SOR/2017-47: Muskowekwan First Nation Solution Potash Mining Regulations


March 24, 2017

REGULATORY IMPACT ANALYSIS STATEMENT (This statement is not part of the Regulations.) Issues The Muskowekwan First Nation submitted a proposal to Indigenous and Northern Affairs Canada requesting the creation of regulations under the authority of the First Nations Commercial and Industrial Development Act (“FNCIDA”) for a solution potash mine development on Muskowekwan First Nation reserve lands.... (Click for more)

Published on March 30, 2017

Bill Summary

SOR/2017-47: Muskowekwan First Nation Solution Potash Mining Regulations

REGULATORY IMPACT ANALYSIS STATEMENT (This statement is not part of the Regulations.) Issues The Muskowekwan First Nation submitted a proposal to Indigenous and Northern Affairs Canada requesting the creation of regulations under the authority of the First Nations Commercial and Industrial Development Act (“FNCIDA”) for a solution potash mine development on Muskowekwan First Nation reserve lands. The Government of Canada does not have a regulatory regime specifically designed to regulate a potash mine on-reserve. The existing Indian Mining Regulations and Indian Act are insufficient to appropriately manage the complex and large-scale development and operation of a potash mine on reserve land. The Province of Saskatchewan has a comprehensive regulatory regime for potash mining, and although some provincial laws of general application will apply, essential elements of the provincial laws and regulations affecting potash mining will not apply on First Nation reserve lands. Regulations made pursuant to FNCIDA are necessary to close the regulatory gap in areas such as environmental management and protection, gas inspection, hazardous substances and waste, dangerous goods, and uniform building and accessibility standards, among others. Without adopting a regulatory regime that is compatible with the regime that applies to potash mines off reserve lands, the developer, Encanto Potash Corporation, or any other developer will likely be discouraged from investing in this on-reserve economic opportunity due to the uncertainty of what regulatory regime, if any, will apply. Background First Nations Commercial and Industrial Development Act Increasingly, First Nations across Canada are developing plans for complex commercial and industrial development projects on-reserve. A lack of adequate regulations for such development on-reserve land leads to regulatory uncertainty that can discourage investment in such large projects and hinder economic development. These projects have economic benefits such as employment and business opportunities for First Nation members, and create significant ongoing revenue for First Nation governments. Large scale industrial projects contribute to the economy of the surrounding region, providing employment opportunities and generating tax revenues that benefit all Canadians. In 2006, FNCIDA came into force to facilitate economic development on-reserve by addressing regulatory gaps. FNCIDA enables the Government of Canada to create a regulatory regime for a specific project, on a specific piece of reserve land, by legislatively replicating or incorporating by reference relevant provincial laws. In practice, this means that projects under FNCIDA are required to meet standards that are substantially similar to those that apply in the rest of the province where the reserve is located. The use of FNCIDA removes legal uncertainty and risk, enhancing confidence for First Nation people, investors, developers and the public by ensuring that they are dealing with regulations and regulators that they know and understand. FNCIDA requires that a tripartite agreement between the Muskowekwan First Nation, the Province of Saskatchewan and the Government of Canada be entered into prior to the making of the Regulations. This tripartite agreement ensures that provincial officials can perform administrative, monitoring, compliance and enforcement activities with respect to the project on specified reserve lands that are used for the project. Provincial officials will perform these activities as they do for similar projects located off reserves. Muskowekwan First Nation Solution Potash Mining Proposal The Muskowekwan First Nation has requested that the federal government use FNCIDA to address the regulatory gap with respect to the development of a solution potash mine on its reserve. The proposal being pursued by the First Nation is a joint venture with Encanto Potash Corporation to mine potash located under Muskowekwan First Nation lands from the Prairie Evaporite Formation’s Belle Plaine and Patience Lake potash reserves, using a solution mining technique. Solution mining extracts potash using wells and circulating fluids, instead of using shafts and conventional underground mining. The solution potash mine will produce potassium chloride — up to 2.8 million tonnes annually for over 50 years — for shipment via railcars for distribution. Once this project is under way, over 1 000 construction jobs could be generated during the expected three years of mine development, and approximately 500 permanent mining-related jobs will be created when the mine is fully operational. The Muskowekwan First Nation is also pursuing a demonstration project to prove a new technology for selective potash mining. The technology uses a novel method of extracting potash with 80% less water consumption, no salt tailings left behind on the surface, and low capital and operating costs. The demonstration project will entail the extraction of 100 000 tonnes per year of potash, increasing to 500 000 tonnes per year if the technology is viable. The project will have a shortened construction period of less than a year and will use an existing exploration well. This demonstration project will generate several dozen full time jobs. Should the new technology be proven viable, it could represent a significant technological advance in potash mining. Objectives The primary goals of the Regulations are to ensure that impacts related to the environment, health and safety and other impacts common to potash mining are effectively managed; address legislative and regulatory barriers to economic development in First Nations communities; and provide certainty for investors, developers and the public while minimizing costs. Description The Regulations reproduce, with some minor adaptations, the regulatory regime of the Province of Saskatchewan applicable to solution potash mines located on provincial land. Key provisions contained in the Regulations relate to emergency responses, facility operations, containment, storage, transmission, and the treatment or disposal of any substance that arises from potash mining activity. The Regulations will only apply to the “project” on Muskowekwan reserve lands, as “project” is defined in section 1 of the Muskowekwan First Nation Solution Potash Mining Regulations, and will not apply to other First Nations, other reserve lands or other federal lands. The Regulations and tripartite agreement are structured with enough flexibility to allow either the demonstration or larger-scale solution potash mining project, or both, to proceed. To ensure the ongoing consistency of the regulatory environment for the Muskowekwan solution potash mine with the off-reserve environment, the incorporation of provincial laws are stipulated to be applicable “as amended from time to time.” As a result, the Regulations will evolve as the provincial law evolves. It is expected that amendments to the Regulations will be required only if the Province of Saskatchewan were to create an entirely new statute or regulation, or if relevant changes to the Province of Saskatchewan’s existing laws necessitate new adaptations to the Regulations. The Regulations are the fourth regulatory proposal brought forward under FNCIDA. Together with a Canada–Saskatchewan–Muskowekwan First Nation tripartite agreement, they create a comprehensive regulatory regime for solution potash mining on the Muskowekwan First Nation reserve. The tripartite agreement was signed on January 27, 2016. “One-for-One” Rule The Government of Canada is committed to controlling any new administrative burden on business resulting from regulations. The Regulations will only apply to the “project” on Muskowekwan reserve lands, as “project” is defined in section 1 of the Muskowekwan First Nation Solution Potash Mining Regulations. The Regulations are enabling regulations and serve to facilitate commercial activity. They do not impose new burden on business as there currently is no potash mine operating on the reserve. The regulated proponent can choose whether or not to pursue the regulated activity and meet the associated requirements. As a result, the “One-for-One” Rule does not apply to this proposal. Small business lens The Government of Canada is committed to respecting the sensitivity of small businesses to the impacts of regulations. The Regulations will only apply to the potash mining operations on the project lands, which will initiate business development opportunities, rather than impose new burdens or costs on existing small businesses. Existing small businesses could benefit from increased commercial activity associated with the project. As a result, the small business lens does not apply to this proposal. Consultation The parties primarily affected by the Regulations are the Muskowekwan First Nation; Muskowekwan Resources Limited (owned by the Muskowekwan First Nation) and its partner, Encanto Potash Corporation, as proponent in the development; the Province of Saskatchewan, which will administer and enforce the regulatory regime; the Government of Canada and the population of surrounding communities, including the rural municipalities of Touchwood, Kellross, Emerald and Mount Hope, the First Nation communities of Okanese and George Gordon, and the Lestock Métis community. The Regulations, which are specific to the project, were made under FNCIDA at the request of the Muskowekwan First Nation and supported by a Band Council Resolution in July of 2012 and subsequently in May of 2016. Officials representing the Muskowekwan First Nation and the Province of Saskatchewan have collaborated throughout the drafting process and are parties to the tripartite agreement. Community members of the Muskowekwan First Nation have provided their strong support demonstrated by allocating the lands for the potash development via the Indian Act land designation voting process. Support of the project from surrounding communities is also high due to the influx of economic opportunities associated with a project of this magnitude. During the construction phase of the project, it is estimated that in excess of one thousand job opportunities will be created, and the operational phase will generate hundreds of further employment opportunities. This influx of employment will also have positive effects on local economy, and will create new opportunities for entrepreneurial endeavours, and increases in local revenues. When the project proposal was submitted to the federal government in December of 2012, a potash mine was considered a “designated project” under the Canadian Environmental Assessment Act, which triggered a federal environmental assessment process. In October of 2013, the Government of Canada amended the Regulations Designating Physical Activities to align them with the Canadian Environmental Assessment Act. As a result, the amended Regulations delisted potash mining as a designated activity requiring an environmental assessment. The Canadian Environmental Assessment Agency (CEAA) then terminated the environmental assessment process for the Muskowekwan potash mine project, and it was taken up by the provincial environmental assessment process. However, before the CEAA terminated the environmental assessment process, the project proposal was posted on their website for comments. The comments received were generally positive; however, there were submissions made by two First Nation communities, one Métis group, and one environmental group. The concerns that were raised through the CEAA environmental assessment process included potential effects of the project on quality and quantity of surface water and on water tables; salt stockpiles leaching into groundwater and being transferred by wind and extreme weather; impacts on wildlife; potential greenhouse gas emissions; and impacts of flooding. There were also specific concerns from the Métis group relating to right of access and potential damage to a Métis historical site. This site, referred to as the Chicago Line or Little Chicago, is located within the project area and used for traditional purposes (foraging, hunting, and other cultural and traditional activities). Social and economic impacts relating to the potential for increased instances of intoxicant availability and criminal activity in conjunction with population increases, and transient population growth were also raised. The rights-based comments raised by the First Nation and Métis groups are being addressed through Indigenous and Northern Affairs Canada’s (INAC) dedicated consultation and accommodation process as they are not strictly related to the regulatory development for the mine, but more a result of the project itself, and the land use. The consultation and accommodation process makes certain that mitigation measures are in place to ensure that potential or existing Aboriginal or Treaty rights are not negatively impacted. At the beginning of INAC’s consultation and accommodation process in 2013, contact with Indigenous stakeholders provided introductions to INAC’s role and process for engagement, and offered stakeholders the opportunity to apply to the Aboriginal Participation Fund — a fund whose purpose is to help defray potential costs associated with the engagement process, so that cost is not a deterrent to concerned rights holders participating. INAC has met with potentially affected Indigenous communities to discuss the project to date and these discussions will continue into the second draft of the project’s provincial environmental assessment report submission, and as the project moves into the pre-development phase. Prepublication The Regulations were prepublished in the Canada Gazette, Part I, on June 25, 2016, and in the First Nations Gazette, Part I, on July 5, 2016, for their respective 30-day comment periods. No comments were received as a result of the First Nations Gazette comment period. INAC received one comment from a citizen following prepublication in Part I of the Canada Gazette relating to sufficient notice of the Regulations, the applicability of the First Nations Certainty of Land Title Act with regards to the proposed potash mine project, and the requirements regarding an environmental assessment for the proposed project. Key stakeholders — including the Muskowekwan Band Council and the Province of Saskatchewan — have been engaged throughout the regulatory development process since the project’s inception in 2012. Furthermore, the First Nations Certainty of Land Title Act is not applicable to this particular project because regulations designed to govern a potash mine do not change the tenure of land or involve land titles registration. Finally, the Province of Saskatchewan is currently undertaking its environmental assessment of the potash project under the province’s Environmental Assessment Act. Any potential adverse effects of the project must be mitigated before it is allowed to proceed. Also, because the project will be located entirely on reserve lands, which are federal lands subject to the Indian Act, INAC is required to authorize the project under the Indian Mining Regulations, the Indian Act, and the Indian Reserve Disposal Regulations. INAC is therefore required to evaluate the environmental effects of the project under section 67 of the Indian Act. Issues of an environmental nature that are raised in the federal assessment process will also be addressed through the provincial process. Department officials responded directly to the stakeholder to provide clarification and information on the concerns that were raised. No changes were made to the Regulations based on the stakeholder’s comments. During the review period following prepublication, an inconsistency was identified between the project land description presented in the initial project proposal with the description filed in the Canada Lands Survey System. This resulted in the unintended omission of mineral interests in the land descriptions in Schedule 1, paragraph (b) of the draft Regulations that were prepublished. To correct this error, with stakeholder agreement, the Administrative Area Plan and the project lands description as identified in Schedule 1, paragraph (b) of the Regulations were amended to describe the areas of the new Administrative Area Plan and registration number of the Canada Lands Survey System. This amendment ensures that, as originally intended and consistent with stakeholder consultations and expectations, the Regulations will apply to all of the surface and subsurface lands identified as project lands for the mining operations. Rationale The Government of Canada does not have a regulatory regime specifically designed to regulate a potash mine on-reserve, and the existing Indian Mining Regulations are not adequate to appropriately manage the complex development and operation of a potash mine on-reserve. Creating the Regulations contributes to the Government of Canada’s strategic outcome of facilitating the sustainable use of First Nation community lands and resources. The Regulations allow for the adoption of a modern, robust regulatory regime to close the regulatory gap for the potash development that exists between federal and provincial lands. Filling this regulatory gap provides worker health and safety and environmental protection for the project lands and surrounding area. The Regulations will also advance closing the economic gap for First Nations by providing both direct and indirect economic benefits to the Muskowekwan First Nation. Although the creation of these Regulations does not ensure the project will go ahead, without them the project could not go ahead. The Regulations level the playing field between the off-reserve and on-reserve regulatory environments, making the reserve land more attractive for investment. The indirect benefits of the Regulations include resource revenue for the First Nation, increased employment and economic development opportunities for the First Nation and surrounding communities, and royalty revenues. These benefits are not quantified, as they are secondary benefits of the Regulations. The regulatory approach of incorporating by reference the provincial regulatory regime for potash mining is significantly more cost-effective than creating a new federal regime to regulate the project. The province already has a well-established potash mining regulatory regime and expertise in this area, and fewer human resources and work hours will be required to incorporate by reference the provincial regime than to develop a whole new federal regulatory regime. Provincial officials will administer and monitor much of the activity of the mining operations synonymous with standards and practices for potash mining off reserve land. As a result, the developer will not carry more administrative burden than what would be expected if the on-reserve project was located off reserve. Employing the existing provincial resources for the Muskowekwan potash mining project will generate secondary cost savings for the Government of Canada because the existing provincial infrastructure will be used to administer and monitor the facility for potash mining as it does on provincial lands. Making these Regulations does not necessitate the project moving ahead; rather it enables the project to proceed on the Muskowekwan First Nation lands. Therefore, there will only be secondary costs and economic benefits for the Province of Saskatchewan once the mining project comes to fruition. The proposal is an enabling regulation; therefore, there are no direct costs to the federal government, Canadians or the industry at large. In addition, capital and operating costs of the actual solution potash mining operations have not been included as they will not be costs resulting from the creation of these Regulations. The Regulations also benefit the Government of Saskatchewan by promoting increased investment in the province; and ensuring that potash mining on the Muskowekwan First Nation project lands will be subject to a regime that mirrors the regime that applies in the surrounding area, with an equivalent level of certainty for environmental protection and management measures. They also provide assurance to the general public that the potash development will be adequately regulated using industry-wide standards, addressing risks to citizens and to the environment. This project could also illustrate to other industry leaders increased federal flexibility to encourage investment opportunities in First Nations communities through the effective intergovernmental regulatory cooperation under FNCIDA. Implementation, enforcement and service standards The primary reason for establishing the Regulations for the Muskowekwan First Nation solution potash mining lands is to enable a full range of comprehensive regulatory standards, including compliance and enforcement mechanisms. The Regulations include the following authorities to monitor compliance and to detect and penalize non-compliance: requirements for industry to obtain various licences and approvals, to keep records, make reports, and provide information on request; authority for government officials to inspect, investigate, search and seize, and to issue directives and orders; and ability to issue fines and other financial penalties for non-compliance and offences; and authority for government officials to make applications for various orders, if necessary. Compliance and enforcement provisions, to a large degree, replicate provisions in the regulatory regime of the Province of Saskatchewan that apply to similar projects off-reserve. To summarize, the Muskowekwan First Nation Solution Potash Mining Regulationsreplicate, with minor adaptations, the provincial regime, and give provincial officials the authority to administer, monitor and enforce the regulatory regime. The tripartite agreement between the Muskowekwan First Nation, the Province of Saskatchewan and the Government of Canada provides the conditions, under which provincial officials will administer, monitor and enforce activities. Contact Neil Burnett Director Policy, Research and Legislative Initiatives Lands and Economic Development Indigenous and Northern Affairs Canada 10 Wellington Street, 17th Floor, Room 090 Gatineau, Quebec K1A 0H4 Telephone: 819-994-7311 Fax: 819-994-4345 Email: [email protected] Footnote a S.C. 2005, c. 53 Footnote b S.C. 2005, c. 53 Footnote c S.C. 2005, c. 53 Footnote d S.C. 2012, c. 19, s. 63 Footnote e S.C. 2005, c. 53

This Bill does not amend any statutes.

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