Commentary: OMA Makes Suggestions For Provincial Budget

The following is the second part of an open letter to The Honourable Dwight Duncan, Ontario’s minister of finance, from Chris Hodgson, president of the Ontario Mining Association, outlining the OMA’s ideas for the province’s budget.

Electricity rates in Ontario have gone from being a competitive advantage to a disadvantage relative to other mining jurisdictions within Canada and around the world.

From the year 2000 and onward, the gap between electricity prices in Ontario and the national average has grown.

The fact that Ontario Power Generation asked the Ontario Energy Board to approve a 14% rate hike in November leads one to suspect that OPG is out of touch with business realities in Ontario. The government-owned power utility often appears as an ally of re-cessionary forces. The Ontario Energy Board challenged OPG’s numbers and ruled that an 8.5% increase in rates was more reasonable. While it is more reasonable, it is not a level that is going to help mining and other businesses in Ontario become more competitive.

Mining companies in Ontario spend $500 million annually on energy. Any increase in energy rates only harms operations, especially during times of low commodity prices. The OMA believes that the principle of a megawatt of electricity saved should be as valuable as a megawatt of electricity generated would strengthen conservation programs.

Another area where government can assist in improving the competitiveness of mining — and all businesses in Ontario — is the compensation system. Mining employers in Ontario pay about $65 million in premiums to the Workplace Safety and Insurance Board annually. The mining industry continues to work long and hard to improve its safety performance and it ranks as the third safest sector in the province. The mining sector in Ontario invests almost $2,300 in safety training per employee annually.

At this time, employers in Ontario pay the highest average annual workers’ compensation rates in Canada and Ontario has the largest unfunded liability in the country. The unfunded liability of the system, which is estimated at $12 billion, is higher than it has ever been in the history of the Workplace Safety and Insurance Board of Ontario and its predecessor, the Worker’s Compensation Board.

The government can also go a long way to promote regulatory and process certainty and streamline permitting processes. We support the Ontario government’s efforts to introduce small regulations that employ a risk-based approach to permitting and approvals. In particular, we feel that Ontario needs to accelerate its current efforts to improve the certificate of approval process and to provide legislative authority to tailor approval processes to match the level of concern regarding low to medium-risk activities.

Modernizing regulatory processes within the province is one part of the solution. In addition, we encourage the government to seek out interprovincial and federal regulatory and process alignment whenever possible. Finding policy alignment with the United States and other key jurisdictions is another component of an effective strategy to keep Ontario industry competitive.

Last, but not least, we recommend that the government institute a process, whereby new policy, standards and regulations are assessed for competitiveness before government makes its decisions. This will prevent any unintended consequences that may cause new policy directions to place Ontario at a disadvantage in comparison to rival jurisdictions. It will also assist with measures to ensure consistency and alignment of policy and processes across jurisdictions.

There is much to do in these troubled economic times and we need to work together to get through them. Mining is one of the core industries of Ontario’s economy and it needs to be conserved as part of Ontario’s economic base. Factories may be able to pack up and move to new locations in other jurisdictions. Orebodies can’t be put on the back of a truck and repositioned in a new site. Mines are developed where the geology has placed the orebodies and exploration work has identified them.

The mines and minerals cluster in Ontario employs close to 200,000 people. More than 80% of Ontario’s mineral products are exported, boosting Ontario’s balance of trade substantially. Mining is largely a “made in Ontario” industry that contributes disproportionately to reduce the province’s international trade deficit. Corporate taxes alone paid by the industry have been more than $425 million annually.

All in all, Ontario’s mining industry is a productivity powerhouse. It is a modern, high-tech solution-providing industry that delivers benefits to all parts of Ontario that far outweigh the size of the industry relative to many others.

In the world, demand for minerals and Ontario’s minerals is only going to increase. As of today, the global population is estimated at 6.72 million. That makes for a lot of demand for future growth and development that cannot take place without mineral and metal products needed for telecommunications, power production and transmission, agriculture, transportation, health care and medicine, consumer goods and environmental improvement.

When that demand picks up, we need to ensure that Ontario’s mining sector is able to respond competitively to meet the demand. Strategic investments by government and attention to improving relative competitiveness will help to position all Ontarians to benefit from the next upswing in global commodity markets through a strong mining industry.

Yours truly, Chris Hodgson, President, Ontario Mining Association