Panel Report

The environmental damage and potential social disruption caused by the Cigar Lake Project can be justified only if the project returns certain benefits to Canadian society. Although reasonable profits for the proponents are essential to the successful completion of this project, resource development is not justified unless it also brings benefits to Canadians in general and to local residents in particular. The major quantifiable benefits take two forms -- royalties/taxes paid to governments, and employment/business opportunities for citizens. Since local people must bear the greatest risk of environmental damage or social disruption, it is essential that a substantial share of the jobs and business activity created by the project remain in the north.

This chapter contains a discussion of the benefits from the Cigar Lake Project that might be expected to accrue to Canadians, in general, through government revenues, and to the residents of Saskatchewan's North, in particular, through employment and business opportunities.

13.1 Benefits to the People of Canada and Saskatchewan

13.1.1 Project Viability

A project that lacks economic viability is not likely to provide significant benefits. In fact, economic disbenefits associated with unmitigated environmental damage are likely to result from projects that are not economically sound. The province of Saskatchewan, therefore, included a viability assessment in its submission to the panel. [Jane Forster, Government of Saskatchewan, Opening Presentation, Cigar Lake Public Hearings, Regina, Saskatchewan, September 4, 1996, p. 7.] Noting that the Cigar Lake Project has one of the largest and richest uranium deposits known, the province concluded that it is expected to be among the most competitive uranium mining operations in the world. At capacity, it will be able to provide sufficient uranium to meet approximately 14 per cent of the annual world-wide production requirements.

Other factors which the province indicated would contribute to the economic viability of the Cigar Lake Project include:

• the existence of positive cash flows across the forecast price ranges;
• a predicted rate of return that is higher than the industry threshold for project viability;
• less than one chance in one hundred of economic failure, according to Monte Carlo simulation techniques used to evaluate a range of scenarios; and
• project owners (Cameco, Cogema, Idemitsu, TEPCO and KEPCO) that have expertise in uranium marketing and well-developed, long-term relationships with customers.

Based on the Department's analysis, we believe the project will be economically viable and will create significant benefits to the province and to the people of the North.

J. Forster, Province of Saskatchewan, Transcript of Cigar Lake Public Hearings, Regina, Saskatchewan, October 4, 1996, pp. 21-22.

13.1.2 Provincial Revenues

Provincial revenue from this project will be obtained in the form of royalties, capital taxes and surcharges, surface lease fees, property taxes, provincial sales taxes and income taxes. The level of public income that may be expected from this project will depend substantially on its profitability, which in turn will be directly dependent on the price at which the product, yellow cake, can be sold. Using various scenarios, as required by the Guidelines, the proponent has concluded that provincial revenues could be as high as $1.44-billion or as low as $1.00-billion. [The Cigar Lake Project Environmental Impact Statement, Additional Information II, Cigar Lake Mining Corporation, July, 1996, pp. 1-3 to 1-5.] The province provided an independent evaluation that was somewhat more conservative with respect to the predicted revenues. Based on an extensive analysis of world-wide uranium supply and demand, [Final Report, Saskatchewan Environment and Resource Management, May, 1996, Section 3, pp. 1-26.] the province concluded that revenues would be in the range of $595-million to $905-million. [J. Forster, Government of Saskatchewan, Opening Presentations, Cigar Lake Public Hearings, Regina, Saskatchewan, September 4, 1996, pp. 9-11.]

A comparison of the estimates provided by the proponent and the province has been made in Table 13.1. It can be seen that, in addition to predicting royalties that are about 20 per cent lower than those arrived at by the proponent's scenario, the province is expecting to receive much less revenue from sales taxes. The fact that the province lowered its sales tax from 9 per cent to 7 per cent after this estimate was made would cause a further decrease in the estimated revenues.

The proponent's estimate of revenue in Table 13.1 is also larger because all payroll taxes are taken as revenue to the province, whereas the provincial estimate was limited to income taxes. Although a breakdown of the amount included by the proponent is not given, it is our view that payroll deductions for programs such as Workers' Compensation should not be considered to be public revenue. Such programs add no incremental funds to the public treasury; they simply provide insurance for the employees that the proponent would have to purchase elsewhere if it were not available in its present form.

Despite the difference in the amounts predicted by the various scenarios, it is apparent that this project has the potential to make a substantial contribution to the provincial treasury.

Before concluding the discussion of potential provincial revenues from the Cigar Lake Project, it should be noted that income from the surface lease fees and property taxes does not go into the province's general revenue fund; it is transferred directly to the Northern Revenue Sharing Trust Account which provides funding for northern municipalities and school boards. [Final Report, Saskatchewan Environment and Resource Management, May, 1996, Section 2, p. 81.] A portion of the public funds derived from this project would therefore be of direct benefit to northern communities. However, as we have noted in a previous report, [D.G. Lee, J.F. Archibald, J. Dantouze, R. Neal and A. Yassi, McArthur River Underground Exploration Program, Supply and Services Canada, January, 1993, p. 4.] bands and persons who fall under the fiduciary responsibility of the federal government do not share in this fund, thus creating the possibility of inequities if the federal government does not also use some of its revenue from uranium mining to establish a similar fund for those communities under its jurisdiction.

13.1.3 Federal Revenue

The federal government will also receive substantial income from the Cigar Lake project. The proponent estimates that total revenue to the Government of Canada would be $665-million. These estimates, summarized in Table 13.2, include various payroll taxes such as CPP and EI which, in common with the provincial WCB fees mentioned in Section 13.1.2, provide no net benefit to the public treasury. Table 13.2 also includes $25-million for services provided by the AECB which fall into the same category. It appears, therefore, that the net federal income attributable to the Cigar Lake project would be somewhat less than the $665-million predicted in Table 13.2.

The province made a point of noting that the AECB fees were deducted from the company's income before royalties were calculated. This has the effect of decreasing the funds that would flow from this project into provincial coffers.

More significant to the Province of Saskatchewan is the fact that those costs are deducted before the calculation of royalty payments and, as such, proportionately reduce the royalty payments paid by the industry to the province. Indirectly, the people of Saskatchewan are paying the costs for AECB's regulation of uranium mining in Saskatchewan.

T. Penikett, Government of Saskatchewan, Transcript of Cigar Lake Public Hearings, Regina, Saskatchewan, September 4, 1996, p. 7.

13.2 Benefits to Residents of Saskatchewan's North

13.2.1 Education and Training

Because current uranium mining practices rely heavily on modern technology, many of the jobs associated with the Cigar Lake Project would require considerable education and technical training. The main vehicle through which northerners can acquire the skills required to capture a significant portion of the jobs at Cigar Lake and other sites is the Multi-Party Training Plan. The objective of this plan is "to provide training that will enable residents of northern Saskatchewan to take advantage of new job opportunities and to compete for available vacancies that are being created through mining development in the province's north". [Multi-Party Training Plan, Northern Education Services Branch, Province of Saskatchewan, August, 1996, p. 2.] It does this by providing training-to-employment opportunities in cooperation with some of the mining companies, including Cameco Corporation, Cogema Resources Inc. and the Cigar Lake Mining Corporation. Other participants in the plan are Northlands College; the Prince Albert Grand Council; the Meadow Lake Tribal Council; Saskatchewan Post-Secondary Education and Skills Training; Human Resources Development, Saskatchewan Region; Jim Brady Development Corporation (Métis Authority); Saskatchewan Economic Development; and the Provincial Apprenticeship Board. This five-year, $10.5 million plan, which was announced as part of the province's response to a previous report from the panel, [The Government's Position on Proposed Uranium Mining Developments in Northern Saskatchewan, Government of Saskatchewan, December, 1993, pp. 31-32.] has been highly successful but will end in 1998. The province reported on October 4, 1996, that the partners in the Multi-Party Training Plan had invested $6.7-million which had enabled 544 individual students to participate. To that date, more than 300 training certificates had been awarded and 284 northerners, most of aboriginal ancestry, had gone on to full-time or seasonal employment, 76 per cent in mining-related work. [R. McKay, Government of Saskatchewan, Transcript of Cigar Lake Public Hearings, La Ronge, Saskatchewan, October 2, 1996, p. 70.]

The province also described efforts undertaken to improve science and mathematics education in northern K-12 schools and a new SIAST environmental engineering technology program that is expected to result in graduates being recognized as Applied Science Technologists. [Ibid., pp. 12-13.] Cameco Corporation, which will become the operator of the Cigar Lake Project if it is approved, also announced initiatives that would assist more northern students to enter university engineering programs. [B. Michel, Cameco Corporation, Transcript of McArthur River and Cigar Lake Public Hearings, La Ronge, Saskatchewan, October 2, 1996, p. 129.]

A final important initiative by the province is the attempt to incorporate the traditional knowledge of northern peoples into the training delivered. For example, a new Environment/Resource Management Certificate program is being developed in cooperation with several Aboriginal post-secondary training institutions, including the Saskatchewan Indian Federated College, the Saskatchewan Indian Institute of Technologies, Dumont Technical Institute, Northlands College and SIAST-Woodland. The insights acquired by northern people through centuries of living in harmony with the natural environment must be retained and included in any education designed to prepare residents of Saskatchewan's North for life in the twenty-first century.

It is clear that education and training are the keys to enabling northern people to benefit from resource development, including mining. Basic education, including improved literacy skills and computer training, should be as easily available in the north as in the southern part of the province. Efforts to improve the K-12 and college programs must continue and sufficient training-to-employment should be provided to ensure that a qualified northerner is available for each job opening created if the Cigar Lake Project is approved.

It is recommended that the Multi-Party Training Plan be renewed or replaced by an alternative, improved vehicle for training-to-employment when its current mandate expires. The good start that has been made under the auspices of the Multi-Party Training Plan must not be wasted by failure to capitalize on the successes that have been achieved to date. The cooperation between the province and the industry to provide training that approximately matches the employment opportunities available is an outstanding example of the way in which benefits from resource development can be maximized for local residents.

13.2.2 Employment

The Cigar Lake EIS indicates that employment opportunities will occur in two phases if the project is approved. The first phase, construction, will require approximately 270 employees and last for about two years. The second phase, production, will require 200 employees and last for an estimated 39 years. [The Cigar Lake Project Environmental Impact Statement, Supporting Document No. 8, Cigar Lake Mining Corporation, July, 1995, pp. 4-8.] Milling of Cigar Lake ore will also add 38 employees at the JEB site and extend the employment of 129 workers for an additional 25 years. [The Cigar Lake Project Environmental Impact Statement, Main Document, Cigar Lake Mining Corporation, July, 1995, p. 19-5.] In the present climate, where high unemployment is endemic, long-lasting jobs must be considered as one of the major benefits of the project, particularly if the majority of the employees are from northern Saskatchewan.

The Cigar Lake EIS states that, "residents of the Athabasca region of northern Saskatchewan will receive first priority consideration when filling vacant positions at the sites. Vacancies not filled from the Athabasca region will be open to other residents of Northern Saskatchewan. Vacancies not filled from northern Saskatchewan will be open to other residents of Saskatchewan and Canada." [Ibid., pp. 19-5 to 19-6.] In addition, during public hearings on the McArthur River project, Cameco Corporation (which has been designated as the operator of the Cigar Lake project, should it be approved) made a number of commitments with respect to its workforce at the McArthur River mine and the Key Lake mill. Through these undertakings, described in detail in a previous panel report, [D.G. Lee, J.F. Archibald and R. Neal, McArthur River Uranium Mine Project, Supply and Services Canada, February, 1997, pp. 6 - 7.] Cameco made three primary commitments with respect to employment opportunities and its employees. In summary, these are:

• a commitment to a policy of maximizing the opportunities for residents of northern Saskatchewan to fill any positions that become available;
• a commitment to the development and implementation of a comprehensive education and training plan for all employees; and
• a commitment to various measures to enhance on-site services available to their employees.

Although these commitments were made for another project, they should also apply at the Cigar Lake site. It is, therefore, essential that project approval include a requirement that employment commitments similar to those Cameco has made for the McArthur River project also apply to the Cigar Lake project. Furthermore, it is recommended that Cameco be held publicly accountable for these undertakings by inclusion in the surface lease of provisions that requires it to report annually to the province on progress made on the implementation of each of these commitments.

The Cigar Lake EIS states that northern employment is expected to reach "about 50% within five years of operations start-up". [The Cigar Lake Project Environmental Impact Statement, Supporting Document No. 8, Cigar Lake Mining Corporation, July, 1995, pp. 4-8.] We find this to be an unacceptably low expectation in light of the funds and efforts that have gone into preparing northerners for mine work and the commitment made by the proponent to maximize northern participation in its workforce. We believe that it should be possible to have a minimum of 50 per cent northern employees from the beginning of the project. Approval to proceed should be granted only with the condition that the proponent maintain a minimum of 50 per cent northern participation in its workforce at all times. Furthermore, it is recommended that the employment objective for northern participation in the workforce be increased by 1 per cent per year until it reaches at least 67 per cent. Sixty-seven per cent has been identified as the target because it appears to be an objective that is attainable, while at the same time requiring the proponent to remain committed to maximizing northern participation. It is also consistent with participation objectives that have been supported by the operators of other northern mines such as the BHP diamond mine [The Globe and Mail, " Mine Deal Would Secure Jobs for Natives ", October 21, 1996, p. 1A (Western Edition).] in the Northwest Territories and the McArthur River uranium mine. [McArthur River Report, Response to the Report of the Joint Federal-Provincial Panel, Cameco Corporation, April 2, 1997, p. 10.]

13.2.3 Business Opportunities

The Cigar Lake project will provide numerous business opportunities associated with the provision of goods and services. The proponent has stated that it is its intention "to provide first priority for new business opportunities to businesses from the Athabasca region communities" and secondary priority to businesses located in other parts of northern Saskatchewan. [The Cigar Lake Project Environmental Impact Statement, Additional Information II, Cigar Lake Mining Corporation, July, 1996, Table 1.3.1.] While this is a laudable commitment, the proponent then goes on to estimate that out of a total requirement of $1.87-billion only $338-million (18 per cent) would be obtained from northern Saskatchewan. This estimate is very low, especially when compared to Cameco's report that 42 per cent and 30 per cent of its goods and services were purchased in the north in 1995 and 1996, respectively. [McArthur River Project, Response to the Report of the Joint Federal-Provincial Panel, Cameco Corporation, April 2, 1997, pp. 9 - 10.] A goal of obtaining an average of at least 35 per cent of all goods and services from northern suppliers would be more justifiable. Further, with the increase in northern business acumen anticipated over time, it would not be unreasonable to expect this percentage to gradually increase over the projected 40-year life of the project.

Because northern business opportunities are among the most significant socio-economic benefits to be derived from this project, the proponent should be monitored to ensure that northerners are being given the priorities promised in the EIS. To ensure that the proponent is following through on its commitments, the surface lease should include provisions requiring the operator to report annually to the Government of Saskatchewan on its progress with respect to the acquisition of goods and services from northern business.

13.3 Conclusions and Recommendations

The Cigar Lake Project will likely be economically viable and produce substantial public revenues for the Governments of Canada and Saskatchewan. It is also expected that revenues derived from surface lease fees and property taxes would contribute approximately $33-million to the Northern Revenue Sharing Trust Account.

It is recommended that the Multi-Party Training Plan be renewed or replaced by an alternative, improved vehicle for training-to-employment, when the current agreement expires.

It is recommended that the employment objective for the participation of northerners in the mine workforce be set initially at 50 per cent and increased by 1 per cent per year until it reaches at least 67 per cent.

It is recommended that the surface lease include an objective of obtaining at least 35 per cent of the required goods and services from northern suppliers, with the expectation of gradual increases during the lifetime of the project.

It is recommended that the surface lease include provisions for the Cigar Lake Project that require the operator to report annually to the Government of Saskatchewan on the progress being made with respect to northern employment and business objectives.