ECONOMIC NOTES MARCH 2015 THE CREE AND THE DEVELOPMENT OF NATURAL RESOURCES By David Descôteaux Northern Quebec overfl ows with mineral resources Nation, composed of some 16,000 people, already partici- whose development could generate substantial eco- pates in certain mining projects and has benefi ted in recent nomic activity. To derive benefi ts from these resour- years from the development of natural resources in the James ces successfully, businesses, the government and Bay region. Not surprisingly, the standard of living in this local communities—many of which consist of Aborig- Nation is among the highest of Quebec’s Aboriginal peoples. inal populations—must collaborate in order for every- one to have an interest in the economic success of development projects. In this regard, the Cree of It is the openness of Quebec’s Cree Quebec have demonstrated over the years that it is Nation to resource development that possible to develop natural resources in such a way explains, at least in part, its economic that everyone benefi ts, among other things by join- dynamism. ing with companies to become stakeholders in development projects, invested in their success. It is the openness of Quebec’s Cree Nation to resource de- The goal of this Economic Note is to describe this collabora- velopment that explains, at least in part, its economic dyna- tion model, which encourages and facilitates development in mism. The signature of the “Paix des Braves” (the Peace of Quebec’s north while respecting Aboriginal communities and the Braves) between the Quebec Government and the Grand 2 forming partnerships with them. Council of the Crees in 2002 was a major turning point. This agreement, which aimed to encourage Cree and non-Cree THE CREE MODEL organizations to collaborate in developing the territory’s The “Plan Nord” announced by the Quebec government in resources, transferred to the Cree the administration of a cer- 2011, to be rolled out over a period of 25 years, aims specif- tain number of domains that used to be the responsibility of ically to seize the opportunities offered by the development the Quebec government like social services, employment of northern Quebec’s resources.1 It anticipates the public and and economic development. It granted to the Cree an private investment of many billions of dollars for the develop- annual, tax-free payment of $70 million, indexed to the 3 ment of mineral resources and the construction of transporta- increase in the value of natural resources development. The tion infrastructure. agreement allowed for the hiring of Cree workers by Hydro- Québec and by natural resource development companies. On this territory, which covers 72% of the province of Que- The Paix des Braves also reserved a portion of contracts for bec, there are over 120,000 inhabitants, including 33,000 Cree businesses and stipulated the payment of royalties from Aboriginals belonging to four First Nations: the Cree and Hydro-Québec. Inuit in the Northern Quebec region, and the Naskapi and Innu living in the North Shore region (see Figure 1). The Cree This Economic Note was prepared by David Descôteaux, Public Policy Analyst at the Montreal Economic Institute. The Cree and the Development of Natural Resources Figure 1 Aboriginal communities and “Plan Nord” projects Kuujjuarapik Whapmagoostui KéMag (Taconite) Matimekosh DSO Kawawachikamach Chisasibi Lac Duncan Wemindji Éléonore Renard Lac Bloom Eastmain Mont-Wright Fire Lake North Lac Knife Rose Tantalum-Lithium Fire Lake Waskaganish Nemaska Whabouchi Pakuashipi Lac Guéret Lac Tio La Romaine Natashquan Mistissini Uashat Maliotenam Bracemac-McLeod Arnaud Casa Berardi Waswanipi Blackrock Mingan Lac Bachelor Oujé-Bougoumou Lac à Paul Langlois Active mine Mine project in preliminary development Cree Innu (Montagnais) Mine project in development Naskapi Inuit Sources: Ann Bigué and Frédéric Pagé, “Le Plan Nord et les autochtones,” Lavery, November 2009; Government of Quebec, “Plan Nord.” An agreement like the Paix des Braves, by reducing the risk gamau, signed an agreement in 2013 with the Oujé-Bou- of confl ict and by setting up a sound arbitrage process for goumou Cree community. In addition to providing training, determining the best locations for mining projects, avoids the education, employment and business opportunities for the “not in my backyard” phenomenon and maximizes the eco- community, it guarantees that the Cree will receive fi nancial nomic gains both for Aboriginal communities and for Quebec benefi ts linked to the future profi tability of the iron ore and society as a whole. vanadium project.5 BEYOND THE PAIX DES BRAVES The Canadian Stornoway Diamond Corporation, for its part, The framework of the Paix des Braves does not prevent a signed an agreement in 2012 with the Mistissini Cree com- mining company from signing an agreement with a particular munity and the Grand Council of the Crees for the Renard band council to share the profi ts of a mine. One of the fi rst Diamond Project. The Cree will have employment priority; agreements of this kind was reached between the Inmet when equally qualifi ed, contracts will be awarded to Cree Mining Corporation and the Cree of Mistissini. The company businesses; and Stornoway will pay royalties to the Cree com- wanted to work the gold and copper deposits of the Troilus munity to work the mine.6 The Goldcorp mining company Mine, west of Lake Mistassini. The two parties negotiated negotiated a similar agreement with the Wemindji Cree com- and signed an accord in 1995, in which the corporation com- munity for the Éléonore gold-mining project in Northern mitted to hiring Cree workers for up to 25% of its workforce, Quebec. Under this agreement, the company commits to, granted Aboriginal businesses priority for certain contracts, among other things, provide the Cree with fi nancial benefi ts and paid an annual royalty to the Aboriginal community for in connection with the economic success of the project, spe- the duration of the active life of the mine.4 cifi cally “through a variety of fi xed payment mechanisms and participation in the future profi tability of the mine.”7 Other agreements, most of them confi dential, are based on mechanisms for sharing revenue with the community. This These agreements have enjoyed a certain degree of success, could mean, for example, royalties that will grow in step with both in Quebec’s north and elsewhere in Canada, but some the production of a mine, with profi ts earned, or with the of them have hit a few snags on occasion. This was the case, evolution of the price of the resource. For instance, Black- for instance, when tensions surfaced in 2013 between the Rock Metals, which exploits an iron ore mine near Chibou- northern Ontario Attawapiskat First Nation and the De Beers 2 Montreal Economic Institute The Cree and the Development of Natural Resources diamond mining company. In this case, a better alignment of Table 1 economic incentives based on revenue sharing, for example as a proportion of profi ts, could have facilitated the project’s smooth operation. Indeed, one of the grievances of the Recent agreements between companies Aboriginal community was that it considered its royalties (a and Aboriginal communities fi xed amount of $2 million a year) too small compared to the annual production of the Victor Mine, evaluated at $400 million.8 Community Company Project The current controversy regarding the Strateco Resources uranium exploration project (the Matoush project), located Cree of Nemaska Nemaska Whabouchi lithium mine north of Chibougamau and of the Cree village of Mistissini, Lithium (3.6% participation in the project) highlights another important factor in the success of develop- ment projects, which is however more a matter of law than economics, namely its “social acceptability.”9 This project, Mi'kmaq of the Innergex Escuminac windfarm Gaspé Peninsula (50% participation in which Quebec’s offi ce of environmental hearings (BAPE) was the project) looking into at the time of writing, is contested by numerous groups and is subject to a moratorium. For resource develop- Atikamekw of Resolute Forest Opitciwan sawmill (55% ment to take place to everyone’s benefi t, governments, com- Obedjiwan Products participation in the panies and communities must all make an effort to fi nd some project) common ground, within the existing legal framework, in order not to jeopardize development projects in general. Cree of BlackRock Iron ore project Oujé-Bougoumou (confi dential) Certain recent agreements, involving the Cree among others, go further in the merging of economic interests. They contain Cree of Mistissini Stornoway Renard diamond project the usual clauses regarding royalties, the hiring of local work- Diamond (confi dential) ers and contracts reserved for local businesses, but they also give the Aboriginal community a more direct fi nancial stake Cree of Wemindji Goldcorp Éléonore gold-mining in the economic success of the project. project (confi dential) One of the ways this is done is through stock ownership. The presence of Aboriginal shareholders in Quebec companies 10 has historically been low, according to the available data. ity share of 55% in the Opitciwan sawmill, while Resolute However, certain recent projects are reversing this trend. For holds the remainder.13 example, the Cree community of Nemaska owns 3.6% of the shares of Nemaska Lithium’s Whabouchi lithium mine project The more that local communities become stakeholders in in the James Bay region.11 Three Mi’kmaq communities in the development projects—whether by becoming shareholders Gaspé Peninsula will also be equal partners with the Lon- or by signing agreements that provide gains for the commun- gueuil fi rm Innergex in a windfarm in Escuminac that may fea- ity that increase at the same rate as the profi ts of the com- ture up to 89 wind turbines.