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Say no to Baffinland, Oceans North Canada tells Valcourt

Cash-strapped iron producer says they need expansion to make Mary River profitable


Baffinland's Phase 2 proposal would break ice in the winter in Milne Inlet and Eclipse Sound, which lie within the proposed Lancaster Sound Marine Conservation Area. (FILE IMAGE)

Baffinland’s Phase 2 proposal would break ice in the winter in Milne Inlet and Eclipse Sound, which lie within the proposed Lancaster Sound Marine Conservation Area. (FILE IMAGE)

Bernard Valcourt, the federal northern affairs minister, should say no to a request from Baffinland Iron Mines Corp. for an exemption from the North Baffin Regional Land Use Plan, the Oceans North Canada lobby group said May 25 in a letter to the minister.

That’s because exemptions to Nunavut Land Claims Agreement processes are warranted only in “the most extraordinary circumstances to safeguard a purpose or principle embedded in the NLCA,” the group said

And Baffinland’s request does not meet that criteria, because, among other reasons, their current regulatory problems are self-inflicted, said the letter, signed by Christopher Debicki, Ocean’s North Canada’s Nunavut projects director.

“Baffinland/ArcelorMittal has largely created its own problem by getting approvals for one project and port when it was already contemplating an alternative.That said, there are processes in place to address the necessary changes to land use planning that can accommodate this application,” the letter said.

Baffinland sent their plea to Valcourt May 21, asking that he cut the Nunavut Planning Commission out of the regulatory process and move their Phase 2 expansion proposal directly before the Nunavut Impact Review Board.

Right now, Baffinland is permitted to ship up to 4.2 million metric tons of ore from Mary River through a port at Milne Inlet during the ice-free season only.

But the Phase 2 proposal, which the Nunavut Planning Commission rejected April 9, would increase that to 12 million tons for 10 months of the year and allow winter icebreaking through Eclipse Sound.

They received permission for the current transportation system only after a lengthy environmental review that saw them get a project certificate in December 2012 allowing them to ship up to 18 million tons through Steensby Inlet via a railway and port.

But right now, Baffinland can’t afford to build the railway and port — they can’t raise the estimated $5 billion in financing that is likely the minimum required to construct such ambitious infrastructure.

So, soon after getting their project certificate, they applied for and received the amendments that allow them to use Milne Inlet in what they describe as the “early revenue phase.”

But in their pitch to Valcourt, the company admits the Mary River mine’s current operation is still not profitable and that they still can’t get financing for the Steensby Inlet rail-port scheme.

So for that reason, Baffinland told Valcourt they need the Phase 2 Milne Inlet expansion to continue providing jobs and contract opportunities in the region.

“Baffinland emphasizes the importance of Phase 2 in moving the project to profitability and enabling these types of benefits to continue to flow. A Ministerial exemption from the NBRLUP will move the proposal a critical and timely step toward achieving this,” they said in part of their submission to Valcourt.

Baffinland is a privately-held company, owned 50 per cent by the global steel giant ArcelorMittal and 50 per cent by a private equity firm called Nunavut Iron Ore.

That means their financial statements are not available to the public.

But Baffinland said Phase 2 is “necessary” for the financial success of the Mary River mine.

“The next necessary phase of the Mary River Project is Phase 2. Phase 2 will see an increase in production and shipment of ore, which is important to the economics of the Mary River Project. This additional efficiency is vital in supporting the financial viability of the Project and is necessary to ensure that the benefits of the Mary River Project and the ERP will continue,” Baffinland told Valcourt.

Due to new low-cost production in Australia and weaker demand in China, global iron ore prices have plummeted since ArcelorMittal and Nunavut Iron ore bought Baffinland in 2011.

But Oceans North said Baffinland’s predicament is no reason to overturn processes that are established within the NLCA.

“We believe that responsible shipping and the protection of harvesting and a healthy marine environment can be accommodated within processes that are consistent with — and indeed will strengthen implementation of — the Nunavut Land Claims Agreement,” the letter said.

They also point out that Baffinland proposes regular icebreaking through Eclipse Sound, the body of water that separates Bylot Island from Baffin Island in front of Pond Inlet.

Eclipse Sound falls within the proposed boundary of the Lancaster Sound National Marine Conservation Area, which has yet to be created.

Parks Canada and the Qikiqtani Inuit Association are expected to negotiate an interim management plan for the protected area that would include regulations for commercial shipping within the marine park’s boundaries.

For that reason, the land use plan amendment process should be kept alive and done in tandem with the planning process for the marine park, Oceans North said.

“Responsible shipping through Eclipse Sound in appropriate times of the year doesn’t require an exemption, but can likely be accommodated in an open process that seeks to ensure the ecological integrity of this region,” the letter said.

And Oceans North says other reasons for rejecting Baffinland’s exemption request include:

• a ministerial exemption would be divisive and make it less likely to achieve a broadly accepted result;

• exempting industrial shipping from land use planning would set a bad precedent for the future regulation of shipping in Arctic waters;

• the NLCA considers land use planning and environmental screening to be equally important, which is why the agreement created separate institutions of public government to do that work;

• an exemption would fly in the face of more than 35 years of community, industry and government participation in planning for the region;

And Oceans North said Valcourt should work with the Nunavut Planning Commission to ensure that it can work on a land use plan amendment “in a timely fashion.”

The underfunded NPC has told Baffinland that they won’t likely have the resources to handle a land use plan amendment process until 2016-17.

After that communication triggered Baffinland’s request for a ministerial exemption, the QIA stepped up to say they oppose the exemption request but would support a land use plan amendment.

May 27, 2015 — Letter to Bernard Valcourt

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