Panel Report

The environmental damage and potential social disruption caused by the McArthur River Project can be justified only if the project returns certain benefits to Canadian society. To be acceptable, resource development must bring benefits to Canadians in general and to local residents in particular. The major quantifiable benefits take two forms - taxes/royalties paid to governments, and employment/ business opportunities for citizens.

5.1 Benefits to the Governments of Canada and Saskatchewan

5.1.1 Project Viability

A project that lacks economic viability is unlikely to provide significant benefits to governments. In fact, projects that suffer economic failure and leave unmitigated environmental damage are likely to create an economic burden. The Province of Saskatchewan, therefore, included a viability assessment in its submission to the panel.¹⁵ Noting that McArthur River is one of the largest and richest uranium deposits in the world, the province concluded that:

• positive cash flows would be realized across the forecast price ranges;
• the rate of return would be higher than the industry threshold for project viability;
• the use of Monte Carlo simulation techniques to evaluate a range of scenarios indicated that the probability of economic loss from the McArthur River Project is less than one in a hundred; and
• the project owners (Cameco, Uranerz and Cogema) are the three largest uranium-producing companies in the world, each with potential customers for their share of the products.

All indications, therefore, are that the project is economically viable.

5.1.2 Economic Impact

Public revenue from this project would be obtained in the form of Crown royalties, corporate taxes and surcharges, surface lease fees, property taxes, sales taxes, income taxes and fuel taxes. Other fees paid by the proponents provide no net income to the public treasury. These include costs such as those incurred for providing workers with insurance and pensions through UIC, CPP or WCB payments, and those associated with licensing and regulating the project.

The industry plays an important role in our economy - in direct jobs, economic spin-offs, resource revenues and taxes.

Henry Feld kamp, Transcripts of McArthur River Public Hearings, Saskatoon, Saskatchewan, September 11, 1996, p. 90.

The level of public income expected from this project would depend substantially on its profitability, which in turn would directly depend on the selling price of the product, yellowcake. Using various scenarios, as required by the Guidelines, the proponent has concluded that provincial royalties would be in the range of $337-million to $1.36-billion and that provincial corporation taxes could range from $451-million to $979-million.¹⁶ The province indicated that its independent evaluation agrees generally with these figures and estimated that other provincial revenue would include sales taxes on goods and services of about $51 -million, fuel taxes of about $22-million, and income taxes on labour income of about $32-million.¹⁷

In addition, revenue from the surface lease fees and property taxes would contribute an estimated $23-million for the Northern Revenue Sharing Trust Account (NRSTA). These revenues do not go into the province’s general revenue fund, but are injected directly into the northern economy through the NRSTA. A description of NRSTA is found in the Final Report that the province submitted to the panel.¹⁸

In total, it is estimated that the provincial revenues from the McArthur River Project would range from about $900 million to $2.5-billion. Similar estimates indicate that total federal income would range from about $500-million to $1 .2-billion.¹⁹ Table 2 presents a summary of the projected government revenues from the McArthur River Project.

Table 2: Projected Government Revenues From McArthur River - Key Lake Project
($Millions - 1995)

Revenues	Government of Saskatchewan - Medium Price Scenario	Government of Canada - Medium Price Scenario
Royalties	$677a	N/A
Corporate Taxes	$636b	$736c
Additional Revenues
Surface Lease, Licence and Permit Fees	$12	N/A
Property/Business Taxes	$11	N/A
Employer UIC/CPP	N/A	$18
AECB Fees	N/A	$10
From Labour Income
Income Taxes	$97	$128
Provincial Sales & Other Taxes	$24	$60
From Purchases
Sales Taxes	$40	Offset by GST Rebate to Proponent
Fuel Taxes	$22	$1
Totals	$1,519	$953

Based on range of low-high price scenarios:

• ^a $337 - $1,358-million.
• ^b $451 - $979-million.
• ^c $490 - $1,188-million.

5.2 Benefits to Residents of Saskatchewan’s North

5.2.1 Employment

Although mining is often regarded as the industrial sector which provides the most jobs in northern Saskatchewan, only about seven per cent (7%) of employable northerners work directly in mining. It is, therefore, clear that uranium mining cannot provide a complete solution to the need for greater employment opportunities in northern Saskatchewan. Even if allowance were made for a possible expansion of the industry in the future, uranium mining could not be expected to bear sole responsibility for the number of jobs that are needed to provide the current generation of northerners with employment. However, the industry can be expected to contribute an important number of jobs in return for the privilege of developing one of the province’s most valuable resources.

Because of the size of the McArthur River deposit, it is expected that almost two decades of steady work would be available for about 520-530 people.²⁰ In the present climate, where high unemployment is endemic, particularly in northern Saskatchewan, long-term employment must be considered as one of the major benefits of this project.

During the public hearings, Cameco was careful to point out that the McArthur River Project would be a replacement for the Key Lake mine and, therefore, would generate only a limited amount of new employment. It would, however, preserve approximately 380 jobs for many people currently employed at Key Lake,²¹ an objective that is of equal importance to the creation of new jobs. Underground mining would be the main source of new employment because not all of the surface miners at Key Lake would wish to work underground at McArthur River. Modifications to the surface facilities at both Key Lake and McArthur River would also be expected to create about 100 additional short-term jobs.²²

Cameco has committed to a policy of maximizing the opportunities for residents of northern Saskatchewan to fill any positions that become available. Specifically, Cameco has undertaken to:

• monitor and review the qualifications and experience required for all jobs in its operations to ensure that northerners are not pre-empted by unreasonable or unnecessary qualification requirements;
• provide incentives to encourage northern students to improve their qualifications by staying in school. These incentives include an expansion of its northern summer student employment program, increased support for career education programs in the north and the implementation of a more focused northern scholarship and education award program; and
• place a permanent Employee Relations Counsellor in the Athabasca Region.²³

That counsellor is hired specifically to work with employees and their families to try and find out what those stresses are and what we can do to mitigate those stresses.

Jamie McIntyre, Cameco Corporation, Transcript of McArthur River Public Hearings, La Ronge, Saskatchewan, October 2, 1996, p. 143.

In addition, Cameco has committed to the development and implementation of a comprehensive education and training plan for all employees that includes:

• expanded supervisory and management training;
• productivity improvement, personal development, team learning and communication training;
• major improvements in northern on-site training including more than forty supernumerary positions to accommodate the training of northerners for technical and trade positions;
• cross-cultural training to ensure that site employees establish and maintain positive working relationships;
• a workplace literacy program;
• financial and operational support for an enhanced pre-employment training program in the north;²⁴ and
• retraining Key Lake employees when that operation closes, to enable them to take advantage of employment opportunities offered at McArthur River.²⁵

It will, however, secure the employment future for most Key Lake employees. Our first priority, therefore, will be to retain our existing skilled work force and retrain those that are interested for the new opportunities available through this development.

Jamie McIntyre, Cameco Corporation, Transcript of McArthur River Public Hearings, La Ronge, Saskatchewan, October 5, 1996, p. 49.

In response to an employee consultation program, Cameco has also committed to various measures to enhance on-site services available to employees. These include:

• improved employee counselling services through expanded employee assistance programs;
• enhanced supervisory development training; and management a review and updating of radiation safety training programs;
• road traffic research;
• the design and implementation of a new orientation program;
• scheduling of vacation leave to coincide with traditional harvesting activities for employees from the Athabasca region;
• the addition of a northern radio signal to the mine sites; and
• an improvement in telephone services for better communication between employees and their families.²⁶

Wives feel very left out of their husbands’ careers because they don’t know where they work; they don ‘t know who they work with; they don ‘t know where they eat, where they sleep,...

Penny Gurney, Transcript of McArthur River Public Hearings, La Ronge, Saskatchewan, October 2, 1996, p. 141.

These commitments are important undertakings that enhance the acceptability of this project. In the absence of such commitments, it would be difficult to justify the intrusion of this project into the lives of northern people. The panel, therefore, recommends that provisions be added to the surface lease for the McArthur River Project that require Cameco to report annually to the Government of Saskatchewan on the progress being made on each of these commitments.

If these measures are diligently pursued, it would be reasonable to expect northern participation in the workplace to increase progressively. The McArthur River Human Resources Development Agreements should, therefore, reflect this expectation. The panel recommends that the employment objective for the participation of northerners in the mine and mill work force be increased by 1% per year until it reaches at least 67%. Sixty-seven per cent has been identified as the target because it appears to be an objective that is attainable in the long term, while at the same time requiring the proponent to remain committed to maximizing northern participation. It is also consistent with participation objectives used in other jurisdictions, such as the Northwest Territories where the BHP diamond mine has a similar human resources agreement.²⁷

5.2.2 Business Opportunities

Business opportunities at the McArthur River site are expected to include contracts for:

• ventilation shaft sinking and mine development;
• construction of the permanent McArthur River camp, offices and other surface facilities;
• construction of the road from McArthur River to Key Lake;
• maintenance and on-going surface work for the road;
• ore and aggregate haulage; l Key Lake mill modifications;
• catering; and
• operation of the new McArthur River facilities.²⁸

Suppliers would also be required for a variety of consumables, including chemicals (lime, barium chloride, ferric sulphate and flocculant), fuel (propane, diesel and gasoline), and building materials.

Cameco has committed to maximizing opportunities for northern businesses.²⁹ In the past, it has done this by tendering many contracts solely in the north, employing a system of preferential bidding, packaging contracts within the capabilities of northern contractors, providing advice through its Northern Affairs Office in La Ronge, and encouraging joint ventures for very large contracts.

During the current hearings, the company promised to undertake three additional initiatives to improve northern business participation in this project.³⁰ First, contractors are now expected to describe, in detail, their northern participation objectives as part of the proposal and tendering process. Significant weight will be given to these factors when contracts are awarded. Secondly, Cameco will use its considerable purchasing and distribution clout to improve northern access to high quality products and services. This includes the use of its transportation network, where feasible, to transport goods produced in the north to markets in the south. Thirdly, Cameco will cooperate, where possible, with federal and provincial agencies and northern businesses to improve northern infrastructure including the highway system, health services, institutional training, tourism, recreation opportunities and air services.

Because northern business opportunities are some of the most important socio-economic benefits cited by the proponent, the McArthur River Project should be monitored to ensure that northerners are being given priority and that Cameco is carrying through on the business principles it has committed to during this environmental review. The panel, therefore, recommends that provisions be added to the surface lease for the McArthur River Project that require Cameco to report annually to the Government of Saskatchewan on the progress being made with respect to each of these commitments.

Furthermore, as their business expertise develops, northerners will be able to provide an increasing portion of the goods and services required for this project. To ensure that northern capabilities are encouraged, the surface lease agreement should contain objectives for business opportunities similar to those established for the employment of northerners. A goal of obtaining at least 35% of all required goods and services from northern suppliers would be a reasonable objective at this time.

. . . when the mining stops in northern Saskatchewan...at least the mining companies can turn around and say, “Look, we have got four or five different northern companies out there, successful, healthy companies that we are going to leave behind”.

Rene Rediron, Transcript of McArthur River Public Hearings, Saskatoon, Saskatchewan, September 11, 1996, p. 200.

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There are limits to the kinds of businesses that can be generated by the mining industry and the second part of that is that those businesses may or may not be sustainable.

Angus Pratt, Transcript of McArthur River Public Hearings, La Ronge, Saskatchewan, October 1, 1996, p. 159.

5.3 Government Policy

Uranium mining companies are required to secure surface leases which contain human resources agreements specifying the employment objectives for the project. In northern Saskatchewan these have, typically, required the companies to maximize the employment opportunities for northerners, and the two current operators (Cameco and Cogema) now have mine-site work forces with 50% or more northerners. In fact, it was reported during the Socio-Economic Benefits 19 hearings that this is a greater percentage of northern participation than for any other industry in Canada.³¹ This remarkable and admirable achievement is due in no small measure to the willingness of the industry to accept and vigorously pursue the employment objectives contained in the human resources agreements. Without such objectives, it is doubtful if the current rates of northern employment would have been realized.

During the hearings, the panel also learned that the government agencies and departments responsible for regulating the mines and doing other work in the north have a much smaller northern participation in their work forces. The same departments that require the industry to maximize northern employment appear not to have taken this as a serious responsibility for themselves. By failing to take advantage of the knowledge and skills of northern people, governments may be depriving themselves of opportunities to integrate into the communities and to find northern solutions to northern problems. For example, mine regulators (AECB, SERM and Saskatchewan Labour) would likely have greater credibility in northern Saskatchewan if more of their personnel came from that region, and other agencies working in northern Saskatchewan could also benefit from the employment of culturally-sensitive northern people. It is recommended, therefore, that federal and provincial government departments and agencies providing services in northern Saskatchewan adopt human resources objectives for themselves that are similar to those applied to the uranium mining industry.

5.4 Conclusions and Recommendations

The panel concludes that the McArthur River project would likely be economically viable and that it would 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 $23-million to the Northern Revenue Sharing Trust Account.

During the hearings, Cameco committed to a number of specific measures designed to maximize employment and business opportunities for northerners. It is recommended that provisions be added to the surface lease for the McArthur River Project that require Cameco to report annually to the Government of Saskatchewan on the progress being made on each of these commitments.

It is recommended that employment objectives for the participation of northerners in the mine and mill work force be increased by 1% per year until they reach at least 67%.

It is recommended that an objective of obtaining at least 35% of all required goods and services from northern suppliers be added to the surface lease.

It is recommended that federal and provincial government departments and agencies that provide services in northern Saskatchewan adopt human resource objectives similar to those applied to the uranium mining industry.

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¹⁵ Jane Forster, Government of Saskatchewan, Opening Presentations, Regina, Saskatchewan, September 5, 1996, p. 2.

¹⁶ All estimates are in 1995 Canadian dollars.

¹⁷ Jane Forster, Government of Saskatchewan, Opening Presentations, Regina, Saskatchewan, September 5, 1996, p. 4.

¹⁸ Final Report, Saskatchewan Environment and Resource Management, 1996, Section 2, p. 81.

¹⁹ McArthur River Project Environmental Impact Statement, Appendix 7F, Table 8, Cameco Corporation, 1995.

²⁰ J. McIntyre, Cameco Presentation, Panel-Proponent Information Meeting, La Ronge, Saskatchewan, March 22, 1996, Slide 6.

²¹ McArthur River Project Environmental Impact Statement, Main Document, Cameco Corporation, 1995, p. 3.11.27.

²² Ibid, p. 3.11.28.

²³ McArthur River Project Environmental Impact Statement, Addendum, Cameco Corporation, 1996, p. 2.6.18.

²⁴ McArthur River Project Environmental Impact Statement, Addendum, Cameco Corporation, 1996, p. 2.6.19.

²⁵ J. McIntyre, Transcript of McArthur River Public Hearings, La Ronge, Saskatchewan, October 5, p. 49.

²⁶ Ibid, p. 2.6.20.

²⁷ The Globe and Mail, “Mine Deal Would Secure Jobs for Natives”, October 21, 1996, p. 1 A (Western Edition).

²⁸ McArthur River Project Environmental Impact Statement, Main Volume, Cameco Corporation, 1996, p. 3.11.29.

²⁹ Ibid, p. 3.11.28.

³⁰ Ibid, p. 3.11.20.

³¹ Jane Forster, Transcript of Public Hearings, La Ronge, Saskatchewan, October 2, 7996, p. 56 and p. 62.