A potentially big risk — new native taxation — has been taken out of Canada’s arctic natural gas pipeline project. The Northwest Territories and federal governments teamed up to assure the C$7.5 billion (US$6.75 billion) Mackenzie Gas Project that demands for aboriginal property taxes are nonstarters.

The assurance was given in an open letter to all concerned as hearings on the MGP continued in Yellowknife before the National Energy Board.

Territorial Premier Joe Handley and federal Indian and Northern Affairs Minister Jim Prentice sent the message. It followed months of calls for special taxation that started in the Deh Cho aboriginal communities of the southern Northwestern Territories and showed signs of spreading all along the 1,200-kilometer (750-mile) route of the proposed Mackenzie Valley Pipeline.

While aboriginal tax advocates did not spell out details of proposed new levies, it was made plain they were talking about several native settlements each collecting tens of millions of dollars per year from gas installations. Regardless of increasingly generous land claims resolutions and an evolving doctrine of northern aboriginal rights that continues to strengthen them, Handley and Prentice wrote that there are limits to concessions Canadian governments are willing to consider.

Both Ottawa and territorial authorities draw the line at allowing native communities to impose special taxes outside their designated settlement areas and on people who are not citizens of the First Nations involved. There are about 30 agreements that turn over to local aboriginal governments revenue from federal and territorial levies collected from native settlement residents, such as personal income taxes and Canada’s goods and services tax (a national 6% sales tax).

But “the government of the Northwest Territories does not intend to negotiate an agreement to broaden the power of aboriginal governments to include the ability to levy property taxes on both land and improvements owned by non-citizens outside community boundaries,” the letter said. “Therefore, aboriginal governments would not have the ability to levy a property tax on the pipeline.”

The only exception will be the long-standing power of native authorities to collect property taxes on land and improvements within their community boundaries. Little of the arctic gas project is affected because both its production fields and pipeline are largely out in the northern countryside, well away from inhabited areas. By way of keeping peace with native districts, the document also emphasized that Canada’s current Conservative government will implement a commitment made by the former Liberal administration before power changed hands in a federal election last winter.

A C$500-million (US$450-million) federal fund is being created for northern native community needs associated with new industrial activity ranging from policing to preservation of native languages and culture. “Over the next 10 years this fund will be managed by aboriginal organizations to support initiatives to mitigate any negative socio-economic effects arising from the Mackenzie Gas Project in their communities,” Handley and Prentice wrote. “This is money that will flow directly to entities established by aboriginal organizations and will be spent on priorities identified by these same entities.”

The fund is not the only northern revenue source associated with gas development, the territorial premier and the federal minister emphasized. Current legislation and land-claims settlements create a system of production royalties. Exactly how resource revenues will eventually be divvied up between the territorial and aboriginal governments remains to be settled. Nothing will be done to impose special levies on the gas project if the territorial government succeeds in strengthening its tax powers as a result of long-range “devolution” negotiations with Ottawa, added another document filed with the NEB.

Information turned over to the board includes a “fiscal assurances” letter written by Handley and territorial Finance Minister Floyd Roland. “It is the intention of the government of the Northwest Territories to maintain a post-devolution royalty regime for the three anchor fields of the MGP that would not exceed the royalty burden of the regime as currently defined in the (federal) Canadian Petroleum Resources Act,” the assurances letter said. “It is not the intention to increase property taxes with respect to the MGP’s assets disproportionately to property taxes payable on similar properties in other regions of Canada. It is not the intention of the Government of the Northwest Territories to impose any other tax or fiscal measure that would have the effect of directly targeting the MGP operations and facilities,” the document promised.

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