Nunavut looks at ending fuel tax rebate for working mines

Tununiq MLA Joe Enook posed questions in the Nunavut legislature March 3 and March 7 about why the Nunavut government is looking at restricting the application of its fuel tax rebate to junior exploration firms only and to remove the benefit for companies that operate working mines. (FILE PHOTO)

Updated March 8 at 5:20 p.m.

The Government of Nunavut has decided its fuel tax rebate program is too generous.

That’s why the GN plans to tighten the purse strings when it comes to mining companies doing work in the territory.

The fuel rebate program, in place since 2006, gives mining companies, and others, a break on the amount they are obliged to pay in fuel tax — one of the few homegrown revenue streams available to the government for investment in much-needed territorial infrastructure.

In order to be eligible for the rebate, a company or individual must be involved in harvesting, outfitting, quarrying for carving stone, mineral exploration or mining development, extraction or reclamation.

The Department of Economic Development and Transportation and Department of Finance have decided that they will still allow mining companies to get a fuel tax rebate during the exploration and development stage of their projects, but once they build an operating mine, this rebate would disappear.

This news came to light March 3 in the Nunavut Legislature, when Tununiq MLA Joe Enook asked Economic Development Minister Monica Ell-Kanayuk for details on current development partnership agreements between the GN and mining companies.

Development Partnership Agreements, which detail what Nunavut gets out of the deal, such as jobs and investment, must be signed before a company can qualify for the tax rebate.

“Currently we have only one development partnership agreement and that is the Agnico Eagle Meadowbank mine agreement,” Ell-Kanayuk told Enook, according to the Hansard transcript of the day’s exchange.

“The departments of Economic Development and Transportation and Finance have come to the consensus that the Fuel Tax Rebate Program should be cancelled, at least for operating mines. The two departments are now working on developing a replacement for the development partnership agreement.”

In other words, the GN will retool the terms of those agreements before it signs any new ones with, say, Baffinland Iron Mines Corp., which operates the Mary River iron mine in north Baffin.

That prompted Enook to ask more questions of Finance Minister Keith Peterson during the legislature’s question period March 7.

“Can the minister provide a clear explanation for why the government has made this decision?” Enook asked Peterson.

Peterson said when the program was introduced, there was only one operating mine, but it’s likely that number will eventually increase.

He said the government is wondering whether it’s financially prudent to offer the rebate for every mine, and for a mine’s entire lifespan, which, through production and eventual reclamation, could last upwards of 20 years or more.

“Our internal discussions are, perhaps, that the fuel tax rebate should assist the mines that are in exploration and in development, and once they reach the point where they’re in production, they’re on their own. That’s the internal discussions we’re having,” Peterson said, according to Hansard transcripts from March 7.

“Can the minister describe how these changes would benefit Nunavut?” Enook asked, in reply.

Peterson said the rebate could still be helpful in enticing junior mining companies to the territory by offsetting the huge cost of launching mineral exploration programs in the Arctic.

It allows Nunavut to compete with other jurisdictions, Peterson said.

However, for now, one company — presumably Agnico Eagle — has thus far received “about 80 per cent of the $19 million the Government of Nunavut has paid out through the Fuel Tax Rebate Program since it was implemented in 2007,” Peterson said.

“There’s quite a significant amount of money paid out and this is money that could go into programs and services. It could go into an elders facility. It could go into a treatment centre,” he added.

“This is one reason we collect taxes from companies, the fuel taxes, so we can reinvest them in infrastructure and programs in Nunavut.”

The fuel rebate program has not been without some controversy.

In 2014, Nunavut Justice Andrew Mahar ordered the Nunavut government to pay Agnico Eagle nearly $2 million in fuel tax rebates owing because the GN had changed some program deadlines without informing the company.

As a result, some of Agnico Eagle’s rebate claims had been denied.

The GN is currently appealing that legal decision.

Due to an error in Hansard, an earlier version of this story stated that the GN had spent $90 million so far in the Fuel Tax Rebate Program. That figure is, in fact, roughly $19 million.