Resource Rights | The Canadian Encyclopedia


Resource Rights

Natural-resource development has played a major role in Canada's economy and continues to be a focus of national concerns.
Softwood Lumber
Immense softwood lumber pile in Saguenay, Quebec. Photo taken on: August 21, 2010. 15803579 \u00a9 Howard Sandler |
Petroleum Industry
Drilling for oil and gas northeast of Sundre, Alberta on High Tower #18. Roughnecks connecting drill pipe on rig floor (photo by Angus McNee, courtesy Take Stock Photography Inc.).
Whitehorse Hydro Power Dam Spillway
Violent white water in spillway of hydro-electric power plant of the small scale hydro station at Whitehorse, Yukon Territory. Photo taken on: June 30th, 2013

Natural-resource development has played a major role in Canada's economy and continues to be a focus of national concerns. While these concerns have centered on energy policy during the 1980s, water resource management along with forestry, fisheries and environmental management are emerging as the issues of the 1990s. These other resource sectors present difficult policy choices as Canadians face the issues of conservation, environmental protection, unemployment and the maintaining of markets in a competitive world.

Ownership of Resources

The right to develop resources (or to choose not to develop them) is, in the first instance, a right of ownership. Under the common law of Canada, the basic rule is that the ownership of land carries with it the right to harvest renewable resources such as crops, trees, fish and wildlife, and also the right to extract nonrenewable resources such as coal, minerals and oil. Originally, governments in Canada gave individuals ownership of this type when crown land grants were made to settlers and developers, but new policies emerged around the turn of the century whereby governments gave only restricted ownership rights to resource developers. Mining leases and limited cutting rights began to replace outright grants of mineral and forest lands.

In the case of agricultural lands, homesteaders of crown grants did not include rights to minerals such as coal, oil and gas under their land. The government retained ownership of minerals and gave only restricted development rights (by means of leases) to companies conducting exploration for minerals such as petroleum and natural gas. In western Canada today, provincial governments are by far the largest owners of undeveloped natural-resource rights; as well, they are the landlords of the oil, mineral and forest companies that enjoy exploration and development rights. In northern Canada and in the offshore regions outside the provinces, the federal government enjoys such ownership.

Under the Constitution Act, 1867, the original provinces of Confederation retained ownership of crown lands and resources within their boundaries. When BC and PEI joined Confederation in 1871 and 1873, they too retained ownership of natural resources. But when the Prairie provinces were created (Manitoba in 1870, Alberta and Saskatchewan in 1905) a new and controversial policy emerged. In these provinces, ownership of natural resources was retained by the federal government to provide funds for colonization and railway building. Not until 1930, after a sometimes bitter political struggle, were natural-resource rights transferred by the federal government to the Prairie provinces. By this time, most of the agricultural lands had been transferred into private ownership; but because the federal government had reserved mineral rights when disposing of land in the prairies and had granted restricted tenures, the provincial governments inherited a rich treasure house of resource rights under the 1930 transfer. It is as a consequence of these rights that Alberta grants oil and gas leases and receives oil and gas royalties; that Manitoba can develop vast hydroelectric power resources to sell in the US; and that Saskatchewan controls uranium and potash reserves of worldwide significance.

Federal Ownership of Resources

The mineral and petroleum resources of northern Canada and the offshore regions of the East and West coasts remain under the ownership and control of the federal government and provide a huge potential for development. The federal government has also passed legislation that provides for the issuing of exploration rights and production licences, under which developers must meet expenditure commitments and pay royalties should commercial production begin. The Canada Oil and Gas Act, 1980-81-82, established a federal regime for petroleum resources that was intended to increase Canadian ownership in petroleum companies and to ensure Canadian benefits in jobs and the procurement of goods and services. With the change of government, in 1985 this statute was replaced by the Canada Petroleum Resources Act, with less emphasis on these "Canadianization" issues and greater certainty in the terms and conditions of exploration and development.

Legal Restrictions on Ownership of Resources

Ownership is not the only determinant of resource rights. Just as the owner of a business is subject to federal, provincial and municipal legislation setting out how the business must operate, so companies that acquire resource rights from the federal and provincial governments are subject to legislated requirements (eg, laws to protect the environment, laws providing for employee safety, or taxation laws). Obviously, resource rights acquired by an owner often clash with these legislated requirements. In a BC case, the court held that restrictions placed on operations in a provincial park were so severe as to amount to expropriation of mining rights that had been granted before the park was established. In result, the holder of the mining rights was entitled to compensation.

The classic Canadian example of conflict between resource ownership rights and restrictive legislation occurred in the 1970s when federal legislation (the Petroleum Administration Act) was perceived by the western provinces to be an unconstitutional interference with provincial resource ownership rights. In particular, federal threats to establish unilaterally the wellhead prices for petroleum and natural gas, and new federal taxes levied on these resources, were seen as direct interference with the rights claimed by these provinces to sell their resources on such terms as they saw fit and to receive royalties at rates they would determine. These conflicts were temporarily resolved by agreement between the federal and provincial governments during the constitutional debates of 1981.

A new section of the Constitution Act, 1982 purports to clarify the extent to which provinces may manage their resources, giving them exclusive power to make laws dealing with the development, conservation and management of nonrenewable resources and forestry resources, and to regulate the rate of primary production from these resources. Parliament has paramount jurisdiction to regulate interprovincial and export trade in natural resources, and both levels of government are given full powers of taxation.

There are other areas of conflict over the ownership and control of natural resources in Canada. The conflict between the US and Canada over alleged discrimination against foreign investors under Canada's National Energy Program (1980) has been eliminated by the Canada Petroleum Resources Act. The claims by the US lumber industry that Canadian lumber competes unfairly in US markets because of alleged subsidies given to the Canadian industry by the federal and provincial governments have recently been resolved for the time being, but with the potential to resurface (see Softwood Lumber Dispute). The Free Trade agreement (1988) between Canada and the US expressly includes energy resources and may lead to more effective bilateral trade in natural resource products generally; it may, however, also increase friction between federal and provincial governments regarding energy. Boundary disputes between Canada and the US affect fisheries and petroleum development in offshore waters on the East and West coasts and in the projection seawards of the Alaska-Yukon boundary.

Within Canada, Indigenous people have land claims to natural resources resulting from both treaties and from Indigenous land claims in non treaty areas. Based on the findings of the 1970 Calder Case that Indigenous land rights exist in Canada (though they may have been extinguished in some cases), the federal government embarked on a policy of negotiations with First Nations in the northern territories to achieve comprehensive land claim settlements. Successful negotiations in the cases of Nunavut, the Western Arctic Region and parts of the Northwest Territories have resulted in what are referred to as modern-day treaties. Pursuant to section 35 of the Constitution Act of 1982, these modern treaties are affirmed so as to gain constitutional status. Reflecting the traditional values of the First Nations, these modern treaties are preoccupied with land rights and natural resource issues. See also Indigenous Rights and Indigenous Self-Government.

In southern Canada where Indigenous land rights had in the main been surrendered by the historic and traditional treaties, negotiations have centered on issues of treaty interpretation and implementation. In BC, where few treaties had been made, the First Nations and the governments of Canada and BC are engaged in a process of treaty making assisted by a BC Treaty Commission established after an agreement among the 3 parties.

In the northern territories, claims to regional self-government are accompanied by claims to ownership rights over northern natural resources. In the offshore regions, a long-standing dispute between the federal government and the coastal provinces concerning ownership and jurisdiction has been resolved in favour of the federal government in a decision of the Supreme Court of Canada concerning conflicting Newfoundland and federal claims to the Hibernia oil field (see Hibernia Case).

Issues involving resource rights also surface from time to time in relation to such matters as the regulation of fishing, the protection of the environment, the control of the air waves and the management of watersheds. A recent report cites the need for an interjurisdictional agreement covering the Mackenzie River drainage basin before developments such as hydroelectric dams in Alberta and BC are allowed to proceed.

Canada is a large country with bountiful natural resources. Its size and its federal system of government (see Federalism) explain why natural resources play such an important role in the Canadian economy and why government policies are so significant and so likely to be contentious. In these circumstances, it is a continuing national challenge to manage natural resources co-operatively and wisely.

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