Time for a new way to share resource royalties with First Nations — and all Yukoners


The Yukon News recently reported that the Tr’ondek Hwech’in First Nation’s 2016 royalty cheque was a whopping $69.

That’s not $69 million or even $69,000. Just $69.

I know how they feel. I recall when my double-digit royalty cheque for that quarter’s Aurore of the Yukon sales provoked chuckles around the family dinner table.

On the plus side, I can now tell my kids that Aurore generated more royalties last year than the entire Dawson-area mining industry did for the Tr’ondek Hwech’in.

Some have suggested dramatically improving the scheme for sharing resource royalties with First Nations, including Yukonomist as far back as 2012. Since the current scheme was negotiated, the landscape has shifted dramatically in terms of constitutional law and political reality. It is hard to imagine First Nations allowing a sizeable mine or gas development to go ahead in the Yukon without a much richer share of the benefits than today’s convoluted formulas allow.

Remember that the Selkirk First Nation only gets the big royalty cheques it does because the Minto mine is on Category A settlement land. Few future mines will be on Category A land, but will most likely be on regular public land.

The new Liberal government should fix this in its first 100 days. A draft deal is already on the shelf since the Yukon Party suggested sweetening the deal a few years ago. There is nothing stopping the new government from announcing a more generous sharing arrangement.

The NWT has already moved to sharing 25 per cent of resource revenues with First Nations.

While our new government is adjusting revenue sharing with First Nations, it should do the same for all Yukoners. Why not share another 25 per cent — or even all the rest — of the royalties from resources on public land with all Yukon citizens? First Nation Yukoners would benefit both as First Nation citizens and as Yukoners. This would give all Yukoners a bigger direct stake in the success of our resource industry, as is the case in Alaska with their oil dividend.

The resources are under public land after all, and it is not written in stone that royalty revenues are reserved for deputy ministers to play with.

At the end of the year, the Yukon government would send 25 per cent of its resource royalty revenues to First Nation governments, then divide the rest by the number of Yukoners and give a refundable tax credit to everyone and their children. It would be a relatively easy and cheap way to distribute the money.

The deputy ministers would still get the personal and corporate income tax and all the fees paid by resource companies and workers.

However, keep in mind that, although the Yukon government’s royalties are in the six-digit range, it is not like the territorial government is rolling in royalty cash. The 2016-17 budget estimated $233,000 in total royalty income, or 0.019 per cent of all revenues. That’s barely enough to pay the freight for a single assistant deputy minister.

J.K. Rowling would snort derisively at all of us. She’s sold an estimated 450 million books, which would generate an impressive ten digits in royalties. Hermione Granger, her lovable know-it-all sidekick character, would tell us you can’t have resource royalties without a resource industry.

Royalty revenues are a result of the royalty rate and the volume affected.

The rate is part of the reason for the Tr’ondek Hwech’in’s paltry cheque. Placer mining royalties are governed under a separate scheme from hard-rock mining. Placer miners pay just 37.5 cents per ounce, which is a fraction of a percent when gold is trading around US$1200 per ounce. The scheme was set up when the Placer Mining Act was passed in 1906, and the rate hasn’t been increased in ages.

The new Liberal government’s carbon tax will hit the diesel-intensive placer industry hard. If they want to flow more placer royalties to the Tr’ondek Hwech’in, they will have to hit it with royalty increases too. If they increased the royalty to 0.5 per cent, a rate seen in some other jurisdictions, that would boost the royalties payable to around $8 per ounce. Keep in mind that this is a percentage of gold sold, so it will be a much bigger percentage of the placer miner’s profits.

Yukon placer miners will likely produce around 70,000 ounces in 2016, according to speakers at The Yukon Geoscience Forum & Trade Show. At $8 per ounce, that works out to $560,000 in royalties. That would double the current Yukon intake, but still isn’t much to split among 11 self-governing First Nations and almost 40,000 Yukoners.

Oil, gas and hard rock mining are where the real royalty bucks are. Just the Kotaneelee gas field in the Southeastern Yukon, for example, generated over $2 million per year on average during its 20-year life. The Minto mine also paid more than $2 million per year on average during the first five years of its life.

At this point, Hermione would probably point out that closed mines don’t pay royalties. Nor do oil and gas companies whose projects are tied up in court with YESAB.

With Minto’s temporary closure coming up in 2017, the Yukon will have zero operating hard-rock mines and zero operating oil and gas wells. You don’t have to hire an expert tax lawyer to calculate how much royalty revenue zero mines and wells generate.

Despite the hard times, the Yukon government should announce it will be sharing more royalty revenue with First Nations and all Yukoners. This would increase support for the resource industry, and, one hopes, lead to royalties being a lot more than zero.

Keith Halliday is a Yukon economist and author of the MacBride Museum’s Aurore of the Yukon series of historical children’s adventure novels. He won last year’s Ma Murray award for best columnist.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Chief Medical Officer of Health Dr. Brendan Hanley. (Crystal Schick/Yukon News)
Exposure notice issued for April 3 Air North flight

Yukon Chief Medical Officer of Health Dr. Brendan Hanley has issued another… Continue reading

Crystal Schick/Yukon News file
Runners in the Yukon Arctic Ultra marathon race down the Yukon River near the Marwell industrial area in Whitehorse on Feb. 3, 2019.
Cold-weather exercise hard on the lungs

Amy Kenny Special to the Yukon News It might make you feel… Continue reading

Yukonomist Keith Halliday
YUKONOMIST: The Neapolitan election

Do you remember those old bricks of Neapolitan ice cream from birthday… Continue reading

Whitehorse City Hall (Joel Krahn/Yukon News file)
This week at city hall

A look at issues discussed by Whitehorse city council at its April 6 meeting.

Two people walk up the stairs past an advance polling sign at the Canda Games Centre on April 4. (Haley Ritchie/Yukon News)
April 12 is polling day: Here’s how to vote

If in doubt, electionsyukon.ca has an address-to-riding tool

Today’s Mailbox: Rent freezes and the youth vote

Dear Editor, I read the article regarding the recommendations by the Yukon… Continue reading

Point-in-Time homeless count planned this month

Volunteers will count those in shelters, short-term housing and without shelter in a 24-hour period.

The Yukon’s new ATIPP Act came into effect on April 1. Yukoners can submit ATIPP requests online or at the Legislative Assembly building. (Gabrielle Plonka/Yukon News file)
New ATIPP Act in effect as of April 1

The changes promise increased government transparency

A new conservancy in northern B.C. is adjacent to Mount Edziza Provincial Park. (Courtesy BC Parks)
Ice Mountain Lands near Telegraph Creek, B.C., granted conservancy protection

The conservancy is the first step in a multi-year Tahltan Stewardship Initiative

Yukon RCMP reported a child pornography-related arrest on April 1. (Phil McLachlan/Black Press file)
Whitehorse man arrested on child pornography charges

The 43-year-old was charged with possession of child pornography and making child pornography

Team Yukon athletes wave flags at the 2012 Arctic Winter Games opening ceremony in Whitehorse. The postponed 2022 event in Wood Buffalo, Alta., has been rescheduled for Jan. 29 to Feb. 4, 2023. (Justin Kennedy/Yukon News file)
New dates set for Arctic Winter Games

Wood Buffalo, Alta. will host event Jan. 29 to Feb. 4, 2023

Victoria Gold Corp. has contributed $1 million to the First Nation of Na-cho Nyak Dun after six months of production at the Eagle Gold Mine. (Submitted/Victoria Gold Corp.)
Victoria Gold contributes $1 million to First Nation of Na-cho Nyak Dun

Victoria Gold signed a Comprehensive Cooperation and Benefits Agreement in 2011

Most Read