Premier McLeod’s speech: NWT Chamber of Commerce AGM

Apr 3 2012

(check against delivery)

Thank you. I am pleased to be speaking to the NWT Chamber of Commerce this morning.  Creating a strong and diversified economy is one of the ways that the Government of the Northwest Territories is working towards realizing the vision of the 17th Legislative Assembly.  We need a strong, vibrant business community if we are going to have a strong economy.  And we need a strong economy if we are going to give the people of the Northwest Territories the opportunities they want to prosper and succeed.  Through your work to promote the interests of the business community and foster business development, the NWT Chamber of Commerce continues to play an important role in helping us reach our goal.

The Legislative Assembly has a vision of strong individuals, families and communities sharing the benefits and responsibilities of a unified, environmentally sustainable and prosperous Northwest Territories. We want to see a self-sufficient territory that provides opportunities for all our residents in their communities and regions.  We want a territory where people are healthy and educated and free from poverty and addictions.   And we want a territory where Northerners make the decisions about the things that affect us, like how we protect our land and develop our resources.

Creating this future is not a project for the Government of the Northwest Territories alone.  We will need the participation and cooperation of business and social groups, environmental groups, community governments, Aboriginal governments and the Members of the Legislative Assembly.

Our government started with a commitment to doing business differently.  We know we do not have the resources or expertise to do everything ourselves. We know the value of partnerships and good relationships.  We have made it a priority to reach out to people across the territory and look for common ground, especially with our Aboriginal governments.  It is only by working together that we will be able to realize the full potential of our territory and create the kind of future our people want. We will need the cooperation and assistance of the business community, too.

As you know, our territory has great economic potential. The Conference Board of Canada recently reported that Canada’s northern territories will lead the country in economic growth over the next two years. The Northwest Territories’ economy is forecast to grow by more than seven percent in 2012 and 2013 – well above the Canadian average of two percent.

We have a wealth of mineral potential in our territory – gold, diamonds, rare earths and more.  Developing this potential could lead to new mines that will employ hundreds of Northwest Territories residents.  Spending on mineral exploration was up by 30 percent last year and is expected to grow again.  There are seven projects currently in the works, including Avalon Rare Metals’ Thor Lake project, which is the largest rare earth deposit outside China. Together, these seven projects could attract more than $2 billion in new investment and add over 2000 new jobs in the Northwest Territories.

While Rio Tinto has recently announced a review of its global diamond business, the Northwest Territories diamond sector remains strong.  BHP announced a similar review last fall, but these are both business decisions that do not reflect on either the mines or the sector.  Nothing is wrong with the Ekati or Diavik mines.  Large mining companies such as Rio Tinto and BHP often refocus operations to best meet their overall corporate objectives.  At an estimated construction cost of approximately $800 million, Diavik has recently initiated underground mining operations – which will extend the mine life beyond 2020, reaffirming the viability of diamond mining in the Northwest Territories going forward.  I have been assured that BHP will only sell if it can find a buyer that is committed to living up to the same high environmental and employment standards that it has always maintained.  I have also been reassured that all previous agreements and arrangements with Rio Tinto will continue to be honoured throughout their review process.

We export $2 billion in diamonds annually and have seen increased production at Diavik and Snap Lake.  With Gahcho Kue on the horizon and global demand for diamonds in China and India strong, we can expect this sector to remain an important part of the Northwest Territories economy.

And of course, there is our oil and gas sector.  Approximately 16.2 trillion cubic feet of natural gas and 1.2 billion barrels of oil have already been discovered in our territory. This is only a small part of our estimated potential of 81 trillion cubic feet of natural gas and nearly 7 billion barrels of oil. In addition, there are substantial offshore reserves of oil, natural gas and natural gas liquids.  Less than a year ago, the federal government issued 11 exploration licenses in the Sahtu representing $534.2 million in work bids.  And in 2008 industry committed to spend $1.2 billion to develop three offshore leases in the Beaufort Sea. Subsequent bids expanded this to almost $2 billion in work commitments.

Our government also continues to support the development of the Mackenzie Gas Project, a project of national significance that could contribute $68 billion to the Northwest Territories economy, $86 billion to the Canadian economy and create over 200,000 person years of employment.

But while the Northwest Territories has great potential, we have to make sure that we take the right steps to develop this potential in a sustainable way that creates benefits for all our residents right across the Northwest Territories. People want an opportunity to succeed, and our role as government is to make sure the conditions are right for their success.  We are telling Northerners to stay in school, but we need to keep up our end of the bargain, so there are jobs and economic opportunities for them when they graduate.  Economic development and job creation is one way that this government can help meet the needs of the Northwest Territories and the people who live here.

The Government of the Northwest Territories already provides a broad range of programs in support of economic development and diversification. There are programs to support small businesses and promote community economic development.  We offer support for tourism development and the traditional economy.  And we have programs to encourage and support the development of our mineral resources.  But we need to do more, and this is why the Legislative Assembly has made it a priority for this government to come forward with strategies for mineral development and sustainable economic development.

If we want to become a prosperous, self-sufficient territory providing opportunities for our residents, we will also need to deal with a number of outstanding issues, including devolution, regulatory improvement and strategic infrastructure investments.

We have a wealth of resources in the Northwest Territories, but much of our potential has gone untapped.  One of the challenges we face is a lack of infrastructure necessary to access these resources and bring them to market.  Strategic investments in territorial infrastructure will be one of the ways that our government can help to sustain and develop our economy.

Much of our resource development activity depends on ice and winter roads. While the Government of the Northwest Territories has made investments and worked with industry to extend the winter road operating season, lack of transportation access continues to slow the development of our economy.  In spite of this, it is clear that our resource industries and communities need the stability provided by all-weather roads.

The proposed Mackenzie Valley Highway would strengthen connections between communities and significantly reduce the cost of exploration and development.  The Government of the Northwest Territories recognizes the importance of this project. We have committed money in the 2012-13 capital budget to begin work on the Inuvik to Tuktoyaktuk portion of the highway, in partnership with the Government of Canada.  We have also worked with Aboriginal and community governments to prepare project description reports for the remainder of the highway for submission to regulators.

Supporting the Mackenzie Valley Fibre-optic link is another priority of the Government of the Northwest Territories.  This project would improve communications infrastructure in communities along its route, support the operation of the Inuvik Satellite Station and position our residents to become active participants in the growing international digital economy.  We are currently looking at financing options for this project, including P3 private sector investments.

We will also continue to support investments in hydro initiatives and alternative energy projects that will help provide lower-cost and environmentally friendly energy to residents and businesses.  Recently I was in Fort Simpson, where I took part in the opening of a new solar energy project, the largest of its kind north of 60 and bigger than any in Alberta or Saskatchewan.  This system, connected to the Village grid, is expected to displace 15,000 litres of costly diesel, reduce carbon emissions by 44.5 tonnes a year and create energy cost savings of $15,000 for the entire thermal zone.

As you know, the federal and provincial governments are bringing in cost-cutting budgets, reflecting continuing economic uncertainty across the country.  The Government of the Northwest Territories current fiscal situation is also tight and this limits our ability to make the infrastructure investments we need to help grow our economy.

The Inuvik gas shortage and growing energy costs reflected in the recent Power Corporation General Rate Application have reduced our financial flexibility further, requiring an investment of $33 million to help reduce energy costs to consumers.  Ongoing collective bargaining with the Union of Northern Workers’ and doctors, and upcoming negotiations with the teachers and Power Corporation employees may also impact our fiscal flexibility.

We are currently developing our 2012-13 budget, which will be tabled in the Legislative Assembly near the end of May.  We are going to need to be disciplined about our spending over the next two years if we want to manage our way out of our current situation.  Our first priority will be to protect the existing programs and services our residents rely on, while maintaining some capacity to absorb unexpected expenses or revenue shortfalls.

The conclusion of our successful discussions with Canada to have our borrowing limit increased to $800 million will help give us some additional flexibility.  Increasing our borrowing limit was one of the priorities for this Assembly and I am pleased that we have been able to deliver on it so soon in the life of our government.  The increase to our borrowing limit does not mean an end to fiscal discipline, though.  We will still be prudent and focus on paying down our short-term debt while increasing our cash reserves.   As our financial position improves, we will begin to make more targeted, strategic infrastructure investments during the final two years of this government.

Devolution represents one of the biggest and best opportunities we will have to grow the Northwest Territories economy and it remains a priority of our government.  Devolution will finally give the people of the Northwest Territories control over their own public lands and resources and access to resource royalties that continue to flow out of the territory at a rate of $165,000 per day.

Northwest Territories residents should be the ones making decisions about how land and resources in the Northwest Territories are developed and how we protect the northern environment.  Devolution will give Northwest Territories residents the authority to make decisions that every other province and territory other than Nunavut and the Northwest Territories already make for themselves.  With access to new resource revenues, we will be able to fund programs and services to benefit our residents and invest in our the development of our economy.  It will give us the ability to build the Northwest Territories into a self-reliant, economically sustainable territory and provide for future generations.

We signed the Devolution Agreement-in-Principle in January 2011 and negotiations towards a final agreement are going on right now.  We hope to have an agreement completed by the end of 2012 and will work on implementing it over the following 18 months.

I know that some groups have raised concerns about the potential impact of devolution on Aboriginal and treaty rights and about the adequacy of the proposed deal.  These concerns are misplaced.  Aboriginal land claims and self-government agreements are constitutionally protected and will always take precedence over a devolution final agreement.

And the proposed deal is a good one that will provide substantial benefits to all Northwest Territories residents and which reflects the political and economic realities of today.  It was good enough that Yukon – which already has a devolution agreement – has asked to revise the fiscal arrangements they had negotiated, based on the fiscal arrangements found in the Northwest Territories’ devolution agreement-in-principle. We understand discussions between Canada and Yukon are underway.

With continuing economic uncertainty nationally and cost-cutting at the federal level, it is unlikely that we are going to get a better deal, particularly not one that will make up for the money we have already lost by not making a deal sooner. We are continuing to meet with Aboriginal leaders throughout the territory and looking for ways that we can move forward on this important initiative.

Finally, I would like to speak about the need for regulatory improvement in the Northwest Territories.  The Government of the Northwest Territories wants to see an integrated system of land and water management in the Northwest Territories, based on settle land claims, that functions in the public interest and allows for decisions to be made by Northwest Territories residents.  We need a made-in-the-North approach that ensures that lets us protect our environment, supports sustainable economic development and provides certainty to industry.  This is yet another reason why we need devolution, which would put the regulatory responsibility in the hands of Northwest Territories residents.

Development needs to be sustainable and balanced by a respect for our land and environment.  The land is not just the source of our wealth, it is the source of our wellbeing.  We need to make careful decisions about how we manage our renewable and non-renewable resources.  Our decisions need to be guided by a long-term vision that ensures our residents enjoy the benefits of the land and its resources for generations to come.

The Government of Canada is currently responsible for the regulatory regime and has made proposals for reforming it. The Government of the Northwest Territories is not in charge of that process, but we are working to ensure that Northwest Territories views and positions are understood.  We need a system that works. The details of how it is structured are less important as long as regional interests are fairly represented and Northerners are in charge of the decision-making. Once we have devolution, we will have greater control over the regulatory regime and will be able to implement our own Northern-made solutions and our people will be able to hold Northern governments accountable for how that system runs.

I would like to close today by asking for your partnership and assistance in achieving the goals and priorities of the 17th Legislative Assembly.  Our vision is bigger than the government alone and will require the effort and cooperation of all the people of the Northwest Territories to make it a reality.  If what I have talked about today is important to you – if you want to see a strong and prosperous Northwest Territories where Northerners are in charge of the decision making and effective regulatory processes support responsible, sustainable development – then I encourage you to join with us in support of our goals.  Add your voices to ours and join with us in working to promote and further the interests of all the people of the Northwest Territories.

Thank you.