May 2007

Budget 2007 in review

By H. Ednie

Following the presentation of Minister of Finance James Flaherty’s budget on March 19, the Mining Association of Canada and the Prospectors and Developers Association of Canada shared their support and their disappointment for Budget 2007.

Both welcome measures in the budget related to regulatory reform that acknowledge the federal government’s critical role in ensuring good governance in regulating appropriate development, and applaud the government’s commitment to cut in half the average time period for regulatory review of large natural resources projects, from four to two years.

“MAC enthusiastically supports the government’s attention to improving the project review process and its commitment of $60 million (over two years) to improve accountability and timeliness,” noted Gordon Peeling, president and CEO of the Mining Association of Canada. “While the resource sectors are driving economic growth in Canada, federal project review has become the most significant disincentive to future investment. This boost will ensure improved efficiency of the regulatory process, without lessening the role of environmental review.”

Other positive measures of particular interest to the Canadian minerals industry include tax incentives for the manufacturing and processing sector for investment in eligible machinery and equipment. As well, the federal government plans to work with interested provinces and territories to examine how artificial barriers to labour mobility and other impediments to internal trade might be relaxed. Using the British Columbia-Alberta Trade, Investment and Labour Mobility Agreement as a model, the federal government plans to work with its provincial and territorial counterparts on measures to promote the free flow of people and goods within the country.

The Aboriginal Skills and Employment Partnership (ASEP) initiative, which fosters partnerships with provincial and territorial governments, aboriginal organizations, and the private sector to help aboriginal Canadians receive the skills and employment training for the workforce, will get a boost. ASEP’s current budget of $85 million over six years supports nine projects across Canada, including training for aboriginal Canadians at the Victor diamond mine, which are expected to result in training for some 7,000 aboriginal Canadians. The new budget includes provisions for an additional $105 million for ASEP over the next five years to provide skills training to an additional 9,000 aboriginals.

The Mineral Exploration Tax Credit, commonly referred to as ‘super’ flow-through, will be extended to March 31, 2008. With the application of the ‘look-back’ rule, funds raised up until March 31, 2008, can be spent on eligible exploration activity up until the end of 2009.

MAC, however, did express disappointment that Budget 2007 eliminates the accelerated capital cost allowance for oil sands mining. While the grandfathering of ACCA for existing projects lessens the impact of this proposed measure, it still puts a chill on oil sands investment and development - a major economic engine of the Canadian economy.

Both associations share disappointment that Budget 2007 failed to expand its investment in geoscience. In spite of intense lobbying from the PDAC, MAC, and others, the federal government again did not fund the Cooperative Geological Mapping Strategies. This has been on the books since 2000 when all of Canada’s mines ministers made a commitment to this federal-provincial-territorial initiative and agreed that funding from the federal government ($25 million per year over ten years) would be matched by the provinces.

“Renewed investment in geoscience is long overdue and critical in addressing the looming crisis in declining base metal reserves, which is placing Canadian smelters and refineries at risk,” stated Peeling. “Successive governments have failed to address the need for re-investment in minerals science research and mapping, which is integral to creating opportunities in northern Canada as well as in maintaining Canada’s global leadership position in mining.”

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