Commentary – Private property rights needed on First Nations land: Fraser Institute

The following is an edited summary from the Fraser Institute’s report: Divergent Mineral Rights Regimes: A Natural Experiment in Canada and the United States Yields Lessons by John Dobra. To read the full report visit www.fraserinstitute.org.

The current state of mineral law and policies related to mining non-fuel minerals, and public attitudes towards mining are substantially different in Canada and the U.S. Yet from a historical perspective, these two countries started out with the same laws respecting mining and mineral rights. The obvious questions are: How did the systems diverge?  Why? And what are the implications? The key observations are that U.S. mineral law and policies have been developed in a much less ordered process than those in Canada. In the U.S., this process has yielded some useful adaptations of basic British common law such as mineral ownership in fee-simple title. The Canadian approach to policy, however, produces more intergovernmental collaboration and decentralization on matters such as environmental regulation.

After reviewing the literature, we found two key differences between the two mineral rights systems. The first is that in Canada, minerals are reserved by the provinces, while in the U.S. minerals are either associated with surface ownership (primarily in the eastern U.S.) or reserved by the federal government (primarily in the western U.S.). The second is that in Canada, mineral rights are retained by the Crown or the provinces while in the U.S. mineral rights are privately owned.

These fundamental differences in property rights yield differences in regulatory and tax regimes that are predictable based on legal and economic theories, and are tested using results from the Fraser Institute Annual Mining Survey. We examined differences between the U.S. and Canada on five policy parameters from the Fraser Institute 2012 Mining Survey that touch on critical differences in mineral rights regimes in Canada and the U.S. These factors are:

• Uncertainty over disputed land claims

• Uncertainty over protected areas

• Uncertainty over environmental regulations

• Regulatory duplication and inconsistencies

• U.S. and Canadian mining tax regimes

From differences between Canada and the U.S. regarding how miners perceive the systems to differ on these parameters, we derived the following policy recommendations:

Recommendations for Canadian mining policy

1. The biggest difference between the U.S. and Canadian systems is the presence of strong private property rights in the U.S., and Canada’s Crown-based ownership of mineral rights. This poses particular challenges for developing mining opportunities in First Nations jurisdictions, which could be overcome if provincial governments and First Nations explored avenues to create, strengthen or emulate private property-right regimes on First Nations’ lands.

2. Unless Canada’s leasing system is reformed, it is likely become a greater deterrent to mining investment.

3. Regulators and policy-makers should strive to reduce uncertainty regarding environmental regulations, as they are still seen as potential impediments to mining investment.

4. Regulators should work to reduce uncertainties and duplication over the promulgation and enforcement of mining regulations.

5. Uncertainty pertaining to land rights in Canada is seen as a deterrent to investment by nearly 50% of respondents.

Recommendations for U.S. mining policy

1. Uncertainties in the regulatory regime are declining in the U.S. Policy-makers should work to reduce uncertainty over the promulgation and enforcement of mining regulations.

2. The regulatory regimes affecting mining created by the EPA and BLM should create a Board or Commission framework with members or commissioners appointed for staggered terms of service. This would lend stability to policy by encouraging competing interests to reach accommodation rather than seeking to impose policy and regulation through diktat.

3. Respondents to the Fraser Institute’s mining survey perceive the U.S. tax regime to be less hospitable to investment than Canada’s. Policy-makers should consider measures to harmonize the tax treatment of mining in the U.S. with the tax regime in Canada.