with the aboriginal people on whose traditional territory the mine will operate.

The revenue-sharing agreement, announced Tuesday, means two Indian bands in the Kamloops area will get a cut of provincial taxes from the New Afton mine, a copper-gold project under construction about 10 kilometres west of Kamloops.

The deal, and a similar agreement to be announced Wednesday, puts B.C. at the forefront of Canadian provinces in terms of addressing aboriginal involvement in the mining sector, one B.C. lawyer who specializes in aboriginal law said.

“It is the first one of its kind in British Columbia and British Columbia is leading the way for the rest of Canada,” said Keith Clark, a partner with Lang Michener in Vancouver.

The governments of Yukon, Nunavut and the Northwest Territories have pursued some revenue-sharing models, but no other province has put such arrangements in place, Mr. Clark said.

The agreement could help B.C. shake its reputation as a place where mine projects are hamstrung by unresolved land claims and complex negotiations with aboriginal interests, he said. A big new mine hasn’t been built in the province since the late 1990s and B.C. typically receives poor scores in an annual Fraser Institute study that ranks jurisdictions based on their “policy potential” – in areas such as taxation and certainty – for resource companies.

“The hope is that once aboriginal people realize the economic benefits that they are entitled to receive once a mine goes ahead in their area, it would seem logical they would react more favourably to mining projects,” Mr. Clark said.

Under the new agreement, the province will share mining tax revenue from the New Afton mine with the Tk’emlups First Nation and the Skeetchestn First Nation. The mine is expected to come into production in 2012 and it is not known how much the revenue-sharing deal will generate for the bands.

The economic impact will be “substantial and significant,” said Randy Hawes, B.C.’s Minister of State for Mining.

The new revenue-sharing model is also expected to clarify expectations for mining companies, which have pursued royalty or other payment models to win aboriginal support.

“While companies have to some extent accepted the fact that financial compensation for affected First Nations is a cost of doing business, it is safe to say that the private sector has expressed frustration at having to fill the government’s shoes with respect to revenue-sharing,” said a 2009 report by Woodward and Company, a Victoria-based law firm that specializes in aboriginal issues.

“A company can be reasonably expected to take the view that it is paying royalties and taxes to the government already, and that the government should either share that revenue with First Nations or adjust the royalty and tax rates to take into account company contributions to First Nations.”

Shane Gottfriedson, chief of the Tk’emlups band, said Tuesday he’s been talking and meeting about a potential revenue-sharing agreement for the past seven years.

“We’ve always been in talks with the government for the last 100 years about sharing our resources,” he said. “It hasn’t been just seven years – it’s been 100 years.”