Provinces the key to resource revenue sharing with First Nations

Commentary, Tom Flanagan

Resource-revenue sharing has emerged as the next Big Idea for First Nations. Like most Big Ideas, it seems simple, but in reality is full of legal difficulties and unintended economic consequences.

Perry Bellegarde, National Chief of the Assembly of First Nations (AFN), said immediately upon being elected to that position, “If our lands and resources are to be developed, it will be done only with our fair share of the royalties, with our ownership of the resources and jobs for our people.” By “our” he meant all the natural resources of Canada, everywhere, not just on reserves or First Nation settlement lands.

This view contradicts the treaties signed in Ontario and the Prairie provinces, which provided for the surrender of all titles to land and natural resources. But according to the AFN, the treaties do not mean what they say. The AFN says aboriginal leaders actually surrendered land only “to the depth of a plow,” for the purposes of agriculture, so today’s First Nations still own all subsurface rights to minerals and oil and gas.

The plow’s depth theory has never prevailed in court because it lacks historical foundation. It does not appear in the abundant documentary evidence surrounding the treaties. It first emerged in oral histories collected in the 1970s, a century after the treaties were negotiated. Courts have used oral history when written evidence is lacking or ambiguous, but not to overturn the plain meaning of written agreements supported by other documentation.

First Nations have a legal right to the revenues from resources on reserves. They also, by Supreme Court decision, have a right to be consulted about resource developments affecting claims to aboriginal title or hunting rights guaranteed by treaty, and those consultations have led to lucrative impact and benefit agreements. But First Nations do not have ownership of all natural resources everywhere in Canada. Under the Constitution, the provinces own public lands and natural resources, and the federal government and the AFN cannot impose revenue sharing upon them.

Should the provinces undertake revenue sharing voluntarily within their own jurisdictions? Perhaps, as long as the sharing continues to be realistically tied to the location of resource development. Newfoundland and Labrador, Quebec and British Columbia already have provincial programs to share royalties and other revenues with First Nations located near resource plays. And First Nations in all provinces sign impact and benefit agreements to profit from mines, oil and gas wells, pipelines and forestry projects near where they live. All of these measures create revenue, jobs and other opportunities for First Nations while promoting resource development in the larger economy. It’s win-win, for First Nations and everyone else.

What about general revenue sharing, which would set aside a percentage of all provincial resource revenues to be distributed among all First Nations? Such sharing would be undesirable in several ways. It would wastefully transfer money to wealthy First Nations already favoured with resource development or other business opportunities, while creating perverse incentives for less economically advanced First Nations. Now they would get money for doing nothing, rather than for finding partners to advance their own economies. It would be an entitlement to a share of other people’s efforts rather than a reward for their own efforts.

A recent report supporting general revenue sharing was entitled “Sharing the Wealth.” But wealth is not sitting there waiting to be shared; it must be constantly created. If First Nations are to prosper, they need to be part of the process of wealth creation. Specific resource-revenue sharing works in that direction, but general sharing does not. The provinces should stick with specific revenue sharing, which has been shown to generate new wealth while creating business opportunities for First Nations.

This op ed was originally published by The Globe and Mail on Monday, June 15, 2015: