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The Deh Cho Bridge, linking the capital of the Northwest Territories with the rest of Canada, had its official opening in December, 2012. The one-kilometre bridge replaces ferry service and a winter ice crossing.Bill Bradem/The Globe and Mail

Ottawa and the Northwest Territories have reached a deal to hand the territory province-like power over its land, a move aimed at empowering local leaders to unlock more of their resource riches.

More than a decade in the making, the agreement celebrated by Prime Minister Stephen Harper and NWT Premier Bob McLeod in Yellowknife on Monday will hand the territory an additional $130-million a year and give it greater independence in approving resource projects.

The hope of both parties to the historic agreement is that it will spur development and reshape the economy of Canada's North at a time when its output of oil and diamonds has declined, while low commodity prices have stalled other projects.

"This is a big day for the Northwest Territories. It is a day of hopes, a day of dreams and a day of transformation," Mr. McLeod said.

The deal is the latest move by Mr. Harper's government to reduce Ottawa's role in provincial and territorial affairs.

"Our government believes that opportunities and challenges here would be better handled by the people who understand them best. That is to say, you who live here in the Northwest Territories," Mr. Harper said.

The agreement unveiled on Monday is not in its final form, and two of seven regional aboriginal governments have yet to agree, but the "consensus" is a landmark on a long road of talks.

Negotiations date back 12 years. The financial terms were mostly settled in 2005, when Ottawa was still running surpluses. One NWT official said he doesn't think such a generous offer would be possible these days. An agreement-in-principle was reached in early 2011, and regional aboriginal governments have slowly been signing on. Officials hope to implement a final deal by April 1, 2014.

The financial terms include an extra $67.3-million in annual base funding to the territory, largely for programs and about 175 staff positions it will take on. In addition, the territory will retain a portion of resource royalties that the federal government previously gathered – half of those revenues, up to a total of five per cent of NWT's entire budget. Based on last year's figures, that's about another $65-million. Regional aboriginal governments that have approved the deal will also get extra federal funds.

More broadly, though, the territory hopes the deal will give it control over its own destiny. "We'll be the ones making the decisions, so we'll have to live with the decisions," Mr. McLeod told The Globe and Mail on Monday. He said the territory is not interested in taking all powers back from Ottawa, and the new deal leaves it with "the best of both worlds."

Mr. Harper has worked steadily to reduce Ottawa's role in provincial affairs. He has not attended a first ministers' meeting since 2009, and his government has begun to back out of health policy to let provinces sort out how they spend health transfers.

"The heavy lifting is done, the issues are resolved and negotiators have reached consensus on the terms of a final devolution agreement," he said on Monday.

Yukon signed a devolution deal in 2001 that came into effect in 2003. Since then, territorial figures show a steady increase in average weekly earnings, population and trade.

Ottawa is not giving up full resource control in the NWT. In particular, negotiations on how to split revenue from potentially lucrative off-shore projects won't begin until after a final deal is signed. And some aboriginal governments had pushed for a greater share of resource wealth, or a higher cap.

The deal comes during a period of transition for the NWT's promising resource industry. Production is declining at the jewel of its oil sector, Norman Wells – down 13 per cent from 2006 to 2010 – while the massive Ekati and Diavik diamond mines are scheduled to close by 2019 and 2023, respectively. The Mackenzie Gas Project pipeline is shovel-ready but stalled, due to low natural gas prices that aren't forecast to rebound soon.

But Mr. McLeod sees bright skies ahead for what he called "a potential energy superpower." The territory expects nine mines to be operating by 2020, up from four currently. "Today, we mark yet another evolution of our great territory, one that will help unlock our tremendous potential and bring prosperity to our territory and the nation," he said on Monday.

However, the global mining sector has fallen on hard times, as years of cost inflation had led to massive writedowns, shaken investor confidence and tempered growth expectations.

Observers say the new rules will need to eliminate the federal level of the bureaucracy governing land-use permits. Currently, many businesses avoid the territory, said Henry Sykes, president of Calgary-based MGM Energy Corp., which specializes in oil and gas development in the NWT.

"It's just too complicated, too expensive and frankly too unpredictable," he said, adding he's cautiously optimistic that a devolution deal will cut red tape, and not make things more complicated. "We're hopeful, but we're keeping a close eye on it."

Anja Jeffrey, director of the Conference Board of Canada's Centre for the North, expects the devolution deal will attract investors.

"It all signifies a territory in motion focused on economic development," she said, adding: "It's not going to happen overnight, but it spells self-determination, and that's the way Canada functions. All these [other] jurisdictions have self-determination, and now they have it, too."

With a report from Nathan VanderKlippe