Editorial: Ontario gov’t criticized by Auditor General over Ring of Fire file

With the Auditor General of Ontario Bonnie Lysyk newly releasing her Annual Report 2015, it’s been the Ontario government’s mismanagement of the province’s electricity generation system that has grabbed the biggest headlines across the country, but she also has a fair amount of criticism in the report on how the government has overseen mining and mineral investment in Ontario, particularly with respect to the Ring of Fire chromite camp.

Lysyk notes Ontario is Canada’s largest mineral producer, accounting for a quarter of all Canadian production, and has one of the lowest tax rates for miners, and yet the Fraser Institute’s survey of mining and exploration companies ranks Ontario ninth among Canadian provinces and territories in investment attractiveness for mineral exploration.

Some of her criticism isn’t too surprising, and reflects the problems of any large bureaucracy such as Ontario’s Ministry of Northern Development and Mines, which has an annual budget of $41 million and 270 full-time employees.

She found the ministry doesn’t adequately assess the effectiveness of its investment marketing activities; has inadequate plans for dealing with abandoned mine sites and upcoming mine closures; is a little slow to complete programs and disseminate geoscience information to the public; may have undercollected the amount of bonds or equivalents needed for mine closure; and taken in too little in taxes, highlighted by collecting less than $20 million in royalties from De Beers’ Victor diamond mine from 2008–14, a period when the mine generated $2.5-billion worth of diamonds.

For the Ring of Fire (ROF), the government established the ROF Secretariat in 2010 to work and consult with Aboriginal Peoples, northern Ontarians and the mining community to encourage sustainable development. Today, the secretariat has 19 full-time staff in offices in Sudbury, Thunder Bay and Toronto.

The secretariat has so far spent $13.2 million in operating expenditures. It has also distributed $16 million in transfer payments to aboriginal communities for capacity building (e.g., operational support, and education and training initiatives for the mining sector) and other support, including funding a local liaison position on the reserves, and negotiating the Regional Framework agreement between the province and the nine nearby Matawa First Nations that outlines how they would work together on environmental monitoring, infrastructure planning, social and economic development, and revenue sharing.

Lysyk found the ROF Secretariat has “continuously missed milestones established by the government” for developing the ROF, for instance, having multi-year delays for environmental assessment approvals and land-use planning.

Regarding that $16 million in transfer payments, Lysyk noted the nine communities are required to provide reports for the payments they receive, including progress reports, expense reports and audited financial statements. However, she found these reports “were not submitted on a timely basis, and … contained little supporting documentation to show whether the funds were spent according to the transfer-payment agreements. For example, while communities can claim expenses such as staff travel, meals and accommodation, and professional and legal fees, few invoices were submitted to support the amounts claimed in the expense reports.”

With activity slowing down considerably in the ROF in 2013 with Cliffs Natural Resources’ exit and the fall in commodities prices, the provincial government responded by creating the ROF Infrastructure Development Corp. in August 2014 to plan infrastructure for the area. This corporation would make decisions on how to spend the $1 billion the Ontario government had committed for ROF infrastructure in its 2014 budget. However, the auditor general notes that none of this money has been spent, and it is contingent on as-yet-unpledged matching funds from the federal government.

The auditor general also found the corporation still had no representation on its board from any stakeholder group such as First Nations, industry or the federal government, and has only five senior bureaucrats from the Ontario government. Neither could she find a timeline for when stakeholders would be engaged. She underscores the corporation has cost $550,000 to set up, and will have annual operating expenditures of $4 million once it becomes operational.

Lysyk relays the mining industry’s concerns that “delegating the aboriginal consultation process to the private sector discourages investments in the province’s mining sector because of the high costs of travel to many of these communities in Northern Ontario, and because the length of time to complete the consultation process cannot be controlled.” She points approvingly to the governments of British Columbia and Quebec, who — unlike Ontario — have kept full responsibility for consultation and its related procedural aspects.