Ontario Urgently Needs a Comprehensive “Value-for-Money” Cost-Benefit Analysis for Mining

An Open Letter to Bonnie Lysyk, Auditor General for Ontario

April 10, 2015

Ms. Bonnie Lysyk,
Auditor General for Ontario
20 Dundas Street West, Suite 1530
Toronto, Ontario
M5G 2C2

Dear Ms. Lysyk:

Re: Need for a comprehensive “value-for-money,” costs-benefits analysis for mining in Ontario

Current mining policies, programs, and regulations pose a threat to public finance and taxpayers in Ontario, with potentially billions of dollars at stake.

The Ontario government recently announced its intention to review its Mineral Development Strategy (March 2015). MiningWatch Canada is very concerned about the current lack of a comprehensive “value for money,” cost-benefit analysis for mining in Ontario.

Pitifully low mining royalties, very low corporate taxes, direct and indirect subsidies, give-away prices on electricity, unaccounted social and environmental costs, and hundreds of millions of dollars in mine site clean-up costs are all major concerns. 

According to Natural Resources Canada, mining companies generated over $93.3 billion in gross revenue in Ontario over the last 10 years. During the same period, a meagre 1.5% was generated in mining royalties – 10 times less than a tip at a restaurant!

Low mining royalties are unacceptable, particularly considering that companies are digging up collectively owned non-renewable resources, which will no longer be available for future generations.

In an analysis of the actual taxes paid to governments by the industry, Chen and Mintz at the University of Calgary undertook a study of marginal effective tax and royalty rates (METRR) in 2013. The METRR for the provincial share in Ontario was 2%, one of the lowest in Canada – and possibly in the world.

The Drummond Commission on the Reform of Ontario’s Public Services and two successive Ontario budget speeches (2012 and 2013) committed to a review of the mining tax. This review is still pending.

The problem of low mining royalties becomes sharper as one of the industry’s main economic benefits — employment — is on a steady decline. Twenty years ago, the metal mining industry employed 20,000 workers, but by 2012, in the midst of an ongoing mining boom, the number of jobs had declined 25% to 15,000, reflecting the increasingly automated nature of mining operations.

The Auditor General last reviewed Ontario’s Mineral Development Program in 2005. Many of the recommendations made at that time appear to be ignored in the current Mineral Development Strategy.

MiningWatch Canada is particularly concerned that severe environmental costs and liabilities are not accounted for in the ongoing review. Ontario has some of the worst toxic mining sites in North America, which potentially represent billions in clean-up costs. Current financial assurances for active mines are not providing the necessary security that Ontarians will not have pay the bill – not to mention the bill we already have to pay for abandoned mine sites.

The current Mineral Development Strategy does not address either the significant liability that increasingly larger tailings management facilities represent, nor does it address the lessons learned from the recent Mount Polley disaster in British Columbia. The Independent Engineering Panel set up to look at the cause of the Mount Polley disaster made a number of recommendations about the management of tailings facilities, including an end to the kind of water saturated tailings used at most Ontario mines. The Mount Polley disaster has and will cost hundreds of millions in losses and damages, in addition to a huge cost to the environment and downstream communities.

Ontario is the only province or territory in Canada without a mandatory requirement for environmental assessment of large mines. This greatly increases the risk of accidents and unanticipated effects during operations and after closure. There is no comprehensive baseline study upon which to base an effects analysis, and the existing permitting system does not contemplate ecosystem, social, and cultural impacts.

While the 2009 Mining Act revisions included recognition of Aboriginal and treaty rights, it does not recognize a requirement for Aboriginal consent to claim staking, mineral exploration, and development. A number of recent court decisions make clear that the Ontario’s mining strategy is failing in its fiduciary responsibility to First Nations, and forcing the Province into a costly and unnecessarily conflictual relationship.

We urgently request that the Auditor General’s office exercise its “value-for-money” mandate to evaluate the Ontario Mineral Development Strategy. The attached brief sets out our concerns in more detail.

Sincerely yours,

Ugo Lapointe
Canada Program Coordinator,
MiningWatch Canada
cc. Premier of Ontario
     Minister of Northern Development and Mines
     Minister of Environment and Climate Change
     Environmental Commissioner of Ontario