Like blood from a stone: trying to get information out of the Nova Scotia Department of Energy and Mines

 

This article first appeared in the Halifax Examiner on February 7, 2019.

British Columbia taxpayers are on the hook for $40 million to clean up the disaster of Imperial Metals failed tailings pond at Mount Polley. Photo courtesy Cariboo Regional District.

Late last year, Nova Scotia’s Minister of Energy and Mines, Derek Mombourquette, penned an op-ed that his department sent out to the media. As I mentioned in the Halifax Examiner Morning File on January 16, 2019, the opinion piece was entitled “A little piece of Nova Scotia, everywhere,” and it claimed that the province’s mining industry was “something we can all take pride in, especially with the new Mineral Resources Act.” It would encourage “responsible mineral exploration and development” in the province.

“The new act also cuts red tape and saves industry money,” he said.

The minister went on to try to reassure readers that this did not mean the government would relinquish its duty as regulator or hesitate to stand up to industry to make sure things were done right for the citizens of the province and their descendants after the mines closed and the companies walked away from, say, toxic tailings facilities left behind at open pit gold mine sites.

“Companies that develop a mine in Nova Scotia are required to have a plan to restore the site once it closes,” wrote Mombourquette. “They must also set aside funds with the province, also called security, to do this work, even if the company goes out of business. A company’s plan will be reviewed every three years.”

Sounded promising.

But I still had a few questions about the reclamation plans and the reclamation “funds, also called security.” So I sent my query off to JoAnn Alberstat, media relations contact at the Department of Energy and Mines (DEM). (Unlike mining executives, lobbyists, and other citizens, as a journalist I am not supposed to approach technocrats or government officials with my questions. Rather, as government spokesperson Bruce Nunn told me in an email in June 2018, I am expected to abide by an “understanding” that the government “has with media outlets that it coordinates media inquiries via its communications offices for each department.”)

Atlantic Gold’s secret reclamation plans

I was particularly interested in the reclamation plan that Atlantic Gold had submitted for its Touquoy open pit gold mine at Moose River, the first of four that the company has planned for the Eastern Shore of this eastern Canadian province, part of its Moose River Consolidated Project that would wrap up in 2027. (I wrote about this project for the Halifax Examiner and the Cape Breton Spectator, available here or here.)

Atlantic Gold’s map of its four Nova Scotia mines.

In April 2018, I had submitted a Freedom Of Information request to get a copy of Atlantic Gold’s reclamation plan for Touquoy. However, it had been refused on the grounds that the plan was “business confidential information” and “an unreasonable invasion of personal privacy,” and that the Mineral Resources Act prevailed over the Freedom of Person Information and Protection of Privacy (FOIPOP) Act.

After I read Minister Mombourquette’s rosy claims about the plans for reclaiming mines, I felt new optimism that perhaps the veil of secrecy would be lifted, and I decided to ask again if it were possible to see Atlantic Gold’s reclamation plan for the Touquoy mine at Moose River.

My optimism had been unfounded. The DEM spokesperson confirmed that mine reclamation plans were “protected as confidential documents under the Mineral Resources Act.”

Batted back and forth like a ping pong ball

Next I set out to find out more about the reclamation “funds” that Minister Mombourquette said the companies had to set aside with the province, which could be used to undo the damage a mine caused, even if a company were to go out of business and go waltzing away to Australia (Atlantic Gold has Australian roots and branches).

Atlantic Gold reported in April 2018 that the reclamation security for Atlantic Gold’s Moose River mine had been set at $10.4 million, “the total cost to reclaim the Touquoy site as estimated by the Province.”

According to the Environmental Assessment Registration Document that DDV Gold (now Atlantic Mining NS, a subsidiary of Atlantic Gold Corporation) submitted to the provincial government for environmental assessment in 2007, the company would reclaim a total of 265 hectares (655 acres), including the open pit and haul roads (40 ha or 99 acres), the process plant and service complex (60 ha or 148 acres), the tailings management facilities (130 ha or 321 acres), and the waste rock pile of 35 ha or 86 acres).

Those were the figures provided by the company for the Touquoy open pit gold mine, before the project morphed into the Moose River Consolidated Project that involves four open pit gold mines along the Eastern Shore at Moose River, Beaver Dam, Fifteen-Mile Stream, and Cochrane Hill. Under the new consolidated project plans, Atlantic Gold plans to process all of the ore from both Touquoy and Beaver Dam at the Moose River site, and to process concentrated ore from the other two mines there as well.

How (and whether) this change in the project has been incorporated into the company’s reclamation plan for Touqouy is not for the public to know, as that plan is confidential. In late December 2018, DEM did tell me that a revised plan had been submitted in the fall of 2018, and that it was being reviewed.

The other three mines — at Beaver DamFifteen-Mile Stream, and Cochrane Hill — are still undergoing environmental assessments with the Canadian Environmental Assessment Agency, something that the Touquoy mine somehow managed to avoid, as reported here.

The crater that will be created by Atlantic Gold at its Touquoy open pit gold mine at Moose River will be 600 metres long, 300 metres wide and 125 metres deep, about half as long as Lake Banook in the provincial capital, the Halifax Regional Municipality, but 10 times as deep. Photo: Joan Baxter

As of February 4, 2019, the provincial government’s Reclamation Security Tracker page showed that Atlantic Mining NS had paid $8.13 million. DEM spokesperson Alberstat told me that the amount would be increased to $10.4 million by December 31, 2019 at the latest.

As for details about the reclamation security, I was told they were, “held as cash or a negotiable instrument provided by a third party.” And, “The Province may call the security should this be required. These instruments are protected from claims by others in case of events such as liquidations, bankruptcy, or receivership.”

In its annual reports to Natural Resources Canada, required by the Extractive Sector Transparency Measures Act (ESTMA), Atlantic Gold provided figures for its payments to the provincial government and Halifax Regional Municipality in 2016 and 2017.

In 2017, Atlantic Gold reported to ESTMA that it paid $2.1 million in “fees” to then Department of Natural Resources (the Geoscience and Mines branch moved to DEM in 2018). The company described this as “In-kind payment reclamation bond valued at fair market value of the bond” for the Moose River mine.

In 2016, Atlantic Gold reported that it paid the NS Minister of Natural Resources an “’in-kind’ reclamation bond ($3.43 million).”

ESTMA itself has this to say about how the value of “in-kind” payments is determined: “If a business subject to the Act (“Entity”) can determine the cost of an in-kind payment; that is the value that should be reported. If the cost is not determinable, the in-kind payment should be reported at fair market value.”

An online dictionary tells me that “in-kind” is an adjective “referring to payment, distribution, or substitution of things in lieu of money, a combination of goods and money, or money instead of an article.”

None of this helped me understand what Atlantic Gold meant when it reported that it had paid the reclamation security “in-kind.”

So once again, I contacted JoAnn Alberstat, the media relations person at DEM, to ask what “in-kind” meant in this context, and in what form and to whom these securities were paid and held.

This is her reply:

The ESTMA filings you’re asking about are federal reporting requirements. The province doesn’t have the mandate or authority to review ESTMA reports. I’d suggest you check with the company or Natural Resources Canada, which administers ESTMA, for more information on the filings.

I thanked Alberstat and said I would follow her advice and contact Natural Resources Canada. There was no point in my contacting the company; in response to a recent list of questions I had emailed to Dustin O’Leary, Atlantic Gold’s communications manager, for the mining articles I was working on, I received an email saying the company had “elected not to participate in the series of articles” I was writing.

I had better luck with Natural Resources Canada, which promptly set up a telephone interview for me with Jennifer Johnson, manager of ESTMA in Ottawa, to help me understand the program and also the company reports. Johnson explained that Canada had decided not to join the global Extractive Industry Transparency Initiative (EITI), which calls itself the “global standard for the good governance of oil, gas and mineral resources.”

Instead, she said, Canada had passed the Extractive Sector Transparency Measures Act that came into force in June 2015 and obliges mining, oil and gas companies registered on Canadian stock exchanges to report all payments they made each year to all levels of government, everywhere in the world. Larger privately held companies were also required to report these figures.

As for the use of the term “in-kind” about a payment, Johnson said it meant that there had been “no financial payment.”

She said that the purpose of the reports was to provide the public with details of these payments to governments, so that citizens could follow up with both the recipient governments and with the companies.

So back I went, once again, to the province, to try to find out in what form Atlantic Gold paid its reclamation security installments, and to confirm the amounts that Atlantic Gold reported it had paid to the Department of Natural Resources in its 2016 and 2017 ESTMA filings.

This is the response I received:

Reclamation securities are provided in a form acceptable to the Minister of Energy and Mines (cash, letter of credit, surety bond) and held by the Province of Nova Scotia. … You will have to contact the company for the additional detail you’re seeking.

Unfortunately, the company had already said it wasn’t interested in answering questions from me. But it does have to report on these things to its investors.

Atlantic Gold’s 2017 Annual Information Statement, published on the System for Electronic Document Analysis and Retrieval (SEDAR) site for documents filed with Canadian Securities Administrators, states that the company had:

…executed an agreement with a reputable surety company specializing in contract and commercial surety bonds, including underwriting surface mining reclamation to financial sound companies with adequate reserves. The surety company completed its underwriting process and committed to providing a surety bond in the Company’s name to the Province, 80% of which was collateralized by way of letter of credit provided by the Company, for a negotiated premium. On May 26, 2016, the Company posted its initial reclamation bond for $3.43 million with the Province and was subsequently increased to $5.53 million in May 2017. Further, in May 2017, the Company changed surety providers and the required collateral to be held by way of letter of credit was lowered to 70%.

So there is a part of the answer to the question I had struggled for weeks to coax out of the government regulator, the Department of Energy and Mines.

We still don’t know the identity of the surety provider, or why the “required collateral” to be held by a letter of credit was reduced.

Unanswered questions

Nor do we know how the province calculated the sum of $10.4 million for the mine reclamation surety.

And we don’t know at what stage Atlantic Gold will have to start paying royalties and taxes for the gold it takes out of Nova Scotian soil.

In 2007, in the “Focus Report” that it submitted to the province on the open pit gold mine it planned for Touquoy, then DDV Gold stated, “As legislated, a royalty will be paid on all gold produced and taxes will be payable after the project investment is recovered.”

Section 81 of Nova Scotia’s mineral regulations states that the royalty rate for gold in Nova Scotia is “1% of the net value received by the producer.” Apparently this is what the provincial government considers a “fair royalty regime,” although it doesn’t specify for whom it is “fair.” 1

By world standards, not only is this a very low royalty, but it also allows producers a great deal of wiggle room to reduce what they pay to governments.

According to journalist James Wilt writing in The Narwhal, “companies in Canada pay a tiny fraction of what they pay other countries to extract gold.”

… most governments around the world calculate royalties based on production volume and the cost of the mineral. However, royalties in Canada are generally calculated after costs have been subtracted, a practice which is exceedingly rare globally.

Wilt also noted that in Burkina Faso, a very young and fragile democracy in West Africa that ranks 183 of 189 countries on the United Nations Human Development Index, Canada’s IAMGOLD paid the Burkinabe government 8.7 percent of the value of the gold it extracted there in 2017.

Wilt pointed out that the “net” value production royalty rate applied in Canada opens large loopholes for companies to slip through.

There are more ways that companies can get around paying taxes, even if a mine has been in production and has recovered some costs. Financial tools can include tax credits, cost allowances, development expenses, loss carryovers and flow-through shares.

Or:

 … companies can open a mine near existing operations and call it an “expansion” even though it’s a sizable distance away — meaning a company can continue in the initial “cost allowance” phase. That allows a mine that has been open for many years to continue paying very little in revenue to governments.

Because this kind of project expansion resembles what Atlantic Gold is doing on the province’s Eastern Shore, I was curious about what this might mean for the timing of its payment of royalties and taxes.

To find out, I emailed DEM’s JoAnn Alberstat and asked at what point Atlantic Gold would be expected to start paying royalties and taxes to the province — whether it would be after it recovered its investment in the Touqouy mine, or after it recouped its investment in the entire Moose River Consolidated Project of four mines. I also wanted to know how the province had estimated the amount required as reclamation surety for Touquoy.

Blacklisted

I had dealt amicably with Alberstat for months. As is my habit with all communications people who have the difficult job of dealing with the media on behalf of the provincial government, I always expressed my gratitude to her for her efforts, even though she was often unable to provide the information I requested. Our communication was consistently and mutually respectful and cordial. She always replied promptly to acknowledge my questions, and it was obvious she was doing her best, despite the growing culture of secrecy in the provincial government.

Shortly after I sent Alberstat the questions about the reclamation surety and when Atlantic Gold would have to pay royalties and taxes, I received a call from her boss — Toby Koffman, Communications Director at Energy and Mines.

At first, I was delighted. I assumed that after weeks of requesting that DEM set up actual interviews for me with knowledgeable bureaucrats to save all the back-and-forth of emailed questions and answers, they had finally agreed and I would have a chance to speak directly with a specialist who could answer the questions I had just emailed.

How wrong I was.

Koffman informed me that I was using up too much of their time without publishing any articles. (I have actually written two pieces about mining in Nova Scotia for the Halifax Examiner in the past month, available here and here).

I told him I was still working on two articles related to mining in Nova Scotia (this is one of them), and that I had not yet finished them because I was still trying to get answers to important questions. I said I didn’t want to publish until I had those answers.

He said I was asking for confidential information.

I replied that if it was, all he had to do was to say so.

Then he said that they would be answering no more questions on this subject from me, alleging that I was asking questions to which I could find answers online.

I countered that this was not true; I had spent many weeks doing research, and my questions emerged from the research. For many months I have been studying DEM’s mineral rights map NovaRoc, mineral exploration reports on the NovaScan database, the province’s new mining legislation and regulations, and consulting scientific studies, reports, and experts on open pit mining and mine reclamation.

He repeated that they would not be fielding any more questions from me on the subject.

I was still asking him to clarify what “subject” that was, exactly, when Koffman hung up in my ear.

It appears I won’t be getting any more replies from the Department of Energy and Mines to all those unanswered questions to which Nova Scotians deserve to have answers.

Update: I submitted a complaint to the Nova Scotia Ombudsman about Koffman’s call and behaviour, and was eventually referred back to his boss, Michelle Lucas. After a phone discussion and an exchange of emails, which involved a written apology from Lucas “on behalf of all involved,” I was invited to re-submit all my unanswered questions to the Department of Energy and Mines. In response to my question about royalty payments and taxes, this is what I was told:

All gold produced is subject to royalty. The company pays royalty every three months, based on quarterly production. The company is currently paying royalties.

And:

Provincial income taxes are payable to the province when a corporation has taxable income earned in the province in a taxation year.

The next question, of course, is how much the company is paying to the government in royalties and taxes.

 

 

 

 

 

 

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    April 26, 2019 @ 11:39 am Reply

  2. Joe richman June 6, 2019 @ 1:09 pm

    Hi, I am an old, dumb ex-fisherman, a sculptor ( see above), a long-time prospector & resident of N.S.
    I would like to talk with you about the irrational, environmentally dangerous & just plain stupid ‘manner’ in which we all (citizens, government, bureaucrats, industry & NGOs) go about our interconnected ‘business’.

    Can’t we all do better?

    902-423-2892

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