1. ENVIRONMENTAL ASSESSMENT OF CANADIAN MINING PROJECTS ABROAD CML 1105I MARCH 12, 2013

2. Overview Environmental assessment of Canadian mining projects abroad Accountability of Canada mining companies Legislative efforts seeking accountability for Canada natural resource development projects abroad

3. Canada: Global Mining HQ Toronto: world’s mining finance capital Significant competitive advantage in mining finance by developing expertise in exploration and early-stage development Canadians excel at finding metal, mineral deposits, marshalling the resources to put them into production In 2011, TSX and TSXV registered 58% of world’s mining corporations and financed 90% of all global mining equity deals PDAC conference biggest in world

4. Canada: Global Mining HQ Canada has half the world’s 2,400 active mining exploration companies (close to 40 % of $17.5 billion in corporate mining exploration in 2011) BC has more than half Canada’s mining exploration firms, largest concentration of mining exploration firms in world Do Canada, Canadian mining companies have particular responsibilities with respect to environmental/social impacts of their mining projects abroad?

5. Canadian Environmental Assessment Act Required as matter of law environmental assessments of projects outside Canada to be funded by Canada Applies to CIDA, DFAIT but not EDC Projects Outside Canada Regulations developed to reflect challenge of requiring public participation in projects in other countries POC Regulations – eliminated comprehensive studies of projects, and provided for advisory committees in lieu of panel reviews

6. Canadian Environmental Assessment Act Canadian International Development Agency (CIDA) - until recently provided little funding for bricks-and-mortar projects, such as mines CIDA now supports Canadian mining company projects outside Canada, by paying for access roads etc. Export Development Canada - Canada’s export credit agency, providing financing, insurance and bonding to Canadian businesses operating outside Canada: mining industry is a major client

7. Canadian Environmental Assessment Act CEAA included authority to require federal Crown corporations such as EDC to carry out EAs under CEAA, but regulations only issued for Crown corporations involved in commercial loans in Canada (Business Development Bank of Canada, Farm Credit Canada) Why wasn’t EDC included under regulations?

8. Sierra Club of Canada v. Canada (Minister of Finance) In 1996, Atomic Energy of Canada Limited (AECL) signed a contract to sell 2 678 MW CANDU-6 reactors for $CDN3 billion to China National Nuclear Corporation (CNNC) Cabinet approved a $1.5 billion loan under Canada Account of EDC, which is part of Consolidated Revenue Fund (not EDC funds) CEAA would have required comprehensive study of reactor sale Cabinet revised POC Regulations 2 weeks before deal was signed and declared them in force immediately

9. Sierra Club of Canada v. Canada (Minister of Finance) Minutes of April 1997 cabinet were leaked: In the Sierra Club litigation challenging the CANDU China transaction, the government has taken the position that CEAA does not apply to projects which receive financial assistance from Crown corporations through the Canada Account. However, Justice has advised that its case is not strong and that the Federal Court may well rule in favor of the Sierra Club. If the government loses, Justice expects that the court could issue an order directing the "responsible authority(s)" (RA), DFAIT and Finance, to conduct an environmental assessment which satisfies the Projects Outside Canada Environmental Assessment Regulations (POC).

10. Sierra Club of Canada v. Canada (Minister of Finance) Ministers for International Trade and Finance then authorized the EDC to provide the loan of up to $1.5 billion (CDN) to the State Development Bank of China (SDB) Sierra Club of Canada then filed an Application for Judicial Review with Federal Court of refusal of Ministers to subject sale, construction, operation of reactors to CEAA Sierra Club won several motions (relating to standing) to stall case, but ultimately ran out of money to continue the fight

11. EDC Environmental and Social Review Directive Voluntary, not legally binding EDC, before entering into transaction related to project, determines whether project is likely to have adverse environmental or social effects after mitigation measures and, if so, whether EDC is justified in entering into transaction Directive sets out three EA categories on projects on basis of environmental/social effects Categorization determines the nature and extent of information that will be required by EDC

12. EDC Environmental and Social Review Directive Environmental and social effect means any change to the environment, including any social impact, occurring as a result of the normal construction or operation of the project or in the event of a reasonably foreseeable accident or malfunction in relation to the project Social impacts refers solely to those adverse impacts on people defined in the IFC Performance Standards as: labour and working conditions, community health, safety and security, land acquisition and involuntary resettlement, indigenous peoples, and cultural heritage.

13. EDC Environmental and Social Review Directive Category A if “project is likely to have significant adverse environmental and social effects that are sensitive, diverse, or unprecedented” Annex 2 sets out list of Category A projects for illustrative purposes only, includes open-cast mining, processing of metal ores/coal, petroleum/natural gas extraction) EDC required to use international standards (International Finance Corporation, part of World Bank) as benchmarks in carrying out review

14. EDC Environmental and Social Review Directive EDC requires copy of environmental impact assessment for Category A projects Information provided must demonstrate that project has been designed to comply with host country requirements (provisions for local consultation, licenses, permits) No public participation or independent review requirements No requirement for public registry of EAs

15. Canadian Environmental Assessment Act 2012 Under CEAA 2012, environmental assessments of federally funded projects outside Canada no longer required S.68 prohibits federal authorities from carrying out or providing financial assistance to project outside Canada unless “the project is not likely to cause significant adverse environmental effects” or Cabinet decides that these significant effects are “justified in the circumstances” Result: Canadian legal requirements to assess environmental effects of projects outside Canada eliminated

16. Summary Issues Don’t Canadian laws requiring environmental assessments of projects in other countries represent an infringement of sovereignty? Can’t voluntary measures (such as the EDC policy) ensure environmental and social sustainability? Are legal requirements necessary?