Northwest communities finally get piece of natural resources action

Written By Fran Yanor

A few hours after BC Finance Minister Katrine Conroy stood in the legislature to announce $250 million in new funding for a revenue-sharing agreement in the northwest, glasses clinked at a nearby restaurant where mayors and their staff gathered to celebrate a hard-won victory. 

“I feel good. I’m really happy. It’s not as much money as we wanted, there’s no question, but it’s a foot in the door. It’s a really strong start,” said Terrace mayor Sean Bujtas.

“We’re ecstatic,” said Smithers mayor Gladys Atrill. “The key that we were really looking for is an ongoing agreement.”

The province committed to sharing $250 million in resource development revenue over five years with the Northwest BC Resource Benefits Alliance, a group of 21 communities and three regional districts stretching from Masset to Vanderhoof. The northwest group has been lobbying the province more than a decade for a share of the billions of dollars in revenue flowing from natural resource projects in the region, as well as from resources passing through from the northeast. 

Because most of the $154 billion in major industrial projects being built or proposed in the northwest occurs largely outside municipal boundaries, communities don’t get a portion of the revenue. They say they are unable to keep up with costs of maintaining infrastructure the region relies on.

“A significant amount of resources come out of their communities that don’t benefit their community. So this is a way of putting those benefits back into the community,” Finance Minister Katrine Conroy explained in response to a question during a press conference on budget day. 

Finance Minister Katrine Conroy presents BC’s 2024 budget last week while Premier David Eby and Attorney General Niki Sharma look on. [Photo BC Government]

Communities need to function well for industries to have success and this money will help them do that, said Prince Rupert mayor Herb Pond. “How are they going to draw people into the North? It’s only going to happen if the communities are functioning well.

“This is not a gift from the rest of the province,” he said. “This is LNG money and pipeline money and forestry money and port money, and all of these things that that generates. This is a piece of that coming back into the region. So that we can build really livable communities.”

“This is not a gift from the rest of the province. This is LNG money and pipeline money and forestry money and port money.”

Herb Pond

Prince Rupert hosts the third largest port in Canada, behind Vancouver and Montreal. Vancouver has 2.8 million people and Montreal, 4.4 million. Rupert has 12,000 residents. 

“What I constantly tell anyone who will listen is ‘We’re all in.’ But if you think 12,000 taxpayers in Prince Rupert are going to create the kind of community that’s going to support Canada’s third largest port – and rapidly growing – we’re deceiving ourselves.” 

Northwest booming but tax rolls don’t reflect it 

Besides having one of the busiest ports in the country, the region hosts LNG Canada and Rio Tinto Alcan near Kitimat, as well as numerous mining operations and untold prospects in the so-called Golden Triangle, a mineral-rich area north-northeast of Prince Rupert, Terrace and Smithers. As well, the majority Haisla-owned Cedar LNG is moving ahead and the Nisga’a’s Ksi Lisims LNG project is in development. 

In fact, more than 74 per cent of all provincial projects related to mining, oil, gas, wood and petrochemical manufacturing are located in northwest and the activity is only expected to escalate as demand for critical minerals to support global electrification ramps up. 

The Golden Triangle in the northwest holds known deposits of gold, silver, copper, zinc, lead and molybdenum. [Map BC Regional Mining Alliance]

The golden triangle, which spans parts of Tahltan and Nisga’a territories, includes the reportedly largest undeveloped gold-copper deposit in the world.

“It’s all funneled through our area,” said Bujtas, who is co-chair of the northwest alliance, along with Atrill and Pond.

Yet hardly any of the revenue stays there. 

Because most of the natural resource operations are located beyond municipal boundaries, northwestern towns and cities gain almost no local tax revenue, while the province pulls in about $13 billion in annual provincial taxes. The communities face such a shortfall in revenue across the board, the mayors say most of the $250 million in funding will go to chronically underfunded basic services.  

Infrastructure deficit may be ‘drop in bucket’

2019 study revealed the northwest needs $1.3 billion in capital investments in local infrastructure to build capacity to support major projects and an additional $113 million in annual operating investment to sustain local government infrastructure. 

“We also learned that we were not, as municipalities and regional districts, near where we should be with our asset management and identifying what the real deficits were for our communities when it came to infrastructure, roads, sewers, water replacement, stuff like that,” said Ron Poole, a consultant with almost 40 years in local governments who is assisting the resource benefits alliance. 

“We [are] not, as municipalities and regional districts, near where we should be with our asset management.”

Ron Poole

Once municipalities include asset management in the mix, “that 1.3 billion is likely going to look like a drop in the bucket,” Poole predicted.

Poole may have the longest institutional memory of the northwest’s battle for funding, having served over the years as chief administrative officer of Terrace, Kitimat, and the Regional District of Kitimat-Stikine. He worked as a CAO for Chetwynd in 1996 when that region signed its first resource revenue-sharing agreement and Poole recalled talking with the then-Terrace mayor about the northwest’s potential for the same when he began working with the city in 1999. 

But it would be 15 years before the Regional District of Kitimat-Stikine formally embraced the idea, then several councils and another decade after that before the current leaders of the alliance pulled it over the line. 

Shane Brienen, former co-chair of the alliance, who stepped aside as mayor of Houston last year to run as the BC United candidate in Nechako Lakes, said the resource revenue agreement is hugely positive and will be transformational.

“It’s long overdue,” he said. “it’s going to change our region for decades to come.”

Brienen was involved with the northwest’s lobby for natural resource revenue dollars since it launched in 2014. He said this will fill an important gap. Smaller communities like Houston are ofter not able to match some of the criteria to qualify for federal and provincial grant programs.

As well, amenities were often added to a community to attract workers for big projects involving sawmills, fisheries or mining, then the companies either close or sell their businesses leaving municipalities and residents “on the hook” to pay for them, said Brienen. “Our tax base really doesn’t work that way.”

Where’s the money going to go?

Terrace is a hub city with a population of about 12,500 with limited corporate and industrial development and a local revenue tax base of about $30 million. 

“The city has 85 kilometres of road. We can rebuild 400 meters of road a year right now. That means that we are on what I call the 212-year plan. If we rebuild the road today, we don’t rebuild it again for 212 years,” said Bujtas. 

“We can rebuild 400 meters of road a year right now.”

Sean Bujtas

With the influx of resource benefits funding, infrastructure maintenance and upgrades can speed up dramatically.

“Sewer and water and roads are going to, by far, be the priority,” Bujtas said.

Besides the ongoing challenge of maintaining and replacing old infrastructure, communities must balance the demands of population and housing growth.

Faced with a $1.3 billion infrastructure deficit, even the resource benefits funding will only chip away at it.

“It’s going to take us a long time to get past that deficit before it’s new projects,” said Bujtas. “We’ve got a lot of work to do.”

Smithers banks on long-term funding

In Smithers, the needs are so many, it’s hard to know where council will start, said Atrill.

Property taxes pay for regular maintenance like fixing potholes, but the town relies heavily on grants for improvements to major infrastructure.

“A one per cent tax increase in our community generates $80,000.”

Gladys Atrill

 “We’ve been plodding along, doing the grant applications,” she said. But grants are time consuming for staff, both during the application and reporting stage, and the lag time between application and decision can be long and is sometimes “extraordinarily costly.”

Last year, Smithers was waiting to hear back on a grant application to stabilize a river embankment. 

“While we were waiting, the riverbank fell in.”

Having some money, paid annually, in a predictable way, will allow staff to plan further ahead and help the community build reserves, the mayor said. A new firetruck could cost $900,000, an infrastructure emergency could run hundreds of thousands and the town has a sewer upgrading project estimated at $8 million. 

“A one per cent tax increase in our community generates $80,000,” Atrill said. “There’s no way we can pay for that without grants.” 

Prince Rupert: whack-a-mole watermain breaks

The city of Prince Rupert was founded over 100 years ago and most of the underground pipes and sewers were built within a short span. They’re failing all at once now too.

About 40 per cent of the water in the city’s water pipes are lost due to leakage, so council has put off building a new full-filtration treatment plant – the current one has chlorination only – until after the pipes are fixed. Otherwise, the municipality will be paying for very expensive water to seep into the ground, said mayor Pond. 

Incredibly, the pipes are so degraded and the leaks so prevalent, they caused 34 water main breaks last year alone. Sometimes pressure change from one pipe rupture dominoes into a second and third break as the stress is transferred down the line.

By comparison, Richmond, a city with 18 times the population, had only three or four water main breaks last year, Pond said. 

“Our pipes tell our people where they’re going to work today, not the other way around.”

The breaks happen so often, the city is under a constant water advisory for people who are immune-compromised. “Rather than telling people on-off, on-off, we just leave water advisory on,” he said. Occasionally, there are boil water notices for healthy residents. But Pond said tap water is generally safe for healthy people and that he drinks it. 

The community is in the midst of replacing a third of their water pipes to the tune of $205 million, thanks to a provincial grant of $65 million and an $82 million grant they are crossing their fingers on from the federal government, with the rest of the money coming from the city.

Pond credited Eby with understanding the importance of rural communities. “Despite being a big city guy … he gets the role that we play and that it’s outsized. We kind of punch above our weight in these little communities. But [Eby] really listens. And he’s become our biggest champion.”

Negotiations will determine when the money flows

No one knows when the benefits will start, but it sounds like both sides want the money flowing as soon as possible, Terrace’s Bujtas said. This week, alliance representatives and provincial government staff will begin hammering out an agreement and a funding model that’s equitable across all the communities. 

“The devil is in the details,” said Poole. “The whole idea is that nobody comes out of this suffering.”

On the alliance side, they need to make sure they know where the money is going, he said, and all three regional districts need to get their asset management in place.

“The work just started for us,” he said.

The goal is to end up with an agreement that renews like the Peace River resource Agreement, which has been renegotiated every few years but remained a constant source of funding. 

“Do we feel like [the RBA funding] needs to be double – yes,” said Bujtas. “But we can now take this money and prove to the government what we need it for, what we’re using it for. And then that will give us a stepping stone for hopefully a renegotiation in the future.”

Premier David Eby with Terrace mayor Sean Bujtas at an event in northwest BC last year. [Photo supplied]

The mayors hope to finalize the agreement by April so they don’t lose any more time on an already short construction season in the north. 

On the night of the budget though, the mayors allowed themselves a couple of hours to celebrate a very big win.

“We’re just super happy and looking forward to getting a complete funding model in place so our communities can all move forward,” said Bujtas.