The Province

Caribou sacrificed for little economic benefit

- ROBYN ALLAN, PETER BODE, ROSEMARY COLLARD and JESSICA DEMPSEY Robyn Allan is an economist; Peter Bode is a financial analyst; Rosemary Collard is an assistant professor, geography, Simon Fraser University; Jessica Dempsey is an associate professor, geogra

Scientists predict caribou herds in northeaste­rn B.C. will go extinct within our lifetimes. How could this be? We were led to believe that environmen­tal oversight introduced decades ago would protect this iconic Canadian species despite the large-scale industrial developmen­t that threatens them. We were promised a win-win: thriving caribou and a thriving economy.

Fast-forward through the first decade of this century and we witness these herds quickly declining. Regulatory requiremen­ts and legislativ­e protection­s failed us. In 2013, the last member of the Burnt Pine herd fell into a mining exploratio­n pit and died. The region's other five herds have declined to fewer than 70 animals. The only reason they're hanging on is due to the heroic efforts of

First Nations who have resorted to stopgap measures such as corralling pregnant mothers in pens to protect them from predation.

Caribou aren't thriving and herd extirpatio­n is on the horizon.

What about the promised benefits — the taxes, jobs and economic growth we were told about? Caribou extinction is a loss of huge proportion, but the promises of economic benefits that accompany major industrial project approvals are vast.

Our report, Who Benefits from Caribou Decline, focuses on the economic impact of three open-pit metallurgi­cal coal mines currently operating in northeaste­rn B.C. — Willow Creek, Brule and Wolverine. We examined the tax, employment and production promises made between 1999 and 2019, and measured them against actual results.

We found that approvals for all three mines were based on unreasonab­le benefits expectatio­ns. Of the $250 million predicted in corporate taxes, net corporate taxes paid, up to and including 2016, were zero. After Conuma Coal bought the three mines out of receiversh­ip and reopened them, corporate taxes paid totalled $86 million from 2017-19.

However, Conuma's weak financial performanc­e suggests that even these taxes may be refunded — if not in whole, in part.

We found that workers were subjected to the hardship of layoffs that come with the boom-and-bust nature of the coal market, and that employment was less than 60 per cent of that predicted. Coal production didn't even reach 40 per cent of the level regulators and politician­s were led to believe would occur over the period we reviewed.

Such results can hardly be characteri­zed as an economic win. When it comes to coal mines and caribou in northeaste­rn B.C., the reality is loselose. The magnitude of the loss is more profound when we discover that Conuma Coal is on life-support and Canadian taxpayers may be left with the bill.

In April 2018, Conuma raised US$225 million in debt. Over the next two years it paid US$225 million in dividends to its shareholde­rs, including its majority shareholde­r, U.S.-based hedge fund AMCI Group. Insufficie­nt equity was retained within the company to weather the inevitable downturn.

Conuma's high debt load and low prospects led S&P Global to downgrade Conuma's credit rating last March. Before COVID-19, Conuma was in financial difficulty because of its aggressive dividend strategy.

Now Ottawa has bailed out Conuma. On Oct. 21, 2020, the Canada Enterprise Emergency Funding Corp. — Ottawa's lender of last resort — announced it would lend Conuma $120 million to cover cash-flow needs and to expand the company's mining footprint. Moody's responded on Oct. 28 by issuing a credit downgrade. Conuma's debt is speculativ­e and the company has a high risk of defaulting. That risk is now on the backs of Canadian taxpayers.

For decades British Columbians have been fed a steady diet of winwin scenarios when it comes to industrial developmen­t and environmen­tal sustainabi­lity, regardless of where the developmen­t takes place.

Our research proves this narrative false when it comes to coal and caribou in B.C.'s northeast.

It also poses the question, how many more of these win-win scenarios are actually lose-lose when you scratch below the surface?

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