Commmentary: First Nations poised to emerge as leaders in Ring of Fire development

In July, on the day after the Ontario Court handed a victory to Cliffs Natural Resources  against KWG Resources regarding a potential road into the Ring of Fire, Cliffs’ legal representative flew to Marten Falls, an aboriginal community in the Ring of Fire region to explain the implications of the decision to the chiefs at their annual general meeting.

After his presentation, Cliffs’ representative fielded his first question from one of the chiefs: “How can two mining companies fight in a Toronto court over land that is simply not theirs?” With that simple question, the chief underscored the challenges as to who can lead the development of a transportation corridor into the isolated but mineral-rich region.

Also that month, another potential challenge arose with the Supreme Court of Canada’s Tsilhqot’in Nation decision. It’s the first time that aboriginal title has been granted in Canada, and it could have implications for resource development in Ontario. So, what’s changed with respect to the Ring of Fire since Canada’s highest court handed down a major victory for aboriginal communities in the form of the Tsilhqot’in ruling?

Having spent the last month in the boardrooms of aboriginal organizations, project proponents and various Ontario ministries, it is fair to say that everything and nothing has changed. Ministries are currently at a standstill, reviewing aboriginal policies in light of the Tsilhqot’in decision. Proponents have now obtained their legal opinions on Tsilhqot’in implications and were likely told not to worry — the Ring of Fire is covered by Treaty 9.

However, in one of the aboriginal boardrooms, everything has changed. There is one aboriginal community with the potential to lead what has now become a high-stakes game of political and mining agendas.

But first, let’s take a look at all the moving parts in the Ring of Fire political equation. Ontario has the political will to lead the development of the infrastructure to unlock the Ring of Fire, located 450 km northwest of Timmins and 120 km from De Beers’ Victor mine near James Bay. But Ontario, with its recently downgraded-to-negative credit rating (by Moody’s), can’t do it alone and for this, it will need the financial help of a federal Conservative government, currently unsympathetic to Ontario’s past spending habits.

The federal government has reduced its responsibilities with regards to mining since 1994 because provinces have constitutional authority over their natural resources. In order to draw the federal government as a funder in an infrastructure-related project to the Ring of Fire, Ontario would need to call on the federal government’s core responsibilities such as international trade, aboriginal affairs, environmental protection, navigable waters and integrated management of ocean-related activities and management. So far, building a road to a few mines is not a core federal responsibly.

We also know that building road access to the Ring of Fire is going to become the Stanley Cup prize for a few very hungry large road construction and engineering companies. How will that public road procurement process work? A few local aboriginal construction companies have learnt the hard way that being a sub-contractor is not a great place to be if you want to be paid on time by the project proponent. Count on the First Nations to suggest changes to the current procurement process.

Some observers believe that the current deadlock between the Canadian and  Ontario governments with respect to the Ring of Fire may lie with the road procurement process.

Powering a mining development in the Ring of Fire would be quite a side show in itself. No mining company can realistically make a commitment to build a processing plant in Ontario because of the high electricity rates. KWG Resources is making some headlines about developing a gas-powered smelting plant but still needs to raise the capital. No access to the Ring of Fire, no capital. Many industrials are leaving the Ontario grid for other lower energy cost jurisdictions, such as Quebec. Is there a way to power up northern Ontario without going through Ontario’s expensive transmission system?

Finally, many mining law experts believe that there is nothing to fear from the Tsilhqot’in decision because Ontario is covered by treaties. As a proponent looking to make a deal, you certainly don’t want to show up on ancestral lands with that opening position. Lawyers are already in court, pointing to possible fatal legal flaws in some of Ontario’s treaties, including Treaty 9. Other aboriginal groups have no treaties in Ontario. Suffice to say, Ontario is facing a major reset of its aboriginal policies and regulatory approval process because investment certainty underpins large projects financing, in both southern and northern Ontario.

Given these issues, it is easy to see why governments and project proponents are at a standstill to lead the development of providing access to the Ring of Fire. Who can co-ordinate such a politically and legally complicated process? The mayors of northern Ontario municipalities are trying their best to coalesce an alliance of regional stakeholders but their clout is limited.

A solution may lie with First Nations leadership.

Mushkegowuk Council of James Bay Lowland First Nations is somewhat of an outlier. With its Five Nations Energy company, Mushkegowuk has an established transmission corridor, 100 km from the easterly limits of the Ring of Fire. Mushkegowuk is across the Bay from one of the world’s most inexpensive sources of electric power.

Speaking of the Bay, past studies have shown that James Bay is prospective for a seasonal sea port. If rail were to be developed from the eastern corridor of the Ring of Fire to a seasonal sea port, this could change the economics of many mining projects in the region. More importantly, this initiative could kickstart the building of a light industrial and community access road to the isolated aboriginal communities without having to navigate through intensive, dangerous heavy ore-hauling traffic.

Recently, Mushkegowuk threw its full support behind the Matawa First Nations. The Matawa recently invited Mushkegowuk to present its proposal to join forces in an aboriginal led rail-energy-sea port infrastructure corridor. Mushkegowuk’s acting Grand Chief Leo Friday and Moose Cree member-at-large Lawrence Martin explained how a joint alliance would help kickstart the transportation corridor.

Mushkegowuk territory is immediately adjacent to Matawa traditional territory. It is also located down river from the Ring of Fire and includes shared boundaries.

Moreover, significant mining claims in the Ring of Fire extend onto Mushkegowuk’s territory. Most importantly, both Mushkegowuk and Matawa Councils have agreed in a joint 2011 declaration to collaborate on environment and future partnerships.

This proposed alliance would leverage the federal government’s aboriginal, environmental and navigable water responsibilities. It could purchase and transport Quebec’s power through its existing utility easement corridor. Most importantly, such an alliance would diversify aboriginal income sources away from an over-reliance on mining revenues (there are over 211 impact benefits agreements in Canada between mining companies and aboriginal organizations) and towards much more stable sources: i.e. infrastructure royalties. Moreover, royalties derived from energy and rail transportation are more attractive than user fees derived from roads.

It is difficult at this time to p
redict how Ontario’s Ring of Fire Secretariat, established in 2011 to co-ordinate and facilitate development, could respond to such a proposal because it underscores significant policy considerations. Expect both parties to meet in the near term to discuss this development. However, it may be better to privately finance the business case for an aboriginal-led Ring of Fire infrastructure corridor by various industry stakeholders for a more expeditious outcome.

In the meantime, the Matawa chiefs have responded to Mushkegowuk with a request for more information in the next month. Since the Tsilhqot’in decision, things are indeed moving faster in the aboriginal boardrooms. That’s because many aboriginal organizations now know that if they bring solutions to aboriginal interests, environmental safeguards and infrastructure planning, they can quickly determine which mining projects can benefit from investment certainty. A powerful combination indeed.

— Suzanne Leclair LL.B. is founder of Connect Counsel, a Canadian professional multi-disciplinary business advisory firm dedicated to developing major aboriginal and non-aboriginal partnerships in resource-related infrastructure projects. She is an infrastructure advisor to Mushkegowuk Council.

This commentary first appeared on MiningMarkets.ca, The Northern Miner’s hub for industry insights and opinion.