FORT PROVIDENCE, NWT -- Stephen Kakfwi, the Dene-radical-turned-premier who helped quash a pipeline megaproject in the Mackenzie Valley a quarter century ago, has a blunt message for southern politicians and energy companies.
He's ready to do it again if a deal is not reached to give the territorial government its fair share of the billions in royalties and taxes -- $30-billion in the next two decades -- that will gush in from exploiting vast natural gas, oil and diamond deposits.
"We need a share of the revenues before too much more happens," Mr. Kakfwi says. "If we don't get it, we might review our support for the pipeline, we might review our support for more diamond mines."
That's not just a threat, adds Canada's only premier with a ponytail. For Mr. Kakfwi, it is a statement of reality: Why support economic development that will disrupt the environment and the aboriginal way of life, if the profits flow almost exclusively to Ottawa and the headquarters of oil and mining firms?
In a whirlwind tour of New York, Ottawa and Toronto last week, the NWT Premier underscored the importance of three levels of government -- territorial, federal and aboriginal -- reaching an agreement in devolution talks aimed at redistributing money and responsibility, particularly control over the development of natural resources.
Bizarre as it may seem, the Northwest Territories government says superheated economic growth threatens to impoverish the territory. Its Finance Department has produced this startling statistic: Each dollar of extra tax revenue from mining and energy megaprojects will end up costing the territory $1.04.
Unlike the provinces, the Northwest Territories is not able to impose royalties when its natural resources are extracted. Its main source of funds is an annual grant from the federal government, which controls natural resources in the territory.
The Yellowknife government can levy taxes -- but a clawback provision in the federal grant means that the territory keeps only 20 cents on the dollar from incremental revenue.
What's more, the Northwest Territories is on the hook for many of the costs of increased development: nearly $400-million for improvements to infrastructure such as roads, waterworks and educational facilities, and close to a billion dollars for social services and other operating costs.
The territory predicts it will be $188-million worse off after 20 years, partly because of increased costs for social services and physical infrastructure, but mostly as a result of the clawback provision.
The federal government says it embraces the idea that devolution should leave the territory with more money, although Indian Affairs Minister Robert Nault says the 20-year projection is not convincing, since further economic development could easily swing that deficit into a surplus. "Nobody predicted diamonds."
Mr. Nault says the federal government will continue to spend money to help the NWT build its infrastructure, hinting at a major announcement soon of new spending to improve roads in the territory.
The stretch of highway immediately after Yellowknife, connecting the capital to the rest of the territory and southern Canada, is notoriously decrepit. Part of the 50-kilometre stretch of potholes, washouts and packed mud is being rebuilt, but more money will be needed to complete a paved road able to withstand northern winters, and the pounding from heavy vehicles.
The latest bout of negotiations to give the Northwest Territories a greater share of resource revenue has been going on for more than a year, but no final agreement has been reached.
In another sense, however, Mr. Kakfwi says the push for local control over natural resources is an extension of a fight that began more than 25 years ago over plans by southern energy companies to build a pipeline down the Mackenzie Valley.
"It was frustrating in the 1970s, because no one took us seriously. We were just a bunch of young, inexperienced, radical aboriginal people. We had no credibility with the federal government," he says. "They chose to be rather disdainful and dismissive of us."
Nevertheless, Mr. Kakfwi and other aboriginal activists helped to defeat plans for the pipeline, with a royal commission headed by Mr. Justice Thomas Berger recommending a 10-year moratorium on such a project to allow for time to settle land claims.
Back then, Mr. Kakfwi was a 24-year-old, armed with not much more than conviction and a snappy sports jacket. Now, he's Premier.
But he sees the push to gain formal control over natural resources as the final chapter in a struggle that began nearly three decades ago. "I'm trying to finish what we started in the 1970s."
Mr. Kakfwi is obviously frustrated with the slow pace of negotiations over the past year, however. In a recent interview in Fort Providence, he pointed out several times that Prime Minister Jean Chrétien has promised that a deal on devolution would be reached before he left 24 Sussex Dr.
That appears unlikely right now, with Mr. Chrétien set to step down in February. A draft negotiating framework targets next March as a deadline for reaching an agreement on the broad principles of devolution, including the size of the net fiscal benefit for the NWT -- how much extra cash the territory will get beyond the amount Ottawa sends it each year as a grant. But the process is already behind schedule. The three levels of government were to have given their approval of the negotiating framework in August, but those endorsements won't be issued until next month at the earliest.
NWT Deputy Premier Jim Antoine says the main area of uncertainty is the lack of agreement on the proper split of revenue and responsibility between the territorial government and the aboriginal governments. "How we sort it out among ourselves, that's where the sticking point is," he says.
That may be a sticking point, but Mr. Antoine says he is also unhappy with the federal government's dedication to striking a deal, noting that he is irate enough that he has avoided visiting Ottawa since December.
Mr. Kakfwi says the federal government's attitude -- he decries the "benevolent colonialists" in Ottawa -- is also a barrier to a speedy conclusion to negotiations. The size of the net fiscal benefit is another thorny topic.
Mr. Nault agrees with the NWT Premier on one thing, at least. He, too, would like the talks to move at a quicker pace. However, he takes issue with the description of Ottawa as colonial, saying he is also a northerner -- he comes from Northern Ontario -- and that the federal government spends much more in the north than it takes in.
Federal royalties last year amount to $43-million, he says, while Ottawa transferred $580-million to the territory in that fiscal period. However, the NWT projects a rapid increase in the amount of royalties this decade.
The need for more cash, and a sense of independence from the south, drives the Northwest Territories. Ottawa's motivation to negotiate is less clear, although Mr. Kakfwi's musings about withdrawing support for megaprojects could provide ample reason for the federal government to quicken its pace if energy and mining firms fear that their megaproject ambitions are threatened.
Mr. Nault says a devolution agreement that would make the NWT self-sufficient is one of the most important files in his ministry, adding that some of the rhetoric about federal intransigence could be related to this fall's coming election campaign in the territory.
The Premier says he will know by early 2004 if Ottawa is serious about reaching a deal. He notes that the construction of the Mackenzie pipeline is not slated to begin for at least three years -- giving the territorial government and aboriginal groups ample time to respond if the devolution talks reach an impasse.
The territorial government has no formal sway over the approval process for the pipeline, for the moment. However, the prospect of aboriginal bands acquiring powers over resource development has been enough to spur energy and mining firms to listen closely to their concerns.
There is a strikingly similar situation now with the Northwest Territories. The tentative devolution framework envisions the Yellowknife government eventually assuming the regulatory role of the National Energy Board for oil and gas development in the territory.
The mere possibility of such powers is a real problem for oil and gas firms. If the wishes of the territory are ignored, the industry could eventually face a regulator whose will it had earlier flouted. In any case, energy firms have repeatedly and loudly proclaimed that they want, and need, the support of aboriginal populations before they go ahead with such megaprojects, a reflection -- at least in part -- of the need for political stability when contemplating investments running into the billions of dollars.
There is far from universal support for Mr. Kakfwi's position, and it seems possible that the aboriginal self-governments might not back the territorial government if devolution talks fell apart. Some aboriginal bands, most recently the Tli Cho in the region northwest of Yellowknife, have signed land claim agreements that hand them new powers, and more money in the form of a guaranteed percentage of federal royalties from the territory.
The Tli Cho's chief negotiator for that agreement says his band's support for diamond mines and the pipeline is unlikely to change if the territorial government fails to secure its own share of federal royalties. "It wouldn't change the megaprojects," John B. Zoe says.
But Mr. Zoe doesn't believe that the federal government is the one responsible for the slow pace of talks -- he points instead to the split between the territorial government and the aboriginal governments on how dominant a role Yellowknife should play after devolution. "Just because it's the territorial government doesn't mean they have a monopoly over brains, or how to manage money."
The new math
The NWT argues that under the present arrangement with Ottawa, the extra costs associated with exploding growth will outweigh new revenues for the territory. The first 20 years of megaproject development will bring in billions, but cost even more.
Cash coming in:
$5.214-billion
Total net federal grant: $582-million
Total taxes collected: $4.632-billion
Cash going out:
-$5.402-billion
Federal clawback from revenue: $4.054-billion
Capital and other costs: $1.348-billion
Resulting in a deficit of: $188-million
SOURCE: GOVERNMENT OF NORTHWEST TERRITORIES FINANCE DEPARTMENT
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