The 2011 Exploration and Mining in BC report is out - looks 2011 was a record year for exploration in BC

Each year January the BC government releases the review of mining and exploration for the previous year.   The 2011 edition is out now.

Highlights:
Exploration Expenditures - (2010 figures in brackets):

• Omenica Region           $71.5 million ($33 million)
• Skeena                  $220 million ($172 million)
• Northeast                $41 million ($20 million)
• Thompson-Okanagan-Cariboo 2011 data incomplete($50 million) 
• Coast                    $16 million ($15 million)
• Kootenay-Boundary        $38.5 million ($28 million)

In the five regions with complete data, exploration spending in 2011 was $387 million, an increase from $268 in 2010.  Given all the work in the Thompson-Okanagan-Cariboo in 2011, I can not see how exploration expenditures would not be higher than 2010.   If was assume the same increase as elsewhere, this would indicate $72 million for the Thompson-Okanagan-Cariboo and an annual provincewide expenditure of around $460 million.

It looks like 2011 was a record year for mineral exploration in BC, beating out the previous record of $416 million in 2007.  Adjusted for inflation, the 2007 value would be $450 million.

To give you an idea how good 2011 was we can look at 1990.   1990 was a a good year for exploration in BC with $227 million spend, that is equal to $340 million in 2011 dollars.  

Operating Mines in BC by year and exploration expenditures

• Year    Metal    Coal  Exploration $
• 2004      7       9       130
• 2005      8       9       220
• 2006      9      11       265
• 2007     11      10       416
• 2008     10       9       367
• 2009      8       9       154
• 2010      9      10       322
• 2011     10      11       460 est

I would go back further, but the data is not as easy for me to access.   If I get it I will post.

The loss of another mill

The explosion at Babine Forest Products is horrific in the short term for the community.  The death of some of the mill workers will hit the community in a way that people in urban centres can not understand, in a town of 3500 people, everyone will have known the guys that died.  

People are already considering what will happen to Burns Lake now that the mill has been destroyed.

The Babine Forest Products mill had a capacity of 350 million board feet of lumber per year, this is the largest mill operated by Hampton Associates.  Hampton Associates still has a smaller sawmill in Burns Lake, Decker Lake Forest Products, but this mill only has a production level of 85 million board feet per year.

Rebuilding the mill has a several issues that need to be addressed:

• The cost to build a new mill - in this case one should expect to pay over $100,000,000 to build a comparable mill.
• The volume of timber needed to supply the mill.   The current mill needs somewhere around 900,000 cubic meters of timber per year to operate.    That is a lot of wood.   To justify building the mill you would need to have at least 15-20 years of secure timber supply.   I have no idea if there is the timber volume available for another mill of this size.

In theory there could be a smaller mill built in Burns Lake, but I do not see how this makes much sense for Hampton.   The money needed to build a mill of the size and scale of Decker Lake is still more than a community like Burns Lake can afford.  

I have no idea how the mill was insured, but there could be an insurance windfall for Hampton from the mill being destroyed.

The loss of the mill is a loss of 250 direct jobs in Burns Lake.   There are about 2000 to 2200 people in the work force in the Burns Lake area.   The loss of these jobs is about an 11% increase in unemployment all at once.   I suspect the unemployment rate in Burns Lake is now around 20%.  

To put this in terms of Victoria BC, this is as if 25,000 lost their jobs all on one day.

The impact of the loss of these jobs on the community is more than just the immediate jobs.   Anyone that serviced or supplied the mill will have lost most of their work.   In the next year the loss of mill worker wages in Burns Lake will amount to something around $7,000,000 - workers should get EI which means this loss will not be as big as it could have been.   This may not sound like a lot, but it represents a reduction in the local economy of about 6%.  

If we look at the wider economy, the unemployment rate is likely to rise to more than 30% within a few months.   The economy is likely to shrink by 15% or more within the year.  

Burns Lake is going to see a large out migration in the next year which means the value of houses will fall.  People will not be able to pay their mortgages and will end walking away from their homes.   Businesses that have bank loans are very likely to going to asked to repay them in full and from that be forced into bankruptcy.

For the Village of Burns Lake this means a loss of property taxes.   But their property tax loss does not end there, the mill property is also within the village boundaries.    Burns Lake's property tax rate is 6.3 times higher for industrial properties than residential properties.   The impact on the loss of the mill will not be felt in 2012, but in 2013 when the assessed value of the property falls dramatically.

I can understand the fear that Stewart has of the potential of a competing port opening on the Alaska panhandle in Wrangell, but I think the resolution they have brought forward to the 2011 UBCM is not really useful for anyone.

Ultimately the fate of Northwestern BC and the Alaska Panhandle are closely connected.   There are few functional connections at the moment, but if there were more the region would have more of an economic unity and protect both sides of the border form economic problems.

This is economic nationalism and personally do not think this is the sort of policy that we should engage in.   Canada benefits more from trade than the US by a long shot and BC benefits more than the rest of the country.   We are an economy that has been built to connect with the world.  

B164 CANADA FIRST SHIPPING AND TRANSPORTATION POLICY Stewart


WHEREAS the State of Alaska is seeking access to the North American electrical grid through a connection to the Northwest Transmission line near Bob Quinn Lake, BC with an accompanying service road to the Alaska Border to service such a connection;
AND WHEREAS such a service road would enable access to Wrangell, Alaska leading to the potential development of new bulk cargo shipping facilities in Wrangell at the expense of developing and established port communities in British Columbia, denying these BC communities the economic and social benefits of increased economic activity in the northwest corridor;
AND WHEREAS the many mining and similar projects in Northwestern BC benefit from the taxation and investment policies of British Columbia and Canada:


THEREFORE BE IT RESOLVED that UBCM support a “Canada First” policy for the shipping of bulk argo and similar goods through Canadian ports rather than through Alaska and that the Province of British Columbia be encouraged to adopt and implement such a policy;
AND BE IT FURTHER RESOLVED that any connection to the Northwest Transmission line from the State of Alaska does not include the development of a service road or a new transportation corridor.
ENDORSED BY THE NORTH CENTRAL LOCAL GOVERNMENT ASSOCIATION


UBCM RESOLUTIONS COMMITTEE RECOMMENDATION: No Recommendation
UBCM RESOLUTIONS COMMITTEE COMMENTS:
The Resolutions Committee advises that the UBCM membership has not previously considered a resolution calling on the Province to adopt a “Canada First” policy for the shipping of bulk cargo and similar goods through Canadian ports rather than through Alaska; nor have members considered a resolution opposing the development of a service road or new transportation corridor related to connecting the Northwest Transmission Line to the State of Alaska.
However, the UBCM membership has endorsed a policy position supporting extensions of power infrastructure to northern and remote communities. In the 2002 Energy Policy Digest, the membership supported low-cost service extensions to provide electrical power to all areas of the province.
As well in 2004, members endorsed B25 which requested that the Minister of Energy “commit to writing a comprehensive plan for extension of the electrical grid into the northwest region that considers long-term community and resource development needs.” Then again in 2008, B45 which “urged the continuance of the proposed environmental programs and projects, with a focus on the Northwest Transmission Line, namely the Terrace to Bob Quinn portion of the 287 kV line.”

UBCM Resolution seeking better infrastructure funding for small communities

Another 2011 UBCM resolution here.   I like this one in general, but I think it should be limited to rural communities without neighbouring local governments.   When a single community is divided into multiple local governments, I do not think it should ever be made easy for the small jurisdictions to exist.


In the Victoria area there are 13 local governments for what is at best three different communities - maybe four if you think Sooke is clearly separate.   One of them, Highlands, had no business being allowed to incorporate and does nothing to improve the region.  They should be not be allowed to benefit from the public purse simply by being a low population jurisdiction.


B31 INFRASTRUCTURE FUNDING FOR SMALL COMMUNITIES Lillooet
WHEREAS small communities under 2,500 population which are dependent on residential taxation are struggling to fund infrastructure improvements;
AND WHEREAS the federal and provincial governments have not committed to providing future funding for infrastructure upgrades:


THEREFORE BE IT RESOLVED that UBCM petition the federal and provincial governments to continue to fund Towns for Tomorrow, Local Motion and federal/provincial infrastructure programs.
ENDORSED BY THE SOUTHERN INTERIOR LOCAL GOVERNMENT ASSOCIATION


UBCM RESOLUTIONS COMMITTEE RECOMMENDATION: Endorse
UBCM RESOLUTIONS COMMITTEE COMMENTS:
The Resolutions Committee notes that the UBCM membership has consistently endorsed resolutions seeking the federal and provincial governments to fund various infrastructure programs (2000-B12, 2004-A7, 2009- B129).

Resource Revenue Sharing with Rural Communities

These are two motions coming forward to the 2011 UBCM Convention
B29 RURAL DIVIDEND Barriere
WHEREAS the “Rural British Columbia Project Discussion Paper Series”, under an initiative called “Reversing the Tide”, has identified a number of best practices that, if put in place, would spur economic revitalization in the rural BC economy;
AND WHEREAS reinvesting a percentage of the natural resource dollars back into the regions from which they are extracted has proven to be a positive step in rural economic revitalization in other parts of the world:


THEREFORE BE IT RESOLVED that the provincial government be requested to develop a program that would provide additional financial and capacity building resources for rural BC communities, as well as create a “Rural Dividend” that would return to rural BC communities a fair share of the revenue created by rural-based resource industry activity in their respective regions.


ENDORSED BY THE SOUTHERN INTERIOR LOCAL GOVERNMENT ASSOCIATION
UBCM RESOLUTIONS COMMITTEE RECOMMENDATION: Endorse with Amendment Proposed
THEREFORE BE IT RESOLVED that the provincial government be requested to develop a program that would provide additional financial and capacity building resources to communities by returning a fair share of the revenue created by resource industry activity in their respective regions.


UBCM RESOLUTIONS COMMITTEE COMMENTS:
The Resolutions Committee notes that UBCM members have sought opportunities for new revenue sources(Financing Local Government Study 1998) and the Communities and Resources Committee recommended in its1998 policy paper that “a portion of the stumpage revenue must remain in the harvesting area (revenue should start flowing back to the producing communities).”
More recently, UBCM members have supported and requested that the Province share resource revenues with local governments (2009-B30, 2004 Resource Revenue Sharing Policy Paper, 2003-B30).
The Committee has offered an amendment to reflect the broader policy position of resource revenue sharing that has been adopted by the membership.


B30 REVENUE SHARING FROM MINING ROYALTIES Kitimat-Stikine RD
WHEREAS mineral industry activity involves non renewable resources and creates demand on local
government infrastructure and services such as community water systems, roads and emergency and protective services;
AND WHEREAS property taxation alone is often inaccessible and insufficient for affected communities
within a region to provide needed services and infrastructure:


THEREFORE BE IT RESOLVED that UBCM call upon the provincial and federal governments to
provide revenue sharing from natural resources for local governments affected by resource extractions
in their regions.


ENDORSED BY THE NORTH CENTRAL LOCAL GOVERNMENT ASSOCIATION
UBCM RESOLUTIONS COMMITTEE RECOMMENDATION: endorse


UBCM RESOLUTIONS COMMITTEE COMMENTS:
The Resolutions Committee notes that UBCM members have endorsed resolutions and policy papers that have sought a sharing of resource revenues with local governments recognizing that communities should be compensated for the natural resources that are extracted from their regions.
The Communities and Resources Committee recommended in its 1998 policy paper that “a portion of the stumpage revenue must remain in the harvesting area (revenue should start flowing back to the producing communities).”


In 2004, members endorsed the 2004 Resource Revenue Sharing Policy Paper, which specifically sought a sharing of resource revenues with local governments (forest stumpage, mining royalties) and prior to that a 2003 resolution, B30, made a similar request.

There is a huge fiscal imbalance in BC.   The province collects 100% more money from rural BC than it offers in services to rural communities.   The gap is about $5000 per rural resident per year.   A large part of this imbalance from natural resource revenues, though not all of it.   


If the majority of BC, and rural BC represents 90% of the landbase in BC, is to remain sustainable there needs to be mechanisms in place to allow rural communities to look after the myriad of issues that are currently being neglected.  Rural local governments have become beggars among the primary sources of wealth in this province.


Urban BC would have to see much higher taxation if there were no resource revenues coming in.   The provincial government would see $3.5 billion dollar gap in the budget, that would be a record setting deficit.   


There has been some resource revenue sharing with some rural communities, specifically with the First Nations, but ultimately all rural communities should benefit.   The various forestry, oil and gas, and mining agreements that have been signed in BC with the First Nations means that BC First Nations are the first ones in Canada with real own source government revenues to operate aboriginal governments.   There have been some dramatic improvements in governance in rural BC First Nations over the last five years.


If these motions pass, the BC Government should take note and act on the resolutions.   For Christy Clark, this would be a core way to bolster support in rural BC.   The HST vote results, where rural BC voted 61.85% to scarp the HST, indicate to me there is an ongoing populist revolt in rural BC that is pissed off with government.   The BC Liberals should be secure in re-election in 25-30 ridings, but those are almost all in Metro Vancouver or the Fraser Valley.    The current mood in rural BC is not good for the government.

Rural BC Demographics

I am quantifying various things about rural BC in preparation for my appearance on Voice of BC next Thursday.

My definition of rural BC is all of the province that except for:

• East coast of Vancouver Island from the Comox Valley south to Victoria
• The Sunshine Coast, Sea to Sky, Metro Vancouver
• The Fraser Valley
• Prince George
• Kamloops
• The Okanagan from Ok Falls to Armstrong

Here are some quick numbers relating to demographics specifically how they relate to aboriginal people in BC:

In the 2006 Census, 605,000 people lived in rural BC and 3,470,000 in urban BC.   This means a bit less than 15% of the population of the province.

Rural BC has 82,610 aboriginal people out of a total of 196,070 - this is 42.1% of all the aboriginal people in BC.   They make up 4.8% of all the people in BC but 13.5% of rural BC.  

Two urban centres, Kamloops and Prince George have large aboriginal populations.   They account 16,000 more aboriginal people, about 9.1% of their population.   This means in the rest of urban BC less than 3% of the people are aboriginal.

The Kootenaies, Boundary and South Okanagan have very low aboriginal populations.   With them factored out aboriginal people are about one in five in the rest of rural BC.

The aboriginal presence in rural BC is one that is not normally top of most people's minds in urban BC.   But it is a reality that the population in Prince Rupert, Bella Colla, Lytton, Fort St James and many more locations has a large aboriginal population.   The aboriginal population is also younger.

The rural aboriginal population is not only younger, but it is poorer and less likely to be able to get work.

Fundamentally, any solutions for the economic well being for rural BC has to pay a lot of attention the economic well being or First Nations.

Voice of BC segment on Rural BC

June 23rd I will be appearing with Bob Simpson on Vaughn Palmer's program Voice of BC and we will be talking about the rural urban divide in BC.   Both of us will be coming from the perspective of the importance of rural BC to the whole province.

I will be raising the impact of the large fiscal transfer from rural BC to urban BC.   As part of that I will be talking about the dangers to the provincial economy from the lack of sufficient resources being available to land based ministry staff in rural communities.

 I will also be raising the systemic problems rural communities have and the relative lack of any government services.   As an example getting a business loan in a small town is very hard, in some towns there is not a single banking institution.