Negotiation of Agreements

Impact Benefit Agreements

Impact Benefit Agreements (IBAs, also referred to as Resource Agreements) are often viewed as the main negotiation instrument between First Nations and proponents.45 Many excellent resources exist for First Nations who are considering entering into these types of agreements with proponents.46

IBAs are signed between proponents and First Nations “in order to establish formal relationships between them, to reduce the predicted impact of a mine and secure economic benefit for affected communities.”47 IBAs can also serve as evidence of a First Nation’s conditional consent to a project, providing the project is carried out in accordance with the terms and conditions specified in the agreement.48 IBAs vary considerably in their scope and complexity, and “there is no limit except imagination concerning the topics that may be included in an IBA relating to major mining projects”.49 Some common themes include business and employment opportunities, community development program contributions, training and education programs, etc.50 For a list of potential topics to include in an IBA, see the sources listed in Appendix “B”.

As there are currently no legal obligations on proponents to enter into an IBA with affected First Nations in BC, this discussion paper focuses on jurisdictions whose laws do require the negotiation of IBAs between proponents and Aboriginal peoples.

Recommended Solutions

Legally require IBAs between First Nations and proponents as a prerequisite to the issuance of mine permits

[TAGS: Free, Prior & Informed Consent; Duty to Consult; Condition]

“Past practices have shown that it is unrealistic to expect that industry, who are understandably concerned primarily with their shareholders and their bottom line, will voluntarily seek to involve First Nations in any meaningful way through employment opportunities, business opportunities and sharing of the financial benefits of the project, unless they are required to do so.”

– BC First Nations Energy & Mining Council (2010)51

In BC, the provincial government encourages proponents and First Nations to negotiate IBAs. The completion of an IBA, however, is not a mandatory prerequisite to project approval.52 This omission significantly undermines First Nations’ bargaining position when seeking to negotiate strong, mutually beneficial IBAs. As such, First Nations and practitioners alike have expressed the need for mandatory agreements between proponents and affected First Nations before the government approves a mining project (i.e. by issuing a mine permit or an environmental assessment certificate).53

Unlike BC, several other jurisdictions have enacted laws that promote the negotiation of IBAs. For example:

  • In the Philippines, legal provisions grant Indigenous Peoples and Cultural Communities priority rights in the harvesting, extraction, development and exploitation of any natural resources within their ancestral domains.54 Where a non-Indigenous person is interested in extracting natural resources (including mineral ores) from these ancestral lands, a formal and written agreement must be entered into with the Indigenous community before the resource development can commence.55
  • Under Yukon’s oil and gas legislation, when work is anticipated to exceed $1,000,000 in any twelve month period, the licensee must enter into a benefits agreement, and this agreement must be in place before work can begin.56
  • In Nunavut, economic and social benefits agreements with proponents must be finalized before projects can commence on Inuit-owned lands.57
  • In Australia, the Native Title Act 1993 provides a process for negotiating agreements between Indigenous peoples and proponents under the “right to negotiate” process for the grant of rights to mine.58 The parties ultimately determine the main features of the agreements, although some guidance is found in the legislation59 and there is no statutory timeframe for completing the agreement negotiations. However, where agreement cannot be reached, the parties must wait a minimum of six months before seeking arbitration from the NNTT.60
  • The Canada-Newfoundland and Labrador Atlantic Accord Implementation Newfoundland and Labrador Act requires developers to complete a benefits plan before the regulatory authority will approve the development plan required under the Act.61 This benefits plan is intended as a means to promote employment of “members of the labour force of the province”, with the possibility for extra provisions to support “disadvantaged individuals or groups62 (which could include Aboriginal communities).

Until the provincial government or the courts impose requirements for proponents to enter into IBAs with First Nations before mining activities commence, First Nations can attempt to enter into MOUs, letters of understanding, or access/exploration agreements that commit the proponent to negotiate an IBA prior to beginning mining operations. In some cases, this requirement has been included in agreements between First Nations and territorial governments. For example, the ‘Economic Measures’ provisions of the Champagne & Aishihik First Nations Final Agreement provides for the Yukon government to require that proponents enter into Project Agreements when a proposal for a development on traditional territories is submitted to the EA regulatory authority.63

Enact laws that encourage First Nations’ rights to financial participation

[Tags: IBA; Financial Participation]

One of the main purposes of an IBA is to ensure that First Nations benefit from the mining project. In addition to the provision of employment opportunities, many IBAs contain some form of financial participation rights for First Nations. There are many different financial participation options, including:64

  • Gross Overriding Royalty: This involves sharing a percentage of the mine’s gross revenue (i.e., pre-deduction of expenses) from the sale of ore. It is a common approach adopted by provincial governments for resource royalty payments.Unfortunately, it has seldom been adopted in resource agreements with First Nations.
  • Equity: This is an ownership interest in all or part of the mining company. For public companies, the interest is held in the form of shares or stock options, and profits are generally distributed through dividend payments.
  • Profit Share: This is a right to a percentage of the total profits from the mine (over its entire life). This approach may be of limited benefit to First Nations since proponents often offset revenue to reduce their profits.
  • Guaranteed Base with Upside: This is a right to a percentage of the expected profits (as stated in the proponent’s bankable feasibility study). The right also includes a percentage of any profits exceeding the expected profits (i.e. the “upside”).
  • Fixed Payments: This is a right to a predetermined and fixed annual payment that does not fluctuate with the mine’s profitability.

Financial participation rights are provided in the laws of some jurisdictions. In South Africa, for example, resource agreements are increasingly being signed between local communities and proponents. These agreements include provisions that grant local communities shares in the mining company.65 Under the Inuvialuit Final Agreement, resource “Participation Agreements” may include a land rent (separate from royalty payments).66 Although not mandatory, under Australia’s Native Title Act 1993, negotiations may include an entitlement for native title parties “worked out by reference to: (a) the amount of profits made; or (b) any income derived; or (c) any things produced” from the activity.67

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