Arctic Yearbook 2014 - Page 203

  203   dozen new funds are being considered (Bauer, 2014a). Natural Resource Funds are a growing trend for oil-, gas- and mineral-rich countries as a vehicle to transfer and save a portion of resource revenues. Canada’s Northwest Territories (NWT), rich in non-renewable resources, established the NWT Heritage Fund through legislation in August of 2012. In a recent survey of all identified natural resource funds in the world, the NWT’s fund was listed as one of the newest and the smallest operational fund in the world (Bauer, 2014a). Although the NWT fund currently is modest in size, a resource revenue windfall is on the horizon. This paper explores the governance measures and regulations that are needed to build agreement on the fund’s objective and to establish strict rules for fund deposits, withdrawals, investment strategy, transparency, and oversight. Successful strategies from funds that have benefitted citizens are examined, including Norway, Chile, Alaska, and Ghana, and their approaches considered within the unique context of the NWT. The issues and options explored in this paper are designed to inform decision-making and to position the NWT Heritage Fund as a world class tool to manage mineral revenues in the public’s interest. The Lessons of History Throughout the last century, Canada’s Arctic has experienced a number boom-bust cycles, which have forever altered the land. This is one consequence of reliance on single-industry natural resources (Briones et al. 2013). Single-industry economies, including the whaling industry, fur trade, gold rush, and recent non-renewable natural resource initiatives, have defined these cycles (Pretes 1984). Periods of rapid economic growth, followed by even faster decline, are an outcome of the North’s economic dependence on a few natural resources whose value and availability are prone to fluctuations. More recently, petroleum extraction and mining initiatives have been the driver of boom-bust cycles. For instance, from 1999 to 2003, rising commodity prices and the start of production at the Ekati and Diavik diamond mines increased the sector’s economic contribution to the NWT by 173%; when prices collapsed during the global financial crisis from 2007-09, the sector contracted by 37% (NWT Bureau of Statistics 2014). What’s more, in the case of non-renewable natural resources, availability is finite and depletion inevitable. A clear example of the risk of a single-industry economy is the abandoned mining town of Pine Point, NWT; the closure of the town’s mine led to a parallel shutdown of its community. Today, all that remains are the outlines of the roads that once connected Pine Point’s twelve hundred residents, and an altered landscape that can no longer yield minerals nor sustain a community (Irlbacher-Fox 2013). The NWT’s new Heritage Fund represents an opportunity for the territory to move beyond the past struggles of many Canadian provinces to manage oil and mineral revenue windfalls and develop a culture of public savings from resource revenues (Simpson, 2011). The NWT Heritage Fund could provide a mechanism to move past boom-bust cycles, and to preserve a finite source of wealth for future generations. This paper examines key policy considerations for the territorial government as it implements fund governance, management frameworks, and legislation. Drawing lessons from best practices in fund development from other jurisdictions,1 recommendations are outlined which support the NWT Heritage Fund’s primary objective: to save for the benefit of future generations. Daitch, Schwann, Bauer, Dias & Fan Li