Evaluation of Petroleum and Minerals (PAA 4.3.1)

Recommendations

It is recommended that:

1. The Northern Affairs Organization clarify and communicate their role in the context of petroleum and mineral development.
2. The Northern Affairs Organization clarify roles between CanNor and INAC to further engage capacity development partners, ensuring a coordinated approach to leveraging opportunities.
3. The Northern Affairs Organization consider options for integrated information management and decision-making regarding land, environmental management and resource claims.
4. INAC continue to work with partners to support geoscience research, while maximizing the value of other northern scientific research through coordination and dissemination.

1.2.1 Background and Description

In accordance with its 2014-2015 Program Alignment Architecture, Petroleum and Minerals operates as one of three sub-programs under the Northern Land, Resources and Environmental Management program:

• Petroleum and Minerals (4.3.1)
• Contaminated Sites (4.3.2)
• Land and Water Management (4.3.3)

This sub-program is responsible for the management of rights issuance for new petroleum exploration rights, terms and conditions of exploration, production licences, and maintains a rights registry that is open to the public. Specific projects managed by this sub-program include the Beaufort Regional Environmental Assessment, the Department's federal lead responsibility for the Mackenzie Gas Project and the Mineral and Energy Resource Assessments for National Park establishment.

The Petroleum and Minerals sub-program is carried out by the Petroleum and Minerals Resources Management Directorate of the Northern Resources and Environment Branch, Northern Affairs Sector of Indigenous and Northern Affairs Canada.

The Petroleum and Minerals sub-program is responsible for the petroleum and mineral resource interests for Northerners, Aboriginal peoples and Canadians generally on federal lands in the Northwest Territories, Nunavut, and the northern offshore.^{Footnote 1}

On April 1, 2014, the new Northwest Territories Act gave effect to the Northwest Territories Devolution Agreement by transferring the administration and control of public lands, resources and rights in respect of waters in the Northwest Territories to the Commissioner of the Northwest Territories.^{Footnote 2} The territorial government has now become responsible for the management of onshore lands, the issuance of rights and interests with respect to onshore minerals and oil and gas, and collecting royalties. The devolution of responsibility from the federal government to the territorial government has decreased, from INAC's perspective, jurisdiction and materiality of the Petroleum and Minerals sub-program, particularly in respect to the management of oil and gas.

The authority for the sub-program Petroleum and Minerals rests in separate pieces of legislation, governing separate activities related to petroleum and mines and minerals:

1.2.2 Royalty Administration

Royalty rates in the North start at one percent in the first year of production and rising every 18 months by one percent to a maximum of five percent until the project payout.^{Footnote 8} Royalties on project payout cap at the greater of either five percent of gross or 30 percent of net.^{Footnote 9}

A web-based Royalty Management System was launched in April 2010 and is used by interest holders to submit the required production and sales figures. The Royalty Management System assists the Department to administer petroleum royalties efficiently. 

Mineral royalties in the Northwest Territories and in mines in Nunavut established prior to the Nunavut Land Claim Agreement are subject to terms of Northwest Territories and Nunavut Mining Regulations where 13 percent of net value of mine production and the sum of the marginal royalty rates (see table 1) must be paid to the federal government annually.^{Footnote 10} In the Northwest Territories, there are three settled land claim agreements that govern royalty revenue sharing with Aboriginal groups: the Gwich'in Comprehensive Land Claim Agreement, Sahtu Dene and Metis Comprehensive Land Claim Agreement, Inuvialuit Final Agreement.^{Footnote 11},^{Footnote 12}

The Nunavut Land Claim Agreement established royalty rates under Article 25, which guarantees that 100 percent of royalties from development on Inuit Owned Lands where Inuit own mineral rights go directly to Nunavut Tunngavik Incorporated on behalf of Inuit.^{Footnote 14} Nunavut Tunngavik Inc. is responsible for distributing royalties to Regional Inuit Associations who then use the funds in the interests of Inuit beneficiaries.^{Footnote 15} Nunavut Tunngavik Inc. has created a trust for royalties that will be distributed to Regional Inuit Associations when it has reached a certain level deemed sustainable, the minimum being $100 million.^{Footnote 16} In an effort to reduce redundancies in service provision, the Regional Inuit Associations are intending to not use the royalties on services already covered by the Government of Nunavut through taxes.^{Footnote 17}

1.2.3 Objectives and Expected Outcomes

For program logic, please see the logic model in Appendix A

The Northern Land, Resources and Environmental Management program (4.3) supports The North Strategic Outcome:

• "Self-reliance, prosperity and well-being for the people and communities in the North."

The Petroleum and Minerals sub-program is one of three that supports the Northern Land, Resources and Environmental Management Program with the program expected result, identified by the 2014-2015 Performance Measurement Framework, of:

• Effective regulatory regimes are established in each of the three territories, which provide certainty to project proponents, Aboriginal organizations and Northerners.

The objective and expected result of the Petroleum and Minerals sub-program is:

• Petroleum and mineral resources on Crown lands in Northwest Territories, Nunavut and northern offshore regions are managed for the benefit of Northerners and all Canadians.

The Petroleum and Minerals sub-program is supported by the following immediate outcomes:

• Secure title for industry
• Fair and stable royalty regime
• Benefits to communities from Northern Resource Development
• Increased exploration activity

The activities undertaken by INAC through the Petroleum and Minerals program are:

• Manage and administer resources
• Assessment and collection of Crown royalties and payments to Aboriginal communities
• Support responsible and sustainable resource development
• Provide advice for policy development, legislation and international initiatives

Under these activities, according to the 2015 – 2016 Report on Plans and Priorities for INAC, Petroleum and Minerals contributes to that expected result by:

• Managing Crown lands for oil and gas exploration and development through the administration of lands and allocation of rights.
• Developing an agreement with the governments of Northwest Territories and Yukon and the Inuvialuit for the collaborative management of oil and gas resources in the Beaufort Sea.
• Assessing Benefits Plans for proposed new oil and gas projects against requirements in new Benefits Plan Guidelines for the North.
• Administering the royalty regime and ensuring the correct amount of royalties and Crown revenues are collected by INAC from oil and gas and mining companies.
• Developing a modernized online map selection system for Nunavut mineral exploration and mining companies.
• Strengthening the management of environmental securities for mineral projects by working with Regional Inuit Association and project proponents on terms around managing security.

The 2014 – 2015 Report on Plans and Priorities for INAC outlines several other roles for the Petroleum and Minerals sub-program, including:

• Working through the Arctic Council, maintain a dialogue on important northern issues and collaborate on key initiatives that will contribute to safe, sustainable, and environmentally conscious practices related to oil and gas development and shipping in the Arctic.
• Advancing environmental and social studies pertaining to oil and gas operations on frontier lands through the Environmental Studies Research Fund and other funding avenues.
• Completing Beaufort Regional Environmental Assessment research projects, working group activities and Final Report (26 research projects and six working group activities).
• Implementing a modernized online map selection system for Nunavut mineral exploration and mining companies.
• Helping to strengthen the management of environmental securities for mineral projects to ensure that appropriate securities are maintained at all times and to reduce the liability of the Department.

1.2.4 Program Management, Key Stakeholders and Beneficiaries

The Petroleum and Minerals Program is managed by the Department of Indigenous and Northern Affairs Canada in partnership with Aboriginal organizations and territorial governments.

The program staff located at INAC Headquarters administers the overall delivery of Petroleum and Minerals. To accomplish this, the Petroleum and Minerals Directorate at headquarters does the following:

• Assures the collection and assessment of royalties, including implementing risk-based royalty audit framework.
• Manages the rights of existing license holders, modernize historical permits and terms and conditions for issuance.
• Implements Beaufort Regional Environmental Assessment Initiative through a targeted regional approach.
• Provides expert advice and policy/economic analysis on petroleum and mineral resource issues in the North to support senior-level decision-making processes
• Contributes to legislative and policy development activities, such as:
  • Revisions to Territorial Coal Regulations;
  • Advice to the Minister with respect to Canada Benefits Plans;
  • Participation in the National Energy Board Arctic Drilling Review;
  • Advancement of efficient and effective oil and gas management policies internationally, inter-departmentally and at Arctic Council; and
  • Provision of advice to land claim and devolution negotiation tables.

The program staff located at INAC Nunavut regional office supports Headquarters activities related to Northern oil, gas, mining and mineral development. Their responsibilities include:

• Providing advice to land claim negotiation tables.
• Organizing and participating in information sharing.
• Providing support and advice to Aboriginal communities and industries on an as needed basis.
• Providing region specific representation and support.
• Review mineral claim and prospecting permit holder reports.
• Engaging in information sharing with businesses, the public, and land and resource management partners to stimulate investment in the territories.
• Managing rapid growth in petroleum and mineral exploration sector.
• Consults with northern communities and engages and advises northern communities/industry on mutual requirements for petroleum and mineral exploration and development to sufficiently support a viable northern economy.
• Collaborate with Headquarters on regulatory reform, and revisions to regulations.

Industry stakeholders include industry associations such as the Canadian Association of Petroleum Producers and the Northwest Territories and Nunavut Chamber of Mines, petroleum and mining production and exploration companies, and a wide range of companies and professionals providing support services to these non-renewable resource industries.

1.2.5 Other Partners

Federal responsibility for the management of Crown petroleum and minerals resources is divided at the sixtieth parallel. INAC is responsible for management in the North, and Natural Resources Canada is responsible for management in the South. However, INAC does not have sole responsibility for the management and regulation of Petroleum and Minerals in the North, and instead shares these responsibilities with a number of other federal departments:

• The Canadian Environmental Assessment Agency administers the Canadian Environmental Assessment Act guidelines;
• Environment Canada is responsible for preserving the quality of the environment in Northern Canada;
• Fisheries and Oceans is responsible for the protection of inland and oceanic fisheries;
• National Energy Board regulates frontier oil and gas, as well a pipelines;
• Transport Canada oversees the safety of marine transportation; and
• INAC's Land and Water Management sub-program (4.3.3) is responsible for surface minerals, and the implementation of statutory and comprehensive land claim agreement obligations in the North.

The Northern Project Management Office, situated in the Canadian Northern Economic Development Agency (CanNor) is responsible for the following:

• Coordinating partners for environmental assessments and regulatory processes;
• Facilitating issues management with exploration and active mines;
• Preparing project specific agreements to facilitate project planning and tracking timelines;
• Coordinating all federal Crown consultations and maintaining the Crown record; and
• Coordinating federal input into assessments.

CanNor is also responsible for supporting community readiness efforts to facilitate participation of northern communities in the regulatory process and maximization of their participation in the benefits from major resource development projects. CanNor contributes to assessing and analyzing the socio-economic impacts and benefits of major resource development projects to support the environmental process and community readiness planning.

For a complete description of the regulatory regime in each territory and a list of organizations responsible for Petroleum and Minerals regulation in the North please see Appendix B and Appendix C.

1.2.6 Program Resources

INAC invested approximately $89 million in the Petroleum and Minerals sub-program during the five years covered by the evaluation. The following tables provide a historic breakdown.

The program's work is not supported by any Transfer Payment Authorities.

Planning and Development of Methodology

In order to develop the Terms of Reference, a preliminary meeting was held to inform the scope of the evaluation with representatives from the Northern Land, Resources and Environment Program and the Petroleum and Minerals sub-program. Additional meetings were held with respect to the sub-program's expenditure and business planning.

An Evaluation Working Group/Advisory Group was established subsequent to the approval of the Terms of Reference. The purpose of the Working Group/Advisory Group, consisting of program management representatives from Headquarters and the regions, was to assist the Evaluation team at various stages of the evaluation process, providing feedback on a detailed Methodology Report, Preliminary Findings, and Draft Report.

2.3.1 Data Sources

The evaluation's findings and conclusions were based on the analysis and triangulation of the following lines of evidence:

• Literature Review
  
  A review of domestic and international literature was conducted to examine issues of relevance, lessons learned, and best practices. Relevance was examined in the context of key issues related to Petroleum and Minerals and Northern Land, Resources and Environmental Management program. The evaluation focused on factors related to the ongoing need for management of petroleum and minerals (demographic and socio-economic information, community benefits, economic and social impacts), and unintended and intended impacts of resource development on Northern communities. The review included four sub-topics: (1) INAC's Petroleum and Minerals program; (2) effective resource development regulatory regimes; (3) effective resource management consultation and benefit agreements; and (4) infrastructure and economic development in northern Canada.
  
  The literature review began with a systematic scan of reports, documents, and articles using key words and phrases related to the program. Key documents were identified for review and an index of documents with bibliographic information was created. The list of documents was assessed to verify that there were no gaps, ensuring the literature review did not duplicate previous research. Previous departmental evaluation or review research was included in this analysis.
  
  
• Document and file review
  
  A document and file review was conducted to find information related to the program's relevance and performance. Approximately 45 key documents and files were reviewed, including:
  • Program and policy related documentation: including Memoranda of Understanding, legislation, Canada's Northern Strategy, Speeches from the Throne, Reports on Plans and Priorities, related program evaluation and audit reports, departmental performance reports, performance management strategies and documents related to natural resource development (such as the Northern Oil Gas Annual Report and the Exploration and Mining Guide for Aboriginal Communities); and
  • Petroleum and Minerals internal documents: acts and regulations, progress and annual reports, benefits plans, maps, meeting minutes, management and business plans documents related to land and exploration, royalty administration files, and Oil and Gas revenue sharing documentation.

Documents from both the literature review and document review were analyzed against the evaluation questions, and themes and insights were identified in a findings template. Findings were triangulated with other lines of evidence.

• Data Analysis 
  
  A quantitative data analysis was also conducted for the purposes of providing a complete understanding of the performance and the impacts of the Petroleum and Minerals sub-program. This analysis focused primarily on performance, administrative, and financial data from existing INAC databases and relevant census data as well as INAC reviews, audits and evaluation data. The data covered the evaluation period from 2009-10 to 2013-2014. Findings from the technical report were triangulated with other lines of evidence.
  
  The program's 2014 Performance Measurement Strategy draws upon data from the Fraser Institute, a Canadian research institute, which studies public policy.^{Footnote 18} Specifically, the Fraser Institute conducts an annual Global Petroleum Survey and Survey of Mining Companies to measure companies' perceptions of administrative regimes for petroleum and for minerals respectively. The studies rank jurisdictions on factors such as tax conditions, royalty regimes and environmental requirements. As will be discussed in Section 4 of this report, the surveys have been used in addition to other data and lines of evidence to measure program performance.
  
  
• Key informant interviews
  
  Key informant interviews were used to gain a better understanding of the perceptions and opinions of individuals who have had a significant role in the Petroleum and Minerals sub-program, and who have a key stake in it.
  
    A list of interviewees was developed based on input from program management, the Working Group, and the Advisory Group. Interview guides were developed to address all evaluation issues and questions, and were tailored to the different interview respondent groups within each interview group and region. In doing so, the knowledge and expertise of the key informants was targeted specifically and was able to be used more effectively. Common questions were applied across the guides to strengthen the evaluation. Key informants with specific regional knowledge were also interviewed to inform the case studies.
  
  Interviews were semi-structured and interview guides were sent to the interviewees by e-mail in advance of the interview to allow for preparation. Interviews were in person when possible and by telephone when necessary. Key informants' responses where typed and analyzed individually after each interview. A key informant interview technical report analyzed key themes and insights across all interviewees. Findings from the technical report were triangulated with other lines of evidence.
  
  A total of 16 interviews were conducted with:
  • Program officials (Headquarters and regional offices)[n=8]
  • Stakeholders[n=5]
  • Experts[n=3]
    
    

• Case Studies
  
  A set of three case studies was conducted across the northern territories to examine differences in impacts across these areas. Issues related to the relevance, design and delivery, and performance of the Petroleum and Minerals sub-program were examined from a regional perspective. Additionally, the case studies provided insight into factors, which have facilitated or hindered the program at the regional level, and allowed the examination of best practices and lessons learned from front-line representatives and stakeholders.
  
  As part of the case study for Nunavut, a site visit was conducted in Iqaluit. For the case study of Northwest Territories, a site visit was conducted in Yellowknife. The case study on Yukon was conducted remotely, given that the case study was conducted for comparative reasons only and INAC's Petroleum and Minerals sub-program has limited jurisdiction there.
  
  The following methods were used to conduct the case studies:
  
  • A review of documents: This was conducted primarily in Ottawa, drawing on INAC, the territorial governments, industry and academic documents. The review was used to develop a preliminary set of key factors in each of the three territories. These documents were also used to identify issues for discussion with interview respondents.
  • Case study interviews: Interviews were conducted primarily in person, but also via telephone, in order to obtain information about the factors influencing exploration and development in the three territories. A total of 37 interviews were conducted with INAC program officials (eight), territorial government officials (18), industry associations and resource development companies (four), and other groups (seven).
  • A review of available data: The rates of exploration and development in each of the three territories were identified through analysis of Statistics Canada, INAC and other data, and formed the basis for studying the factors affecting performance.

2.3.2 Considerations, Strengths and Limitations

3.1.1 Setting the context – Northern resource potential

A large proportion of Canada's exploitable oil, gas and minerals are on frontier (government-owned) lands in northern Canada. For example, 38 percent of Canada's remaining marketable resources in conventional fields are in the North, including 35 percent of Canada's light crude.^{Footnote 19} Furthermore, it is estimated that Nunavut has 1/3 of Canada's total petroleum reserves.^{Footnote 20}

There is immense economic potential for these northern resources. In 2010, there was a reported $30 billion worth of proposed and actual oil and gas projects in the North.^{Footnote 21} The mining sector is expected to grow from $1.6 billion to $10.5 billion in the next 15 years as well.^{Footnote 22} While there is a large amount of potential for development, since 2014 commodity prices have drastically reduced exploration and development interest and activities. While commodity prices and the markets will continue to affect petroleum and minerals exploration and development, there is likely to be continued interest in northern petroleum and minerals in the future. 

3.1.2 A need for INAC's involvement

The vast majority of key informant interviewees responded that there is a need for INAC's ongoing involvement in the management of these petroleum and minerals resources, as resource development potential in the North on government land necessitates effective and sustainable management. One key informant stated that it is important to ensure companies who are awarded licenses for petroleum and minerals, for example, have their rights protected. As such, it is important to have a program in place to ensure secure title for industry. Several key informant interviewees noted as well that INAC's oversight is needed to ensure resource development occurs in an environmentally safe manner.

In addition to providing secure title for industry, INAC's involvement in issuing licenses contributes to the public good of exploration on frontier lands. The rights tenure provisions under the Canadian Petroleum Resources Act and the Canadian Oil and Gas Operations Act stem from a 1985 policy known as Canada's Energy Frontiers: A Framework for Investment and Jobs. The policy established the criterion that exploration licences are issued based on the value of exploration spending a company proposes to put forward for a given parcel of land.^{Footnote 23} One key informant suggested that the system was established in this way because incentivizing exploration of Canada lands and collecting information on their geological potential is of value to all Canadians. As such, it is logical that increased exploration activity is an immediate outcome of the Petroleum and Minerals program.

Given the economic potential described above, there is also an opportunity to leverage royalties to support government programs and to leverage opportunities for communities as well. Mining is one of Canada's most developed industries, employing 330,000 workers and making up 3.9 percent of the nation's gross domestic product in 2012.^{Footnote 24} Petroleum is also one of Canada's primary industries, employing 0.6% of the nation's labour force and representing 6.8 percent of Canada's gross domestic product in 2010.^{Footnote 25} Both sectors are significant employers in Aboriginal communities, with Aboriginal people making up five percent of Canada's oil and gas labour force from 2007 to 2012.^{Footnote 26} As of 2012, 24 advanced projects in the North had the possibility of creating $38 billion in investment, with the development of these projects leading to 8,000 fulltime jobs.^{Footnote 27} Moreover, through exploration, it is possible that the number of operating projects will expand. Resource royalties are also a large source of revenue not just for communities but for the federal, provincial and territorial governments, with $2.3 billion in royalties and taxes being paid to the provinces and territories in the 2011-12 fiscal year.^{Footnote 28}

In Nunavut, the only territory where the federal government continues to manage land, water and resources, mining is a particularly important industry for economic development. Currently, the Government of Nunavut's funding is 90 percent federal government transfers and 10 percent Nunavummiut taxes.^{Footnote 29} Royalties and taxation have the potential to change the funding structure of the Government of Nunavut, further developing its self-reliance. Nunavut's gross domestic product is expected to have the second highest growth rate in Canada, with 4.4 percent growth in 2014 and 7.8 percent in 2015.^{Footnote 30} Short term economic growth will be due to growth in Nunavut's mining sector.^{Footnote 31}

Non-Inuit people's employment rate is much higher than Inuit in Nunavut (95 percent and 46 percent respectively).^{Footnote 32} The territorial government is Nunavut's primary employer, and 88 percent of the workers in Nunavut are employed in the services sector more generally.^{Footnote 33} By 2025, it is expected that the services sector will employ the majority of workers, primarily services in the territorial government.^{Footnote 34} Growth in the mining and construction industries are anticipated to be drivers of growth in employment as well, with an expected annual growth in the labour market at a rate of 1.7 percent from 2013 to 2015 and a 1.8 percent annual employment growth rate.^{Footnote 35}

As such, several interviewees noted that INAC's involvement in petroleum and minerals is needed both to administer a royalty regime and as a facilitator to ensure the needs of both communities and industry are satisfied.

4.1.1 Program meeting Performance Measurement targets

The program's 2014 Performance Measurement Strategy lists 'number of new exploration licences' and 'committed work expenditures by petroleum companies on new exploration licences' as indicators for oil and gas under this immediate outcome, and 'percentage of total land area with titles in good standing' for minerals.

Regarding oil and gas, the target for new exploration licences to demonstrate secure title for industry is one per year. A full breakdown on number of licences issued can be seen in Table 14 in Section 4.4 on facilitating exploration, and demonstrates that the program is well above its targets in this area. There is no target identified for expenditure commitments given that this is conducted through a confidential bidding process; however, Table 4 below demonstrates that expenditures on oil and gas exploration licences has been relatively stable during the evaluation period (although they have declined slightly, perhaps due to commodity price fluctuations).^{Footnote 46}

Similarly, minerals title was found to be secure. While the percentage of overall land in good standing was unavailable, tables 5 and 6 indicate the number of claims, permits and leases that are in good standing in the Northwest Territories and Nunavut:

As can be seen, the leases in good standing in the Northwest Territories grew during the evaluation period; while it fluctuated but ultimately declined in Nunavut, this is likely due to low commodity prices, and therefore low activity levels rather than insecurity in title. In fact, there were only four disputes related to minerals title over the entire evaluation period, indicating a fair and well-managed title security process. Note that claims related to exploration are discussed separately in Section 4.4.

4.1.2 Fluctuating Industry Perceptions of Title Security

Although security of title is deemed strong as per the indicators set out in the Performance Measurement Strategy, industry has indicated that there are concerns in its security of title as managed by the Petroleum and Minerals program. Tables 7 and 8 show the results of a Fraser Institute survey of industry on perceptions of regulatory regimes for Petroleum and Minerals respectively:

In these surveys, industry representatives were asked the extent to which regulatory climates were a deterrent to investing in various jurisdictions. As can be seen, industry concerns have fluctuated regarding regulatory certainty in both territories. One should use caution interpreting these data, as they do not give a clear picture of the extent to which 'deterrent' means 'would invest' or 'would not invest.' That being said, industry and program representatives explained to evaluators which issues specifically affected their confidence in security for industry for potential improvement, which are detailed below.

4.1.3 Factors affecting security of title

In Nunavut, there were few comments with regard to security of title; most interviewees felt the regulatory process was straightforward as compared to other jurisdictions. This was mirrored in the 2012 Evaluation of the Northern Regulation, Resource and Environmental Management where industry was generally satisfied with INAC's administration of the oil and gas permit and license issuance cycle. The industry representatives consulted noted that there were modest regulatory changes in Nunavut during the evaluation period, and this meant there were brief periods of uncertainty regarding the applicability of regulations. In one instance, industry felt that changes to water licences may limit the feasibility and affordability of operations, but generally title is deemed to be secure.

In the Northwest Territories, however, other challenges were raised. Interviewees noted two specific challenges in the approvals process for mineral development:

• First, that minerals work is significantly more difficult in areas where land claims are currently unsettled given that rights to lands and resources are far less clear than in settled areas. This challenge was also noted in the Government's 2007 review of northern regulatory regimes.^{Footnote 47} The 2012 evaluation reiterates this challenge, with approximately half of the mining companies consulted experiencing difficulties due to land claim uncertainty, particularly in the Northwest Territories. The Mackenzie Valley was noted as an area of particular concern, and several key informants noted that one of INAC's roles of greatest value going forward in the Northwest Territories should be to work toward settlement of land claims.
• Second, there were some concerns expressed that a number of regulatory bodies can call for environmental assessments on the grounds of 'public concern' in cases where to do so may not be warranted. In particular, interviewees felt that in some cases, a limited number of outspoken individuals were able to trigger assessments when they were unwarranted and during a project stage where an assessment is not affordable. While this debate is beyond the scope of the evaluation, interviewees did emphasize that better access to reliable environmental data and education for all parties would be beneficial to ensure a proper balance between environmental stewardship and project feasibility. An internal review of the Beaufort Regional Environmental Assessment found that this kind of initiative serves to better prepare all stakeholders for exploration and production by reducing uncertainty over potential environmental consequences.^{Footnote 48}

Two more general comments emerged from discussion with key informant interviews and case study interviewees related to security of title for industry:

• A number of interviewees noted that despite INAC's recent efforts at clarification, consultation requirements remain unclear. Questions were raised regarding timing of consultation, whether to consult directly with communities versus representative organizations, and at what point consultation is deemed to be satisfactory. It should be noted that the 2015 Evaluation of Consultation and Accommodation also highlighted a need for clarity on consultation and accommodation issues and practices, and has recommended continued support and guidance to stakeholders on this issue.^{Footnote 49}
• Interviewees also spoke about the importance of land use planning. One interviewee noted that it is a tool that is valuable for managing the expectations of all parties and providing certainty given that it lays out intended land use. However, interviewees also cautioned that for land use planning to be effective, planners require adequate capacity and that it must be done in such a way that it does not conflict with pre-established regulations, which can unintentionally restrict development. Development of a land use plan for the territory of Nunavut is currently ongoing, and concerns have been raised that areas where mineral rights are already under disposition may be identified for conservation, thus prohibiting further development activity despite significant pre-existing investments. Interviewees stressed the importance of protecting existing mineral rights for areas already under disposition in order to ensure industry continues to feel that title is secure. As such, it is important to strike a balance between the aspirations of the land use plan and pre-existing mineral tenure.

Therefore, the program is generally providing secure title for industry. However, the discussion above provides considerations for further program improvements in this area.

4.2.1 Industry Ratings of Royalty Regimes Improving

Industry ratings of the royalty regime in the Northwest Territories have improved over the evaluation period.

As per the indicator outlined in the 2014 Performance Measurement Strategy, the Fraser Institute survey, which measures industry's perceptions of the Petroleum and Minerals fiscal regime are presented below:

• As can be seen here, the percentage of respondents who rated fiscal terms as a deterrent to investment in oil and gas is lower overall in 2013 (18 percent) and 2014 (26 percent) than in the previous years from 2010 to 2012 (ranging from 36 percent to 39 percent).
• Similarly, the percentage of respondents who rated fiscal terms as a strong deterrent to investment is lower by half in the 2012 to 2014 surveys (eight percent) than in 2010 (18 percent) and 2011 (16 percent).

In the 2014 Fraser Institute Global Petroleum Survey, industry representatives rated the Northwest Territories as 50th out of 156 jurisdictions on appropriateness of its fiscal regime, including royalties; it should be noted that the differences between the top 50 rankings are not large. The 2014 ranking represents a significant improvement over the ranking in 2010 when the Northwest Territories ranked 88th. The range of rankings over the 2010 to 2014 period are consistent with what one INAC representative described during the 2011-12 evaluation as "being in the middle of the pack, where you want to be."

Mineral royalties in the Northwest Territories and Nunavut were deemed to be fair as well. In 2008, Two Duck Resources conducted a study known as Comparative Review of the Rate of Royalty in the Canada Mining Regulation, as Relates to National and International Competitiveness for INAC and the Mining Association of Canada. While the study had been commissioned due to perceptions that the royalty regime may be overly burdensome, it found that the royalty rates for mining in the Northwest Territories and Nunavut, which reach a maximum of 13 percent, are in the middle of Canadian jurisdictions.

4.2.2 Substantial Royalty Revenue

Royalties from petroleum and minerals production in the North provide a substantial contribution to the federal treasury.

Royalty revenues provide an indication of the level of overall petroleum and minerals productivity and profitability. A total of approximately $45.0 million in royalties was received from oil and gas production on northern frontier lands from 2010-11 to 2013-14. The annual total declined somewhat over the evaluation period, from $15.2 million in 2010-11 to $8.3 million in 2013-14. The average annual amount of royalties received over this time period of $11.3 million also represents a significant reduction from the average of $24.0 million in previous five-year period from 2006 to 2010. In the longer term over the last 20 years, total royalty revenues for the federal government from mining in the North have increased substantially, from approximately $8.7 million in 1995-96 to $26.0 million in 2013-14. However, over the evaluation period, royalty revenues have declined substantially, from approximately $109.0 million in 2010-11 to $26.0 million in 2013-14. This is likely due to the reduction in oil prices over the evaluation period.

Revenues from licences experienced a large increase in 2013-14, from an average of just over $13,000 from 2010-11 to 2012-13 to almost $240,000 in 2013-14. This is an indicator of increased exploration activity and therefore the potential for an increase in royalties in future years, as can be seen in Table 10:

4.2.3 More Strategic Use of Royalties

Although the process for determining resource royalties is well defined, it is not transparent how those royalties are being used.

Interviewees indicated that the royalty regime needs to be balanced so as to ensure Canadians can access benefits from resource development and to incentivize industry. While most interviews and the data review found that royalty rates in the North were competitive because they fell in the mid-range of other Canadian and international royalty regimes, one interviewee suggested that not enough royalty revenue was being collected, and that a public review of royalty rates would be beneficial. This was supported by literature as well as several interviewees from the previous evaluation.

Key informants also expressed concern over use of royalties. Some key informants indicated that their major concern with royalties was a lack of transparency about their usage, as they indicated, it was unclear what happened to the royalties after they were collected. Additionally, it was suggested by one key informant that federal royalties could be placed in a national fund or sovereign wealth fund for specific purposes, such as pensions. Other suggestions included using royalties to support the environmental assessment process, to reinvest in green technology for resource development, and to support community readiness activities such as job training and literacy development.

4.3.1 Employment Benefits

The 2014 Performance Measurement Strategy lists 'Number of Northerners and Aboriginal people employed in operations' and 'Employment targets established in Benefits Plans are achieved' are indicators to measure performance in this area. Obtaining data was a challenge as Canada Benefits Plans are confidential and there is no clear baseline for 'Number of Northerners and Aboriginal people employed in operations.' However, the following figures for mining and oil and gas employment were found:

The employment benefits from the oil and gas industry in the North are harder to determine. A provision in the Canada Oil and Gas Operations Act requires companies to develop Canada Benefits Plans, which are intended to provide employment and economic opportunities to Canadians and Canadian businesses. While the Petroleum and Minerals sub-program is responsible for approving Canada Benefits Plans, the content of those agreements is confidential. To provide greater clarity on the requirement of a Canada Benefits Plan, INAC published a new Benefits Plan Guidelines for the North in 2013 that provides clear direction to companies about their obligations for ensuring oil and gas activities benefit northern communities.

Overall, all lines of evidence found there are clear economic benefits from petroleum and minerals development in the North. The mining industry is the largest employer of Aboriginal people in the North, with Aboriginal representation making up about half of the northern diamond mining workforce in the Northwest Territories. Jobs and training opportunities were the most common benefit cited by key informants. As an example of this potential, between 1998 and 2012, mining contributed 35 000+ person-years of employment in the Canadian north.^{Footnote 50} In 2013, the Northwest Territories and Nunavut Chamber of Mines reported that 53 percent of the northern diamond mining workforce was Aboriginal. The 2012 Evaluation of the Northern Regulation, Resource and Environmental Management also found that mining industry representatives and other stakeholders were near-unanimous in agreeing that mining activity had resulted in training and employment opportunities for Aboriginal people and other northern peoples.

4.3.2 Economic and Business Benefits

Furthermore, the mining industry is a significant purchaser of supplies and services from northern companies. As such, it makes a major contribution to the economies of the Northwest Territories and Nunavut. Between 1998 and 2012, mining contributed over $9 billion to northern business development, $4 billion of which was Aboriginal-owned.^{Footnote 51} Diamond production in Northwest Territories has contributed close to 40 percent of the territory's gross domestic product since 2004 through direct and indirect business opportunities.^{Footnote 52} The Northwest Territories and Nunavut Chamber of Mines reports that, in 2013, 66 percent of mining company expenditures ($621 million of $943 million) were with northern businesses; 26 percent of this total ($248 million) was with Aboriginal business.

The Socio-Economic Agreements of the major producing mining companies in Nunavut and the Northwest Territories also specify targets for Aboriginal and Northern employment. While these agreements are private and do not require the terms to be made public, companies often produce annual socio-economic monitoring reports that present the actual employment figures to demonstrate the extent to which they are achieving the targets in the Socio-Economic Agreements.

4.3.3 Royalty Revenue Sharing

Significant mining royalty revenue is shared with Aboriginal communities.

Royalty revenues from mining shared with Aboriginal communities in the Northwest Territories was $35.5 million in 2012 and $21.8 million in 2013. The 39 percent decrease in revenues to Aboriginal communities from 2012 to 2013 is not as large as the 54 percent decrease in total royalties by INAC over these two years.

The following table presents the approximate totals of diamond royalties shared with Aboriginal groups from 2010 to 2013.

In Nunavut, on Inuit-owned lands, 100 percent of all royalties belong to the Inuit where they hold subsurface rights. On non-Inuit-owned lands, the Inuit receive 50 percent of royalties on the first $2 000 000 received in royalties by the Government of Canada and five percent of any additional royalties received as per Article 25.1.1 of the Nunavut Land Claims Agreement. In 2011 and 2012, 100 percent of mining royalties collected were transferred to Nunavut Tunngavik Inc.

While not as large as royalty revenues from mining, royalties received from oil and gas production are a significant source of revenue for First Nations in the Northwest Territories.

The following table presents a summary of resource revenue sharing with First Nations in the Northwest Territories from 2010 to 2013, along with the percentage related to oil and gas production. Total revenues presented are for royalties from oil and gas production, mining and quarrying.

4.3.4 The Importance of Consultation

While mining companies manage financial and technical risks, the growing concept of 'social license to operate' calls on them to also consider social and environmental aspects of their projects. As such, benefits to communities is listed as an immediate outcome in the Petroleum and Minerals Performance Measurement Strategy.

Key informant interviews highlighted the importance of community consultation as a key component of maintaining this social license to operate. Furthermore, Key informant interviews and case studies found that governments and industry could do more to inform communities about the potential impacts of resource development on their communities in order to make informed decisions regarding opportunities and potential risks.

Aboriginal peoples and their traditional ways of life may be particularly vulnerable to the impacts of operations.^{Footnote 53} As is noted in the April 2015 Evaluation of Consultation and Accommodation, it is important to ensure stakeholders have support and guidance in their work to engage, consult and accommodate Aboriginal groups where appropriate as all development should engage and consult with Canada's Aboriginal peoples in a fair, timely and culturally appropriate way throughout the project life cycle.^{Footnote 54} In lands covered by comprehensive land claim agreements such as Nunavut, there is a further legal imperative to work with Aboriginal groups.

4.3.5 Community Readiness Work Required for Further Leveraging of Benefits

There appears to be a disconnect between labour market needs and skills development in the North, preventing communities from fully leveraging the possible benefits of resource development. Greater education and training efforts could help ensure more northern workers are available for hire.

The 2012 Evaluation of the Northern Regulation, Resource and Environmental Management confirmed that there was a substantial benefit for some communities in the North, with significant potential for future benefit; however, it also indicated that benefits from development did not reach all communities and often communities close to small projects did not gain as much. There are challenges at a local level to fully leverage benefits given labour market conditions and limitations in community readiness.

The workforce capacity of the mining industry internationally and in Canada has become a barrier to petroleum and minerals development. The Canadian mining industry is expected to need an additional 120,000 workers by 2024 due to a need to replace aging workers,^{Footnote 55} creating an opportunity for greater inclusion of northern peoples. Furthermore, the hiring of local northern workers in resource development projects in Nunavut is legislated by the Nunavut Land Claim Agreement through the requirement for industries to create Inuit Impact Benefit Agreements for all Major Development Projects.^{Footnote 56} However, difficulties remain in hiring local labour due to low educational attainment in northern communities. While skills development opportunities exist for communities in close proximity to larger advanced mining projects,^{Footnote 57} it may be more difficult for newer projects and smaller companies to offer these opportunities.

Case study and key informant interview indicated that communities are unable to fully leverage the benefits of resource development due to a mismatch in labour market needs and the education and training available. The deficit in education and skills required to take advantage of employment and other business opportunities related to mining is a barrier to communities fully accessing the benefits of resource development.^{Footnote 58} Interviewees suggested that efforts should be made to support community readiness in order to address this misalignment.

It should be noted that the Beaufort Regional Environmental Assessment had a stated mandate to examine community readiness, impacts and benefits, and was found to contribute positively to knowledge on these subjects. As such, it is a best practice example of coordinated work to support community readiness for the purposes of leveraging benefits from resource development.^{Footnote 59}

Finally, the Northwest Territories Mine Training Society was noted as a best practice for leveraging benefits for communities. This organization is discussed further in Section 6.2.

4.4.1 Program Meeting Some Performance Targets

According to the sub-program's 2014 Performance Measurement Strategy, the indicators that demonstrate increased exploration activity are "increase in areas of new permits and claims to prospect, prospecting permits and claims" for minerals and "increase in number of licences issued" for oil and gas.

Data reviewed indicate that during the evaluation period, petroleum exploration remained relatively stable. Table 14 shows the available data on the number of new licences issued during the evaluation period as well as the associated value of work to be spent on exploration, and Table 15 shows the total licence types for oil and gas over the evaluation period:

As can be seen, a number of new oil and gas exploration projects were initiated during the evaluation period, though only in the Northwest Territories.

On the minerals side of the program, exploration declined. As per the Performance Measurement Strategy, Table 16 shows the area of claims recorded and area of prospecting permits issued in the Northwest Territories and Nunavut respectively:

As can be seen from Table 16, the decline in claims recorded per year in the Northwest Territories over the evaluation period is significant, having decreased by nearly 71 percent; the number of prospecting permits issued dropped to zero for 2013-14.

4.4.2 Challenges with Performance Data

Despite the use of these indicators in the Performance Measurement Strategy, key informant interviews and interviewees from the Northwest Territories case study noted that external factors are far more influential than actions program staff could take to facilitate exploration. Specifically, exploration only occurs in significant quantity when commodity prices incentivize it, and mineral prices declined during the evaluation period. Similarly, a lack of available infrastructure and generally high costs of operation in remote, northern environments were both cited as barriers to facilitating exploration by interviewees. Infrastructure was also cited as an explanation for low exploration activity in Nunavut in a 2007 report assessing the territory's readiness for devolution, noting that Nunavut's resources are considered 'stranded.'^{Footnote 61}

It is important to note that although the program is meeting its oil and gas exploration targets from a technical standpoint, oil and gas exploration is not occurring currently in Nunavut. Interviewees noted that a lack of infrastructure that facilitates exploration results in little incentive to explore for oil and gas given that profitability is questionable. Interviewees also noted that Nunavut has undergone an assessment of oil and gas readiness and the Government of Nunavut is currently leading a process to examine what steps need to occur before Nunavut is fully ready for oil and gas exploration and development.

Key informant interviews and case studies suggested several ways the program can further incentivize exploration by industry despite the nature of this performance measure as being primarily influenced by external factors.

4.4.3 Geoscience: A best practice for incentivizing exploration

Given the importance of scientific data on geological potential to all stakeholders, the document review, key informant interviews, and all case studies indicated that further investment in geoscience is a means of facilitating exploration. This was mirrored in the 2012 evaluation, where there was a consensus from industry that INAC needs to invest more in geoscience to realize the resource potential of the North. One of the goals of geosciences in this context is to give an indication of where there is resource potential, and therefore, where companies have a reasonable chance of finding significant discoveries. As such, in light of other factors that deter exploration (a lack of infrastructure, commodity prices, etc.) interviewees indicate that information on geological potential can help incentivize further exploration. One key informant noted that the Place-Fairway analysis, a comprehensive study into petroleum potential in the Nova Scotian offshore, was a best practice as it provided a significant amount of information on what resources may be available and in which parcels. Posting this information on the Nova Scotia offshore board's website in a user-friendly format was valuable as it enticed industry in the area.

However, interviewees also noted that there is not enough funding for all of the geoscience research that is needed. For example, the jointly-funded Canada-Nunavut geosciences office budget has been fixed since 1999, and at current budget levels one interviewee estimated that it would take 100 years to adequately map Nunavut's geological potential. Another interviewee noted that there are numerous sources of funds for sciences in the North, but that they are uncoordinated and leave gaps. For example, the interviewee suggested that the Canadian High Arctic Research Station program is set to focus on the effects of climate when it could be used for further geosciences work. Coordinating research needs among stakeholders is an area where interviewees suggested INAC could play a stronger role. This is corroborated by the 2012 Evaluation of the Northern Regulation, Resources and Environmental Management Programs.^{Footnote 62}

4.4.4 Further Incentivizing Exploration

4.5.1 Economic Factors

Commodity prices have a heavy influence over whether industry is incentivized to undertake exploration and development.

Commodity prices were identified by interviewees as being very influential over the engagement of industry in resource development in the North. The program's performance in encouraging exploration, granting licenses, and collecting royalties depends on the strength of the economy yet is an area where the program cannot exert control. A scan of media from 2015 demonstrates how low oil and mineral prices impact development, with the low oil prices experienced this year reducing exploration in areas of the Northwest Territories. However, low oil prices meant that costs of fuel were also reduced,^{Footnote 72} demonstrating that commodity prices can have a variety of impacts on resource development.  

A lack of infrastructure is a significant barrier to northern resource development and was identified as an area where the federal government could play a greater role.

The literature review, key informant interviews, and case studies found that a lack of infrastructure in the North, particularly in Nunavut, is a barrier to resource development. This finding supports those of the 2012 Evaluation of Northern Regulation, Resources and Environmental Management Programs, which also found that insufficient infrastructure could discourage industry from investing in the North due to the high cost associated with developing that infrastructure.^{Footnote 73} Compared to other resource development operations globally and within Canada, the costs to develop resources in the North are much higher due to the remoteness of sites, harsh weather conditions, cold climate, slow broadband service, lack of transportation infrastructure, and lack of energy infrastructure.^{Footnote 74} These higher costs may negatively impact the economic viability of northern resource projects under certain market conditions. For example, the Mining Association of Canada estimates that the costs for northern mine development include particularly high capital costs that are twice as expensive for gold mines, 2.5 times higher for base metal mines, and 15-20 percent higher for diamond mines. At the same time, operating costs are 30-60 percent higher.

Specifically, transportation infrastructure is one of the primary inhibitors of mining development in the North.^{Footnote 75} The lack of roads to connect communities forces companies to rely on air and marine travel to reach their mine sites, which impacts the cost of transporting staff and materials needed for operation and construction.^{Footnote 76} Companies operating in the North adopt large upfront capital expenditures to build all-weather access roads, airstrips and ports, in addition to other infrastructure costs such as flying staff and material to the sites.^{Footnote 77} Furthermore, energy infrastructure is also a major constraint on resource development in the North. Remote northern communities may be dependent on fossil fuel for their electricity. This is the case in Nunavut where the Qulliq Energy Corporation lacks local energy resources and the capacity to transmit regional electricity.^{Footnote 78} Consequently, there are independent diesel fueled electricity generators and distribution systems in each community and no back-up if they fail to work. Energy costs for mining companies in the North account for over a third of their operating costs, due to their reliance on diesel generators.^{Footnote 79}

In addition to costs associated with inadequate transportation and energy infrastructure, companies must bear the costs of heating, specialized design and construction, navigation of sea ice, and lower efficiency of construction and operations due to the remoteness of sites and cold, harsh climate.^{Footnote 80} Industry also needs to be able to operate independently for at least a year at a time, due to short shipping seasons and a lack of local suppliers in more remote areas of the North.^{Footnote 81} The remoteness of sites adds an additional cost due to the two-week-on, two-week-off staffing system, which requires them to fly staff to the site and home again.^{Footnote 82}

Costs are not only borne by the companies, but also by communities who may not have the municipal infrastructure or social services to accommodate new residents. An influx of new residents could cause a strain on community services and infrastructure such as waste and sewage removal, which needs to be transported by trucks from individual homes and shipped to an external sewage plant.^{Footnote 83} Due to the limited capacity of community services and infrastructure, municipalities may be unable to support a transient resource development population.

Legacy infrastructure, such as hospitals or residences, was highlighted by case study participants as a direct benefit to communities from resource development, suggesting that legacy infrastructure could be used to meet municipal infrastructure needs. Interviewees indicated that the federal government could play a role in funding strategic infrastructure to further incentivize exploration. The federal government has a number of opportunities for territorial and local governments to access funding to support the development of adequate infrastructure across Canada, such as the New Building Canada Fund and the Gas Tax Fund, which provide annual funding over a 10-year period to support territorial and local government priorities. Additionally, the National Infrastructure Component of the New Building Canada Plan and the Public Private Partnerships Canada Fund provide funding for nationally significant projects and to support the use of public private partnerships. 

Tax incentives currently in place are deemed to make the North a competitive jurisdiction for mining to offset barriers such as climate, remoteness and lack of infrastructure.

The Yukon, Northwest Territories and Nunavut account for approximately 40 percent of Canada's land mass, yet with only 0.3 percent of the population residing across the three territories taxes are unable to support the demand for better infrastructure. In Nunavut, 90 percent of the Government's budget comes from federal government funding and the remaining 10 percent is sourced from local taxation.^{Footnote 84} Following personal income taxes and payroll taxes, corporate income tax is the third largest tax source for the Government of Nunavut and the revenue from corporate tax rates is expected to grow in the long term as more resource development projects are established.^{Footnote 85} The evaluation found that current tax incentives for industry encourage development and make the North competitive, generating federal and territorial tax revenue. Royalties and taxes in parts of the Northwest Territories and Nunavut under the Northwest Territories and Nunavut Mining Regulations were in the mid-range of royalty and tax rates in a comparison between 10 mining jurisdictions in eight countries,^{Footnote 86} making them competitive internationally. The taxation regime in the Northwest Territories and Nunavut was found to not be a deterrent to investors during the evaluation period.

4.5.2 Social Factors

Addressing community concerns is necessary to ensure projects advance properly. This includes, at a minimum, ensuring proper consultation procedures are followed and that environmental concerns are addressed in project planning.

The traditional lifestyles and cultures of northern people are intimately connected to the land, and conserving the environment required to support these cultures and lifestyles is important for enabling communities to leverage benefits from resource development and to garner community support for projects. Community opinions and concerns regarding resource development are helpful in determining areas where shared action and collaboration can take place. At the same time, community concerns may create challenges to resource development when the communities are hesitant to support development projects because of the legacy of abandoned mines or if they feel it not feel it will benefit them.^{Footnote 87}

Communities are also sometimes concerned about the motives of regulators, and whether terms and conditions placed on companies by environmental assessment processes will be enforced.^{Footnote 88} This concern is due in part to the fact that federal regulators are not locally based and conduct regulations from Ottawa.^{Footnote 89} Additional concerns are related to the negative health impacts associated with extracting petroleum and minerals. Concerns about the health impacts of certain minerals, such as uranium, are exacerbated by the difficulty in translating explanations of technical extraction processes to people who are not familiar with the technical terms or who speak a language where those terms and concepts are not easily translated.^{Footnote 90} Improved communication was indicated by northern Aboriginal peoples interviewed in the 2012 evaluation as an area of improvement for industry and government, as they felt that if their communities had known in advance that resource development projects were going to become operational they could have more easily leveraged benefits from those activities.

Case study interviews noted that while consultation is crucial to ensuring project advancement, it is important to understand that Aboriginal groups and representative organizations may suffer from consultation and engagement fatigue. The 2012 evaluation suggests that this may in part be because northern communities had found that the quality of engagement varied across industry, with some companies engaging in informative and genuinely collaborative consultations and others seeming to just be covering off a responsibility. During the previous evaluation industry representatives commented that there was some uncertainty about the respective responsibilities of the Government and industry for community engagement. Additionally, it must be acknowledged that there is no singular voice for Aboriginal groups, indicating that there is value in consultations including a variety of Aboriginal stakeholder groups in order to fully understand the context of development.

4.5.3 Environmental Factors

5.1.1 Deficit Reduction and Recruitment and Retention Challenges

Deficit Reduction has exacerbated Human Resources-related issues by creating capacity gaps and reducing the ability for northern staff to foster crucial face-to-face relationships.

A common theme to emerge from case studies was the importance of personal relationships for facilitating petroleum and minerals work in the North. A number of interviewees stated that in the northern context, face-to-face relationships are key to developing rapport and to conducting business efficiently, particularly as the number of stakeholders involved can make the process confusing and because stakeholders can be as diverse as Aboriginal groups, industry, and various territorial and federal departments. One interviewee explained that while it may seem far more costly in the short term to pay for travel that facilitates these relationships, through face-to-face contact stakeholders learn how to deal with one another more effectively, thus saving time and energy in the long run.

As such, a number of interviewees expressed concern about the new travel directive that was implemented as a cost-saving measure in the Deficit Reduction Action Plan. The Treasury Board Travel Directive was updated during the evaluation period and places limits on the cost of travel and the number of employees who can travel, particularly for conferences. Several representatives spoke of the importance of attending conferences, noting that the Travel Directive is a barrier. By attending the Roundup and Prospectors' and Developers' Association Conference, for example, INAC staff can answer a number of questions at once and in detail about minerals development, the regulatory process and the stakeholders involved. Industry has the opportunity to ask questions on important files, and generally relationships are built for the purposes of petroleum and minerals development. As such, the Travel Directive has had a negative impact on the program's ability to conduct its work in an efficient manner.

In addition to restrictions on travel, interviewees at headquarters and in both Nunavut and the Northwest Territories stated that there is a lack of staff and expertise in the areas of policy, environmental assessment, operational minerals work and allowable expenditures and royalty assessment. At Headquarters, this was generally in the context of staffing reductions as a result of the Deficit Reduction Action Plan. In the Northwest Territories, it was noted that employees with science backgrounds are in heavy demand in the petroleum and minerals industries, and so in some cases recruiting new staff is difficult. In Nunavut, it was noted that the cost of living in Iqaluit and difficulties such as obtaining health care in the territory results in high turnover. In a context where face-to-face relationships are crucial to conducting work, this compounds program challenges.

5.1.2 Information Technology and Information Management

Improving information technology and information management were stressed as a means of maintaining program efficiency, particularly in light of the recently reduced staff and travel abilities discussed above.

Generally, program staff were of the opinion that they are collecting the information they need. However, one key informant noted that it is often challenging to get the information they do have online, as there are language and privacy restrictions. Corroborating what others said about the importance of geoscience, this key informant stated that putting more of the program's information online for the public would be beneficial, but that there are privacy restrictions and translation costs that make doing so unfeasible.

Interviewees suggested practical changes are required to INAC's Information Technology to make the program operate more efficiently. Interviewees noted that while from a policy standpoint Lands, Water and Field Operations may seem completely separate, in practice on the ground in the territory the regulatory community needs to work very closely together and share information. In Nunavut, there are currently separate databases for lands, water and field operations, when in reality they are often working on the same parcel of land; lands, water or field officers may require important information from each other's databases to which they do not have access. In addition to integrating Water and Fields Operations information into the Lands database (known as LIMS), specific improvements that could be made include a reminder function to let clients know about required compliance work, as well as a risk assessment tool, which would help to reduce the Crown's liability.

Furthermore, the mining recorder's database for Nunavut is currently housed at Headquarters and the LIMS is housed in Yellowknife. In some cases, information has to be uploaded by satellite and as this method is slow, it can cause delays in work on time-sensitive files.

As such, there is an opportunity to examine the program's information technology systems. While improvements could be costly upfront, interviewees suggest they could save money in the medium- and long-term future by avoiding delays or potential errors that enhance the Crown's liability.

Interviewees in Nunavut stated that they feel it is their duty to provide a well-organized database for the purposes of information management to a resource management group within a future Government of Nunavut where resource responsibilities have been developed. As such, they envisioned the possibility of INAC preparing a comprehensive 'Nunavut Resources Database' to organize the growing body of land, environmental management and resource claim information in the territory for maximum utility.

Nunavut

The Nunavut Impact Review Board is the primary institution responsible for screening and reviewing projects, as well as conducting environmental assessments and monitoring project activities. Consequently the workload is heavy and constantly increasing, placing great strain on the limited capacity of the Nunavut Impact Review Board.^{Footnote 96} Public regulatory boards were indicated in the 2012 evaluation to be short-staffed and INAC regional staff members also found keeping up with existing demands to be a challenge, as they have resources substantially below what is available in the Northwest Territories, despite considerable exploration activity.

Interviewees for this evaluation generally noted that having one single land claim makes the regulatory process simpler.

Several specific comments were made about Northern regulatory reforms in Nunavut:

• Several interviewees stated that the Nunavut Planning and Projects Assessment Act is intended to simplify the regulatory process. Among other components of the legislation, part 5 of the Act clarifies the roles and responsibilities of public government institutions in major projects and planning.^{Footnote 97} However, interviewees also expressed caution about the legislation, noting that post-implementation, industry has had concerns about the extent to which it functions as intended.
• There are some challenges with licensing, permits and regulations. Specifically: coal legislation is out of date; new interpretations of water license rules have placed prohibitive restrictions on water use for companies; and concern was expressed that the Nunavut Planning Commission lacks clarity on its permit approval processes.
• New monetary penalty enforcement legislation has recently been established that will allow the Government to charge fines when proponents do not follow environmental requirements, which is anticipated to protect the environment and decrease future liability to the Crown.
• Online map-staking and an increase in the duration of permits are both anticipated to be valuable changes as they will provide easier access to exploration for industry.

Northwest Territories

Interviewees noted that improvements to legislation during the evaluation period, such as The Surface Rights Act and the Navigable Waters Act, have been positive. They felt that changes will help with compliance and certainty, and that current steps to establish timeframes for project proposal review are beneficial. However, interviewees also noted that some changes, such as those made to the Mackenzie Valley Resource Management Act, were made so close to devolution that their implementation was challenging.

Interviewees stated that the following work can be done to make the regulatory regime simpler:

• Establishing stronger timelines on project approvals and more robust regulatory boards.
• Ensuring environmental review is consistent with level of impact (this requires looking as the issue of 'public concern.').
• Ensuring INAC appoints board members within reasonable timeframes.
• Giving the Government of the Northwest Territories full authority over the land and water boards to make more effective regulatory reforms.

During the evaluation period, the Beaufort Regional Environmental Assessment facilitated research into environmental baseline data so as to study potential environmental impacts of resource development in the Beaufort Sea. This was done with the expectation that it would contribute to more informed and efficient regulatory decisions.^{Footnote 98}While the review was only recently completed and no new regulatory decisions have been made over the area, study of the Beaufort Regional Environmental Assessment website indicates that reports are already being used for purposes such as the Tanker Safety Expert Panel, and the National Energy Board and Environmental Impact Review Board have both expressed interest in using the research.^{Footnote 99}

Finally, it was noted that simplifying the regulatory regime will contribute to certainty, thus making investment in Northwest Territories more stable and smoothing boom and bust cycles.

Land and Water

Resource development can lead to the degradation of water and soil quality, degradation of the permafrost, and disruption of landform and vegetation.^{Footnote 106} A variety of mitigation measures have been standardized to reduce impacts of resource development on the environment, including increasing the distance of resource development activities from water and vulnerable environments, ensuring capacity and resources are available to manage waste appropriately and reduce risk of contamination, and establishing emergency plans.^{Footnote 107} Yet, due to the remoteness of these sites and the hostility of the Arctic environment there are still challenges to ensuring protection of land and water resources.

Wildlife and Caribou

Northern Canada is home to a diversity of wildlife including caribou, polar bears, a range of whale and seal species, walrus, migratory birds, waterfowl, large fish population, muskox, wolves, wolverines, grizzly bears, arctic foxes, and other small mammals.^{Footnote 108} The ecosystems these animals inhabit are often adversely impacted by resource development. Whales can be impacted by expanding shipping routes,^{Footnote 109} migratory paths can be disrupted by roads, areas of reproduction can be disturbed, habitat can be encroached upon by sites, behaviours can be changed due to sensory disturbance caused by new sounds and smells, and large mammals who would typically avoid resource development sites are sometimes drawn in by garbage.^{Footnote 110}

Caribou are particularly important for northern cultures, as they are not only a source of food, clothing, and handicrafts but are also spiritually connected to those communities and the identity of harvesters.^{Footnote 111} Herds of caribou have large ranges, spanning many kilometres, territories and provinces, leaving them particularly vulnerable to migratory pattern disruption due to roads and sites.^{Footnote 112} Caribou management takes place at both a regional and project level, through aerial surveys, and the establishment of speed limits and road closures during migration.^{Footnote 113}

Implementation of the Nunavut Land Claim Agreement through the Nunavut Planning Commission, Nunavut Impact Review Board, Nunavut Water Board, and the Nunavut General Monitoring Program, is intended to promote and protect Inuit interests in resource development, which include protections for wildlife.^{Footnote 114} Nunavut's Draft Land Use Plan designates land as protected areas, special management areas, and mixed use areas to limit disturbances to rich ecosystems, but the boundaries created by this system are artificial and cannot be communicated to the wildlife that move between the designated areas.^{Footnote 115} The inclusion of Inuit Qauajimajatuqangit and traditional knowledge into monitoring and training for personnel, the impact assessment processes, and in the identification of priorities for protection and development has been suggested as a way of further reducing the negative repercussions of resource development in these vulnerable environments.^{Footnote 116} The 2012 Evaluation of the Northern Regulation, Resources and Environmental Management Programs reflected this suggestion, as Aboriginal groups felt there needed to be more done to incorporate Traditional Knowledge into development decisions.

In light of these unintended impacts, INAC's work on environmental and socio-economic baseline data should be encouraged.

INAC is a key partner and financial contributor in several valuable environmental and socio-economic research initiatives that can help to mitigate the unintended impacts discussed above.

Beaufort Regional Environmental Assessment

Beaufort Regional Environmental Assessment supported research on recurring issues with project specific regulatory applications. The issues include cumulative effects assessment and monitoring, information management, regional waste management, oil spill preparedness and response, socio-economic indicators, and climate change.

A total of $21.8 million was invested in Beaufort Regional Environmental Assessment from 2011 to 2015, an average of $4.36 million per year over this time period.

Environmental Studies Research Fund

The Environmental Studies Research Fund is established under a provision of the Canada Petroleum Resources Act. The Environmental Studies Research Fund finances environmental and social studies related to the exploration, development and production of oil and gas resources on frontier lands. The Environmental Studies Research Fund is funded through levies applied to oil and gas lands held by companies under license.

The number of new Environmental Studies Research Fund research projects in the North, and the amount of funding, which the Minister approved based on recommendations of the Environmental Studies Research Fund Management Board are as follows.

The Environmental Studies Research Fund levies collected from companies operating in the North (including levies and back levies collected):

• 2014 – $112,094
• 2013 - $3,224,121
• 2012 - $977,543
• 2011 - $895,053
• 2010 - $1,389,012

(Source: The Environmental Studies Research Fund Annual Reports)

Other research

The Petroleum and Minerals Resources Management Directorate contributes to setting the direction of federally‐funded science research for frontier oil and gas activities by representing INAC on the Frontier Oil and Gas Portfolio Committee that includes Natural Resources Canada and other federal departments and agencies.

The Petroleum and Minerals Resources Management Directorate also works in partnership with the private sector, academia, Aboriginal communities and other federal government departments to initiate scientific research needed to support northern resources management and regulatory decision making. For example, the Branch participated in a Joint Industry Project to compile data on ice characteristics to improve knowledge of engineering needs and requirements in Beaufort Sea oil and gas operations.

Petroleum and Environmental Management Tool

INAC introduced the Petroleum and Environmental Management Tool in 2009 to support its consultations leading up to the Call for Nominations. The Petroleum and Environmental Management Tool is an online, interactive geographic information system based on inputs from expert sources. Petroleum and Environmental Management Tool generates maps on environmental and socio‐economic sensitivity for a selection of valued ecosystem components and maps summarizing geological potential. The Petroleum and Environmental Management Tool was introduced first for the southern Beaufort Sea. The larger pan-Arctic roll-out occurred in 2011.

The objectives of the Petroleum and Environmental Management Tool are to improve rights issuance planning and decision making, to foster information exchange with northern Aboriginal groups and other stakeholders, and to alert companies considering acquiring Exploration Licences of potential sensitivities which may require special mitigation efforts. Mapped environmental themes currently include polar bears, bowhead whales, beluga whales, migratory birds, ringed seals and Peary caribou. Socio‐economic sensitivity is developed from traditional hunting information. These maps have been further refined and developed in consultation with resource management partners.

Environmental Protection

A number of federal acts are also used for environmental protection in Nunavut, such as: Territorial Lands Act, Nunavut Surface Rights Tribunal and Nunavut Waters Act, Navigable Waters Protection Act, Transportation of Dangerous Goods Act, Explosives Act, Fisheries Act, Species at Risk Act, and Migratory Birds Convention Act.^{Footnote 117} However, evidence suggests that the federal government requires a stronger presence in Nunavut for proper implementation of these acts. Interviewees and document review suggest there are issues of enforcement which could lead both to a lack of environmental compliance and to inefficiencies in regulatory processes.^{Footnote 118} Additionally, it was noted that small and new resource development companies find it difficult to meet environmental regulation requirements due to their own limited capacity, which can lead to sites being abandoned and becoming contaminated.^{Footnote 119} As such it is important to monitor these challenges going forward.

It is important that INAC always ensure a balanced approach to its multiple roles of encouraging resource development and maintaining environmental stewardship.

Industry has come under increasing public scrutiny over environmental and social practices, with greater pressure from environmental and regulatory policies to approach resource development sustainably.^{Footnote 120} The balance between environmental stewardship, traditional harvesting, and economic development in the North is delicate due to the intimate relationship northern communities have with the environment. Resource development in the North has been linked with positive benefits, such as infrastructure growth and business opportunities. However, as discussed above, there are impacts on the environment and on the traditional values of communities whose culture, spirituality and livelihood depend on that environment. Interviewees indicated that INAC's role in promoting resource development should be reassessed, as they are also responsible for the wellbeing of Aboriginal peoples and environmental safety. One interviewee indicated that priorities should be questioned, as they suggested economic development was often given higher priority over the well-being of Northerners and Aboriginal peoples and ecosystem health. Other interviewees indicated that the Department's roles as both promoter and protector are often contradictory and that the Department may need to reassess who the beneficiaries of the program should be. This finding was echoed in the 2012 Evaluation of the Northern Regulation, Resources and Environmental Management Programs, which found INAC was seen as both the land owner and the developer in the North, which created confusion in terms of roles and responsibilities.

Relevance

The evaluation has found that there is a need for government involvement generally speaking if resources are to be developed in the Canadian North. This is important for the purposes of securing title for industry, facilitating exploration, and leveraging royalties and benefits for communities. The evaluation has confirmed that INAC is legislated to carry out these duties, and that ensuring this is done effectively and efficiently is a stated government priority.

However, it is also clear that INAC's role is changing as a result of Devolution in the Northwest Territories and the growing involvement of partners such as CanNor. INAC currently has a variety of roles beyond its core duties outlined above, and given this changing environment there is an opportunity to clarify roles and responsibilities with partners going forward.

Recommendation: It is recommended that the Northern Affairs Organization clarify and communicate their role in the context of petroleum and minerals development.

Performance

The sub-program is generally meeting its performance targets in each of these core activities. However, these targets are strongly influenced by external factors such as commodity prices and availability of infrastructure. Given that these factors are beyond the program's control, any additional efforts the program can undertake to compensate should be encouraged. As such, effective coordination and dissemination of geoscience research was stressed throughout the evaluation as a means of continuing to facilitate exploration in the current high-cost and low commodity price environment.

Recommendation: It is recommended that INAC continue to work with partners to support geoscience research, while maximizing the value of other northern scientific research through coordination and dissemination.

Evaluators found few concerns regarding the royalty regime, which is long-standing and accepted by industry. However, several sources did suggest an opportunity for more strategic use of royalties and as the program considers ongoing improvements the options outlined in the evaluation should be considered.

The evaluation also revealed that the sub-program provides the opportunity for substantial benefits to communities in terms of employment, business opportunities, and legacy infrastructure, among others. However, there is concern that communities are not able to fully leverage the potential of these benefits due to factors such as a lack of training or literacy. As such, coordinating use of capacity-building resources with CanNor is recommended in order to continue working toward the Strategic Outcome of self-reliance, prosperity and well-being for the people and communities of the North.

Recommendation: It is recommended that Northern Affairs Organization clarify roles between CanNor and INAC to further engage capacity development partners, ensuring a coordinated approach to leveraging opportunities.

Efficiency and Economy

Significant changes were made during the period under evaluation to the structure of the Petroleum and Minerals sub-program; for example, a number of northern regulatory reforms have been made. While these reforms are intended to enhance efficiency, it will be important to monitor their effectiveness from the standpoint of all stakeholders going forward.

Furthermore, Deficit Reduction made staffing an issue and restricted the face-to-face relationship-building that is necessary for northern work. Given this reality going forward, it is important to ensure the sub-program has the means necessary to properly manage its information. As such, program staff should take the opportunity to re-examine current Information Technology and information management practices to ensure they have the most effective tools for managing information and relationships at a distance.

Recommendation: It is recommended that Northern Affairs Organization consider options for integrated information management and decision making regarding land, environmental management and resource claims.

Devolution in the Northwest Territories was viewed as a positive step for facilitating petroleum and minerals work in the territory, given that it draws local knowledge into the decision-making process. However, it was stressed during the evaluation that capacity-building work in the Government of Northwest Territories is ongoing and that significant work must still be done to modify legislation, regulations and staffing to ensure this work is conducted effectively and efficiently. On a similar note, several interviewees stated that in conducting their daily work on petroleum and minerals in Nunavut they must be cognisant of the preparations required for eventually transferring this portfolio to the Government of Nunavut.

Other Evaluation Issues

Finally, the evaluation has outlined a number of unintended impacts that can occur as a result of resource development. While these impacts are outside of the program's control, it is important to understand them and ensure all possible precautions are taken. As such, best practices such as INAC's funding of environmental research, organizations like the Mine Training Society that help communities to leverage benefits, and continued clarification of consultation requirements, can help to smooth these impacts going forward.

Notwithstanding the challenges outlined above, the Petroleum and Minerals sub-program facilitates significant opportunities. Given the challenge of INAC's multiple mandates of resource development, environmental stewardship and well-being for communities, it is crucial that INAC continually work toward the themes outlined in this evaluation: clear roles and responsibilities amongst partners; thorough information-sharing for all parties; a regulatory system that works for all involved; and a sub-program that provides for the needs of all stakeholders.