Mr. Harper, Tear Down This Wall!

Mining has been an integral part of Canada’s social fabric for well over a century and accordingly we have cultivated an abundance of talented geologists, engineers, technicians and financiers who give us a tremendous competitive advantage. Yet many of these professionals sit by idly, frustrated with what amounts to an inability to broaden Canada’s mineral wealth, while other nations position their natural resources to prosper in a globalized economy. Our abundance of oil remains thwarted from transport to any one of our three oceans, and world class orebodies lay dormant as disorder surrounds their required infrastructure.

 

While Canada’s natural resource industry needs to look inwards in order to analyze and exit its current depressed state, the rulemakers — ie. the federal and provincial governments, as well as any number of regulatory bodies — need to work towards a regulatory system that is meant to safeguard without injuring those it seeks to protect.

 

Understanding risk is fundamental to investment in natural resource projects so the investor, when making capital allocation decisions, can quantify the risks versus rewards. When projects operate within a congested and opaque regulatory environment, investors balk and follow the path of least resistance away from the unknown. The groundswell of politicized agendas, which layers on increased regulation, have created uncertainty, which delays the advancement of countless resource projects and their related infrastructure.

 

Accordingly, the rulemakers need to clearly articulate a defined game plan so that the exploration and extraction industry has a transparent and reliable constitution that business and investment can rely upon to make well-informed decisions. Risks inherent to the exploration and extraction industries are already substantial, without the addition of such extrinsic and synthetic risks.

 

Such imperious regulation can be compared to over taxation. The economist Arthur Laffer’s famous Laffer Curve elegantly depicts how both 0% taxation and 100% taxation equal 0% tax revenue. Laffer was illustrating the state’s necessity for taxation to function, while noting that if the rulemakers got too greedy, they would bite off their own heads. The conclusion seems obvious. . . not too much and not too little, or what Laffer deemed optimal.

 

The moral of the anecdote is that in a world where mineral extraction is a necessity, there has to be a co-operative balance from the effects of industrial activity and environmental disturbance. So Canada must strive for the point that delivers the materials needed to prosper, while maintaining a shared environment. With the era of responsible development and extraction upon us, industry players understand the value in doing things right. Exploration and extraction does not equal environmental destruction, as the technology and the knowledge exist to explore and develop projects optimally. The mistakes of previous eras have been learned from as the consequences have been felt. No one would advocate for development as it was done during the Sudbury era, yet the industry is still stigmatized for errors of the past. Accidents will inevitably happen, but responsible exploration and extraction deserves to be viewed as a powerful tool that can make Canada a global leader and uplift those who are fortunate enough to be in its vicinity.

 

Our industry has the ability to fill a huge gap in Canada's economy, provided there's a responsible structure in place. But a change in attitude and perspective needs to be made if we have world-class aspirations. Leadership, from Prime Minister Stephen Harper and all the way down, need to tear down the walls of unnecessary obstacles with proactive measures that optimize our industry’s potential. So here is what needs to happen for the exploration and extraction industry in Canada to heal and prevail:

 

• Rulemakers needs to clearly articulate the rules of the game so that investors can understand the risks. Rulemakers must put forth transparent guidelines that address what the industry can do, not what it cannot. Then set definitive and reasonable timeframes for the approval processes so projects are not kept in limbo. Cutting one’s losses is a critical option to a business and with projects tied up in political purgatory, management loses this choice. 

Government must set up rules for enforcement. Rules without consequence are meaningless. The current rulemakers have avoided real resolutions and shift responsibility to the industry whose sole reprieve if no reasonable solution can be reached, is the courts and a decade-long legal battle — a surefire way to end any project. Rulemakers need to protect against those who are not respecting the rules and do so in a timely manner, as time is money and investors are impatient. Everyone must be accountable, including industry, special interest groups, First Nations and community stakeholders.
 

• Streamline the permitting process. This includes exploration, environmental, construction, financial market and foreign investment components, all of which have become bloated and bureaucratic. The result is a protracted timeframe between discovery and mine construction which deters investment. The travesty is that the approval process has become the biggest risk that the industry faces, which is an affront to the extreme improbability of finding a feasible orebody. When an orebody is discovered, the focus should be on responsible ways to develop it, as opposed to reasons why we should not.
 

• Canada must invest in infrastructure: If you build it they will come. Creating infrastructure for the 21st century will provide the tools for Canada’s mining industry to thrive, and the investment will pay incalculable dividends. When Theodore Roosevelt authorized the Panama Canal at the turn of the 20th Century and when Dwight Eisenhower commissioned the nearly half a trillion dollar interstate highway system in the 1950s, no analyst could have captured their net present values in such a short-sighted evaluation. After generations, their value is simply priceless as they transcended economic measures and created new thresholds. The same vision needs to be applied to our enormously inadequate infrastructure, which suppresses growth. Leadership has a duty to open up frontiers and expand our limits. The results would be immeasurable.
 

• Governments must support and then stand back. With the rules set and enforcement mechanisms in place, enterprise will flourish and grow. The rulemakers need only to monitor, enforce and collect the tax revenue.
 

These simple solutions can help Canada in its objective to integrate into a globalized economy. The Canadian exploration and extraction industries are world class and must be promoted and simplified in order to foster development. Leadership must recognize that the interests of the few tend to ignore the interests of the many, and be wary of the complacency and hesitation that will ensure economic setback and social decay. This industry has all of the ingredients in place to lead in a globally competitive economy with all of the social benefits that success bestows.