MINING AND REGULATION:
Science and Technology Division
OF THE PROJECT
MINING AND REGULATION:
As the Minister of Natural
Resources Canada, the Honourable Anne McLellan, said when she appeared
before the House of Commons Standing Committee on Natural Resources on
28 November 1995, "...this is a decisive time for mining in Canada.
Mineral exploration is on the rise...we must ensure a regulatory regime
that is conducive to both investment and environmental protection....We
currently have a number of important discoveries that could create hundreds
of permanent new jobs. The diamond project of BHP ... in the Northwest
Territories and Voiseys Bay in Newfoundland come to mind."(1)
The approval process of
the BHP project is taking place under the former environmental assessment
guidelines process. The Voiseys Bay development, however, will be
one of the first major projects to come under the new environmental approval
process set in place in January 1995 under the Canadian Environmental
Assessment Act. Voiseys Bay is therefore likely to provide a
test case for the effectiveness of Canadas regulatory system in
regard to large resource projects. Many informed observers are calling
for streamlining of the regulatory system and possibly even a "single
window" approach. Canadian mining companies are reported to be spending
millions in faraway places such as Chile that they see as less costly,
less regulated and more friendly places to do business. In increasingly
uncertain and highly competitive markets, money tends to go to the lowest-cost,
less-explored areas. Voiseys Bay offers just such a profile since
the ore is rich and close to the surface. The find is already being touted
as the future site of the lowest-cost nickel in the world and probably
the second-largest nickel mine anywhere.(2)
Voiseys Bay thus offers a possibility for attracting international
interest back into the North American market. From reading the press coverage,
one gains the impression that mining companies will be watching Voiseys
Bay very closely for signs of regulatory effectiveness in order to gauge
whether the regulatory climate is favourable for mineral investment.
Running the project on a
cost-effective basis will be especially important since the Newfoundland
government has made clear that it is capping at $20 million the credit
that companies are entitled to use to offset their mining tax in the first
10 years of a new operation. The credit was previously open-ended. A 10%
processing allowance encourages companies to process minerals in the province,
with an additional 10% for refining.
OF THE PROJECT
Since the extent of the
find has become known, companies have been expressing their desire to
acquire an interest in the ore body. Teck Corp. made an astute move when
it picked up 10.4% in April 1995 for $108 million or $36 a share.
In early June 1995, Inco Ltd. paid $525 million for a 30% interest in
the nickel discovery. Since then, Falconbridge and Inco have been bidding
for a major stake in the development, which could represent as much as
8% of current world nickel production. In early April 1996, Robert Friedland,
Co-Chairman of Diamond Fields Resources Inc., the owner, announced he
had accepted Incos offer of $4.3 billion for 75% ownership of Voiseys
Bay at $41 a share. As the worlds largest nickel miner, Inco was
seeking to protect its international market share.
A lawsuit delayed completion
of the acquisition until August 1996. Exdiam Corp., a diamond company
once headed by Diamond Fields Co-chairman Jean-Raymond Boulle, was claiming
all assets of Diamond Fields as compensation for diverting Exdiam corporate
information to raise money to finance Voiseys Bay. The company agreed
to drop its suit in return for a U.S. $25 million cash payment.
Stumbled upon in late 1993
by Newfoundland prospectors looking for diamonds, Voiseys Bay was
projected by Vancouver-based Tech Corporation in July 1995 to contain
31.7 million tonnes of base metal proven reserves with an average grade
of 2.83% nickel, 1.68% copper, and 0.12% cobalt per tonne. The ore is
almost twice as rich as the average grades in the Sudbury nickel basin
of Canada. The copper and cobalt in the deposit are viewed as a fringe
benefit; they will provide enough revenue to pay for nickel processing,
thereby helping to keep down the costs of the project. In late April 1996,
Inco boosted an early estimate of the deposit, saying the field could
hold 150 million tonnes of ore based on the companys understanding
of the geology of the area. By the year 2000 the company expects Voiseys
Bay to be producing 270 million pounds of nickel, 200 million pounds of
copper and 10 million pounds of cobalt annually.(3)
Voiseys Bay is located
near the Labrador coast, within 10 kilometres of deep tidewater, about
330 kilometres northwest of Goose Bay. The project is at present in the
exploration phase. Well over 100 holes have been drilled and thousands
of metres of drill core logged. Exploration is also continuing at an adjacent
discovery in the Eastern Deeps.
To support the current phase
of activity, Voiseys Bay Nickel Company Ltd., the operator, has
applied for more permanent infrastructure support than the tent camp that
was put in place in late 1994. On 15 January 1996, the company sought
the approval of the Newfoundland government to proceed with a road, dock,
airstrip and camp to allow the exploratory activities to advance while
feasibility studies for the mine are undertaken. The company takes the
position that only once these feasibility studies are completed will it
be in a position to register the anticipated mine/mill project in accordance
with applicable environmental assessment processes. Tech Corp. is under
contract to complete a mine feasibility study on behalf of the owner,
Diamond Field Resources Inc.
After the exploration phase,
the developer explained at information sessions held in May 1996 in St.
Johns, that the project would move into the major construction phase
of the mine and the mill, projected to take 18 months and involve
about 250 persons. During the operational phase, about 300 people will
be employed. Although there will be no quotas or preferences in the hiring
of aboriginals or in the granting of contracts, the company is offering
training and hiring incentives.
The Ovoid deposit, located
near Discovery Camp, as shown in Figure 1, would be developed as an open
pit mine. The next likely source of ore is the Eastern Deeps, located
southeast of the Ovoid zone. This ore body would be developed as an underground
mining operation 1,000 metres below the surface but only once the ore
from the Ovoid had been extracted.
Ore would be hauled from
the open pit to a primary crusher, where it would be crushed to less than
200 mm in diameter, before being transferred by conveyor to the concentrator.
The haul road would be constructed during initial mine development.
The proposed mine plan calls
for seven-days-a-week, year-round mining operations with the work force
likely rotating two weeks on and two weeks off.
Acid-generating and non-acid-generating waste would be
managed separately at both the Ovoid and Eastern Deeps locations. To prevent
acid generation, tailings would be stored in long-term water cover, either
in an artificial or a natural freshwater body or through confined marine
disposal. The proponent favours using natural water bodies found near
the development site.
The ore would be processed on site, producing nickel-cobalt
and copper concentrates and a tailings product. The two concentrate products
would be trucked to a concentrate facility adjacent to the port site on
Anaktalak Bay for further processing while the tailings would be pumped
to storage. The proponent would like to locate the processing plant near
to the mine, but the alternative site would be at the port, to which the
ore could be trucked. Concentrates would await shipment in a storage facility
adjacent to the mill.
The proponent proposes to
build a port facility in Anaktalak Bay and an airstrip close to the mill
site. It is proposed to extend and widen the strip used during the exploration
phase, as shown in Figure 1. It is considered feasible to use the port
year-round to ship in equipment and supplies for project operation and
ship out the concentrates. Approximately 25 kilometres of gravel roads
will be required to link up facilities during project construction and
operation. No direct road or rail link is planned to southern Labrador
On-site facilities to support mining activity would include
diesel-powered electrical power facilities, accommodations for 400 construction
personnel and 200 operational personnel, maintenance shops and warehouses,
a water supply system and waste management systems.
The proponent has made a
commitment to comply with all applicable legislation and regulations and
has prepared an Environmental Management Plan for its operations. The
company will develop a contingency plan for accidents and takes cumulative
impacts into account in its environmental monitoring program. It is also
committed to minimizing residual environmental impacts at the project
site upon mine closure and will develop a mine closure plan.
Some analysts have estimated
it could be 1999 before Diamond Fields or its successor has the permits
in place to start production. Meanwhile, Archean Resources Ltd., a private
company headed by the two Newfoundland prospectors, has a contract to
manage the drilling program until December 1996. It owns a 3% net smelter
royalty interest in the discovery.
Both the timing and the
location of the discovery are auspicious. There is currently a strong
demand for nickel, particularly from the stainless steel industry, which
consumes about 60% of world nickel production. The balance is used to
make batteries, metal plating and nickel alloy for the aerospace industry.
Some forecasts put annual production at the new sites at 65,000 tonnes
of nickel, equal to about 8% of world nickel production.
The proposed undertaking
is in an area of overlapping land claims by the 5,000-member Labrador
Inuit Association (LIA) and the 1,500 member Innu Nation. The LIA represents
Inuit and native settlers of partial Inuit ancestry who live primarily
in five communities along the eastern shore: Nain, Hopedale, Postville,
Makkovik, and Rigolet. Nain, a former fishing village, has a population
of 1,200, and is the nearest town to the nickel find, being located 35 kilometres
to the north of the proposed mine site. The LIA comprehensive land claims,
under negotiation since 1978, reflect traditional occupancy of the coastline
and some of the interior. The LIA, Canada and Newfoundland signed a Framework
Agreement setting out the details of the claims negotiation process on
30 November 1990. In March 1993, the LIA tabled its proposal for an agreement-in-principle
and tripartite negotiations have been ongoing since 20 December 1993.
The Innu of Labrador number
about 1,500 and live primarily in two communities: Davis Inlet and Sheshatshui.
They are represented politically by the Innu Nation. Following evidence
of serious social and health issues, in April 1994 the government made
a commitment to the Innu on transfer of services, self-government, relocation
and land claims. Land claims negotiations with the federal and provincial
governments had resumed in the previous month. Negotiators initialled
a land claim framework agreement in October 1995 covering land rights,
access to resources, environmental management, sharing of revenues from
resource development, harvesting rights and self-government.
The aboriginal peoples want
a halt on development until their land rights are resolved and there has
been a full environmental review of the social and environmental consequences
of the project. They have requested that the exploration and development
stages be assessed as one single project and they have threatened to go
to court to stop a piecemeal approach. They believe that the infrastructure
proposed is not needed for the exploration stage but is merely a means
of proceeding with mine development without triggering the Canadian
Environmental Assessment Act. Should the mine proceed, the aboriginal
people want a say in how it is developed and want to share in its training
and employment benefits.
The proponent company has
indicated it will abide by the terms of any new arrangements that are
subsequently put in place. It claims that the existing environment is
known and characterized so that potential environmental effects can be
reliably predicted and proven mitigative measures can be undertaken. The
Newfoundland government would also like to see the claims settled expeditiously.
Leaders of the Labrador Inuit Association are trying to hammer out a protocol
agreement with the Newfoundland government that will give aboriginal people
a say in mine development until such time as the land claims are settled.
If the bid is unsuccessful, the LIA has threatened to apply to the Supreme
Court of Canada to stop the mine until claims to about 14 million hectares
in northern Labrador are resolved. More recently, the LIA has softened
its stance by saying that if it is able to work out an agreement with
the new owner, Inco Ltd., it would consider allowing mineral development,
even though the land claims are not settled.
The initial reaction of
the Labrador Innu to mine development took the form in February 1995 of
a 12-day stand-off with the RCMP at the project site. Their negotiations
with Diamond Fields in the summer of 1995 achieved little in concrete
terms. The sudden rush of mineral fever in an area that, until now, has
supported only a subsistence lifestyle, threatens to change the aboriginal
way of life for ever. Not surprisingly, aboriginal peoples are suspicious
of mining companies which come into a remote area, ignore local interests,
operate only as long as the mine is profitable, and leave behind a legacy
of environmental impacts, abandoning the community as cavalierly as they
The reputation of the proposals
main promoter is also causing some concern in the aboriginal community.
Robert Friedland was the Chief Executive Officer of Galactic Resources
Ltd., a company responsible for a notorious environmental disaster at
Summitville, Colorado, in the late 1980s when a toxic spill of cyanide
and heavy metals went into the Rio Grande water system. The bankrupt company
left the U.S. Environmental Protection Agency with a $100-million bill
for decontaminating the mine site and nearby waterways.(4)
There is a precedent for
protection of aboriginal rights pending land claims settlement. In the
case of the Nanisivik mine in the Arctic there was some interim protection
for Inuit rights and interests during the land claims negotiation process.
Although the provincial government, which has jurisdiction over the land
in Voiseys Bay, has permitted some exploratory drilling to continue,
certain lands adjacent to aboriginal communities were exempted from such
activity until July 1997.(5)
Canada and Newfoundland
still need to reach an understanding on an equitable sharing of responsibilities
for the settlement and implementation of land claims in Labrador. Land
claims negotiations aim to establish certainty and clarity of rights to
ownership and use of land and resources in a manner that will facilitate
and stimulate economic development. Following the Confederation of Newfoundland
with Canada in 1949, aboriginal peoples were left in a constitutional
limbo. The 1949 terms of union transferred "lands reserved for Indians"
to Canada just as if Newfoundland had joined Canada in 1867. This prevented
the provincial legislature from exercising any authority to enact legislation
in relation to Indians. Yet because, unlike Indians in the rest of Canada,
Indians in Newfoundland had the right to vote, had never entered into
a treaty and did not reside on reserves or other "Indian Lands,"
the Indian Act was never applied in Newfoundland.
The Innu made a complaint
to the Canadian Human Rights Commission, which in August 1993 reported
that "to this day the Government of Canada has not acknowledged in
an unequivocal way its direct constitutional responsibility for the Innu
as aboriginal people in Canada."(6)
This ruling affects the Inuit, since a 1939 Supreme Court decision established
that there was federal responsibility for them to the same extent as there
is for Indians. This constitutional irritant has soured relations between
Newfoundland aboriginal groups and the federal and provincial governments.
Today Canada provides funding through agreements administered by the province
for housing, infrastructure, education, health care, and social and cultural
In May 1993, the National
Advisory Board on Science and Technology issued its report Competitiveness
in the Canadian Mining and Forestry Industries.(7)
The Board acknowledged the resource industries as the mainstay of Canadas
prosperity, contributing 45% of total exports. Today, however, the industries
face serious challenges. "New and aggressive foreign competitors
with lower supply and wage costs, increasing use of alternate materials,
more rigorous customer demands, fast shifting trade patterns, and changing
economic and fiscal environments are threatening the very survival of
the Canadian resource sector."(8)
Competitiveness for the resource industries appears to depend as much
on the economic and regulatory environment as it does on productivity.
Foreign governments are using investment, and environmental and incentive
policies to encourage investors to explore, exploit and export local resources.
The managers of Canadas resource industries evidently consider that
the uncertainty and economic risk associated with the inconsistent application
of "environmental assessment" processes are discouraging investment
and are impediments to competitiveness. They attribute much of the problem
to jurisdictional overlap between departments at both levels of government.(9)
A government-industry task
force also reviewed Canadas international competitiveness with respect
to mineral investment capital. It reported in September 1993 that, "although
there exists rich anecdotal evidence of the industrys experience
with environmental assessments and permitting processes, little empirical
evidence has been gathered to document those experiences in detail. Part
of that problem is that it is not always clear what caused the delay or
other incident that could be described as causing inefficiency."(10)
In the projects documented, it remains unclear as to what extent delays
in the process could be attributed to the behaviour of regulatory officials.
Quite often they can be attributed to the failure of the proponent to
provide all the necessary information or to meet design or remedial requirements.
Until more detailed and firmly documented evidence is generated, it is
not possible to determine the exact cause of the regulatory delays;(11)
however, at least in the eyes of industry, it is the environmental, rather
than the health and safety or technical requirements that are the problem.
This section consequently concentrates on the environmental aspects of
regulation, even though at the exploration stage of mining it must be
borne in mind that numerous permits, licences and approvals are required
from the various levels of government.
Since the early 1970s, governments
at all levels have been taking steps to implement environmental protection
legislation. This has led to a complex network of environmental regulatory
regimes in Canada. Environmental regulation involves assessment of the
impact of human activities on the environment and protection of the environment
through such measures as waste management, emissions standards and reclamation
requirements. Some of the apparent complexities derive from the shared
jurisdiction over environmental matters.
A 1982 Resource Amendment
to the Constitution Act, section 92A, granted the provinces
exclusive power to legislate in relation to the development, conservation
and management of their non-renewable resources. The question arises as
to the extent to which the federal government should intrude into assessments
of projects largely within provincial jurisdiction. Environmental assessment
is seen by some provinces, notably Quebec, as an attempt by the federal
government to take back authority under the guise of protecting the environment.(12)
Although the federal government inevitably plays less of a role than the
provinces in the regulation of the mining industry, federal environmental
regulations still have a considerable impact with regard to federal lands,
and transboundary and international matters.
The federal governments
legislative framework for environmental protection and assessment includes
the 1988 Canadian Environmental Protection Act, the 1992 Canadian
Environmental Assessment Act, the Fisheries Act (which predates
Confederation), and the 1886 Navigable Waters Protection Act.
The potential for conflict
and overlap can be seen in the pertinent Newfoundland legislation that
would apply to a project such as Voiseys Bay. Newfoundland has an
Environmental Assessment Act (1981) and Regulations (1984), and
a Fisheries Act (1970), besides specific legislation to protect
such sectors as water, wildlife and parks.
A 1993 survey(13)
of possible areas of duplication, however, did not reveal any real concerns
with overlap between the two governments, even prior to proclamation of
the Canadian Environmental Assessment Act. This new Act provides
that if a province is obliged to conduct an environmental assessment that
also calls for federal review, the federal and the provincial government
will conduct one joint review. There have, however, evidently been few
projects in Newfoundland for which both levels of government have required
The new Liberal government
promised in 1994 to streamline the regulatory regime and reduce costly
federal-provincial overlap and duplication. Industry Minister John Manley
and Natural Resources Minister Anne McLellan both expressed support publicly
and indicated they would work with the industry and provinces to bring
about change by the end of 1995. The February 1996 Speech from the Throne
reaffirmed that proposed regulatory reform would promote better coordination
and strong and clear requirements, as well as minimizing delays.
Alberta, Manitoba, Nova
Scotia and B.C. have entered into agreements to coordinate federal-provincial
environmental assessments through local "single window" offices.
In the case of B.C., it will even be the provinces standard that
applies. Similar agreements are being worked out for Ontario and Saskatchewan.
Since an overall bilateral agreement does not yet exist between Ottawa
and St. Johns, the two governments are working to develop a project-specific
agreement to avoid duplication in environmental assessment activities.
The "single window"
offices will assist in improving communications with industry. In addition,
the Canadian Environmental Assessment Agency is developing generic guidelines
for the mining industry in its preparation of environmental impact statements,
thus providing greater certainty for a proponent with respect to information
requirements. The guidelines are to be released before the fall of 1997.(14)
In regard to Voiseys
Bay, the intention is to develop a joint assessment process that will
ensure timely decisions and lessen duplication of effort. Discussions
at the national level are also revolving around setting time-lines for
issuing approvals so that there will be more certainty in the system once
the environmental obligations have been met.
Government for its part
is also trying to harmonize its regulatory involvement in the federal
assessment process. The Canadian Environmental Assessment Agency is developing
a code of practice (Federal Coordination Regulation) to ensure
that federal environmental assessments are timely and are efficiently
coordinated among federal authorities under the Canadian Environmental
The code will be promulgated before the end of 1996.
The concept of the lead
agency, whereby one federal department becomes the chief co-ordinator
for all the federal issues, is also emerging. In the case of Voiseys
Bay, Natural Resources Canada is currently bringing together the federal
responsibilities. When the project reaches the development phase, the
lead role may fall to the Department of Fisheries and Oceans.
Federal public reviews are
being streamlined to make them more consistent, timely, predictable, open
and efficient. By December 1996, the Canadian Environmental Assessment
Agency will introduce a federal regulation to include time lines that
will shorten the panel environmental review process. This will also apply
to provincial processes in cases where the federal government has entered
into bilateral agreements.
In todays buoyant
investment climate, the government appears anxious to persuade mining
companies that Canada is a good place in which to invest and develop a
mine. It is attempting to remove any regulatory roadblocks that might
discourage such investment. Smoothing the environmental path ought not
to mean rendering environmental tools ineffective, however. There is a
general move by government away from regulating, leaving the industry
to self-monitor its activities. The mining industry has shown itself responsible
in this regard with a voluntary program to accelerate reduction or elimination
of 12 toxic substances by the year 2000.(16)
Nevertheless, government will continue to have the important role of ensuring
that those affected by major resource developments do not suffer long-term
socio-economic or environmental consequences.
Canada has been compared
unfavourably in investment terms to such places as Mexico and South America;
factors cited include past holdups over the environmental assessment review
processes. Yet the examples of adverse environmental consequences abroad
in recent years suggest that avoiding environmental regulation in order
to attract investment capital can have human and, in the long run, very
expensive, consequences. Voiseys Bay may be a wonderful chance to
offer the world a great investment opportunity but it should also be a
worldclass example of how a megaproject can be effectively managed so
as to bring benefits rather than hardships to local inhabitants.
Anne McLellan, Notes for a Speech, to the House of Commons Standing
Committee on Natural Resources, Ottawa, 28 November 1995, p. 1-2.
"Diamond Deposits Still Elusive in Labrador," Northern Miner,
4 September 1995.
Allan Robinson, "Voiseys 50% Richer: Inco," Globe and
Mail (Toronto), 24 April 1996.
Jacquie McNish, "Friedland on Offensive over Toxic Spill Incident,"
Globe and Mail (Toronto), 13 March 1996.
Indian and Northern Affairs Canada, Information Sheet 62, February
1996 and telephone conversations with Newfoundland government officials,
18 July 1996.
Adrian Tanner et al., Relations between Aboriginal Peoples and
Government in Newfoundland and Labrador, A Research Report for the
Governance Project, Royal Commission on Aboriginal Peoples, St. Johns,
Newfoundland, January 1994.
Committee on the Competitiveness of the Resource Industries, Competitiveness
in the Canadian Mining and Forest Industries, Report of the National
Advisory Board on Science and Technology presented to the Prime Minister
of Canada, Ottawa, May 1993.
Ibid., p. i.
Ibid., p. 19.
Intergovernmental Working Group on the Mineral Industry, Canadas
Environmental Regulatory Systems: Current Issues, Background Study
on Environmental Regulatory Concerns by a Government/Industry Task Force
on the Canadian Mineral Investment Climate, September 1993, p. 42.
Ibid., p. 43.
Intergovernmental Working Group on the Mineral Industry, Duplication
and Overlap in Environmental Protection Regulations in Canada, Background
Study on Environmental Regulatory Concerns by a Government/Industry Task
Force on the Canadian Mineral Investment Climate, September 1993, p. 16.
Ibid., p. 58.
Natural Resources Canada, Streamlining Environmental Regulation for
Mining, the Federal Governments Response to the Interim Report
of the House of Commons Standing Committee on Natural Resources, June
1996, p. 9.
Ibid., p. 21.