Towards A Sahtu Development Corporation: A Discussion Paper

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Towards a Sahtu Development Corporation:

A Discussion Paper

Prepared for the Tulita Dene Band

Chief Frank Andrew

By

Garth Wallbridge

March 27, 2011


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TABLE OF CONTENTS

Page

Chapter 1 Introduction and Executive Summary 4

Chapter 2 Financial and Other Findings from Regional Development

Corporations

8

Major Findings 8Financial Achievements of Regional Development Corporations 10

TABLE 1 Financial Growth of Selected Regional Development Corporations 11Gwichin Development Corporation 11Nunasi Corporation 12Makivik Corporation 13Inuvialuit Development Corporation 13

TABLE 2 Inuvialuit Corporate Group Financial Performance 2005-2009 14TABLE 3 Inuvialuit Subsidiaries Financial Performance 2005-2009 16

Recent Regional Development Corporation Holdings 16Social Benefits 18

Chapter 3 Native Economic Development: Lessons from Elsewhere 19The Harvard Project on American Indian Economic Development 19The Context for Maori Economic Development 20

Chapter 4 A Model of Regional Economic Development 22FIGURE 1 A Model Economic Development Corporation 22

Chapter 5 Towards A Sahtu Development Corporation 25Assets and Achievements 26Governance and Operational Institutions 26Business Ventures 26Potential Regional Economic Opportunities 26Next Steps 28Conclusions 29

APPENDIX Development Corporations in Northern Canada and Alaska 32

Inuvialuit Regional Corporation 32Inuvialuit Development Corporation 33

FIGURE A-1 Inuvialuit Development Corporation Main Holdings 34Inuvialuit Investment Corporation 35Inuvialuit Petroleum Corporation 36Inuvialuit Land Corporation 36Inuvialuit Corporate Group Financial Performance 2005-2009 36

TABLE A-1 Inuvialuit Corporate Group Financial Performance 2005-2009 37TABLE A-2 Inuvialuit Subsidiaries Financial Performance 2005-2009 38

Spinoff Benefits 39


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Gwichin Region 40Gwichin Development Corporation 41

FIGURE A-2 Gwichin Development Corporation Main Holdings 42Gwichin Settlement Corporation 43

Gwichin Business Development Department 43Spinoff Benefits 44Tlicho Region 47Tlicho Investment Corporation 47

FIGURE A-3 Tlicho Investment Corporation Main Holdings 47Denendeh Development Corporation 48Denendeh Investments Inc. 49

FIGURE A-4 Denendeh Investments Incorporated Portfolio 50Dehcho Economic Corporation 51

FIGURE A-5 Dehcho Economic Corporation Main Holdings 52Akaitcho Regional Investment Corporation 53Akaitcho Energy Corporation 53

NWT Metis Development Corporation 54North Slave Metis Alliance 54

FIGURE A-6 Metcor Inc.s Main Holdings 55Sahtu Region 56Economic Development in the Sahtu Settlement Area 57

FIGURE A-7 Sahtu Region Main Holdings by Community 58Nunasi Corporation 58Structure and Holdings 61

FIGURE A-8 Nunasi Corporation Main Holdings 62Spinoff Benefits 65James Bay and Northern Quebec Agreement (1975/1978) 67Makivik Corporation 68

FIGURE A-9 Makivik Corporation Main Holdings 69James Bay Crees 70Yukon Umbrella Final Agreement 72Labrador Inuit Land Claims Agreement 74Labrador Inuit Development Corporation 74

FIGURE A-10 Labrador Inuit Development Corporation Main Holdings 76Nunavik Inuit Land Claims Agreement (2006) 77Innu Nation 78Osoyoos Indian Band Development Corporation 78

FIGURE A-11 Osoyoos Indian Band Development Corporation Main Holdings 80Alaska Native Claims Settlement Act 81Arctic Slope Regional Corporation 82


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CHAPTER 1. Introduction and Executive Summary

The focus of this discussion paper is on regional economic development in northern

Canada, mainly in regions with settled land claims. The paper examines the role being

played by economic development corporations in building regional economies andstrengthening the social well-being of land claims beneficiaries. The efforts being made in

regions without settled land claims are also part of the survey.

The main focus is on the regional development corporations in the Northwest Territories.

The Inuvialuit, Gwichin, Tlicho, and Sahtu regions (all with settled claims) are examined, as

are efforts in Nunavut, Northern Quebec, Yukon, Labrador, and Alaska. The work of the

Osoyoos Indian Band in British Columbia, recognized internationally for its excellence,

completes the descriptive portion of the paper. The land claim final agreements contain

many common features, but within those common features each region has created an

economic development model with distinctive elements that other regions could learn

from and possibly use to their own advantage.

The reader is encouraged to look for these features in the descriptions of each economic

development corporation in the Appendix. Chapter 2 presents a summary of the findings.

For comparative purposes, the paper examines research into native economic development

from the United States and New Zealand. The research findings, presented in Chapter 3,

identify the underlying, foundational requirements for successful native economicdevelopment. This analysis helps us to understand why some regions are more successful

than others in building businesses, employment opportunities, and wealth for their people.

Research by the Harvard Project of Harvard University identifies three main elements for

successful native economic development: sovereignty, institutions, and culture. They later

added an additional two elements: leadership and strategic thinking. The land claim final

agreements in northern Canada meet the first three conditions. Comprehensive claims

recognize the sovereignty of the claimant groups, and create the basisand the funding

on which to build social and economic institutions that respect the cultural values of the

claimant group. Where leadership and strategic thinking are also present, success is more

likely to happen and to grow over time. Spinoff benefits are also likely to increase.

The New Zealand Treasury Department, in a recent discussion paper prepared at the

request of the Maori for a national assembly, found that an agenda for Maori economic


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development should focus on three factors: developing people, developing enterprises, and

developing assets. Above all, the paper argues that the single most important factor in

determining the success of Maori economic development over the next 20 years will be

initiatives that improve the education and skills of Maori peoplesound basic education of

youth leading to skill training, employment and higher incomes, and opportunities forpeople to learn on the job as workers, business operators, managers, or administrators.

Enterprise development and asset development flow from this skill development.

Both the Harvard Project and the New Zealand Treasury stress the importance of

separating the institutions of economic development (and the funding they require to build

enterprises and capital assets), from the political functions of aboriginal governments.

Starting from these basic factors and the strong features of the northern economic

development corporations, it is possible to propose a best practices model for a regional

aboriginal economic development corporation. Chapter 4 does that.

Some of the main features of this model economic development corporation include the

following:

Governance institutions that include sole ownership of the economic developmentcorporation by the regional authority, that operate fairly and impartially, and that

keep all business and investment activities separate from the political activities ofthe regional authority;

Goals and objectives that include support for the traditional economy as well asbusiness development;

A business development strategy that includes essential local services, participationin regional industrial projects, and, resources permitting, investments in national

and even international enterprises with joint venture partners;

A strong emphasis on education, training and skill development, and opportunitiesfor beneficiaries to learn on the job through employment in the Settlement Area;

Close monitoring of investments and flexibility in responding to opportunities andchallenges in the economic environment;

Non-competitive alliances and multiple partnership arrangements with otheraboriginal partners to provide essential services across regions;

Scope of activity that includes professional support for small and isolatedcommunities, and investment in community-based projects; and


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Relations with government that ensure a financial stake in government projects onSettlement Area lands and participation with government and industry in planning

forums and major developments.

The final chapter looks at the assets and achievements of the Sahtu region to date andmakes a brief environmental scan of the potential economic opportunities in the region

that would make it advantageous for the Sahtu Dene and Metis to have a regional

development corporation.

A brief environmental scan is enough to indicate that the Sahtu region, and each of the

Sahtu communities, is situated in an area of high non-renewable resource potential for

large-scale industrial development (and potential local spinoff projects). A decision on the

Mackenzie Gas Pipeline Project is expected by 2016. A decision to build the pipeline would

surely spur continued exploration work in the region, for which some beneficiaries already

have training. It would also provide contracting opportunities for Sahtu-owned businesses

supplying helicopter, heavy equipment, expediting and camp services, and opportunities

for ongoing maintenance contracts. Construction of the pipeline would almost certainly be

accompanied by government action to extend the Mackenzie Valley Highway, creating

similar opportunities.

Mining activity in the region is also promising and likely to continue, and steps to develop

hydroelectric power schemes and/or technologically sophisticated alternative energyprojects are already being taken. With five areas of ecologically and culturally important

land being actively reviewed for designation as Historic Sites, and a sixth one having been

proposed, every community in the region has potential opportunities for eco-tourism and

heritage development, land and resource management, and scientific research potential to

take advantage of.

The evidence presented in this discussion paper suggests that one institution that would

put the region in a stronger position to take advantage of these opportunities is missing. A

regional development corporation would allow the communities to pool existing financial

resources and managerial capacity and, if need be, to hire external expertise to undertake

region-wide projects and support future community-based ventures. A Sahtu Development

Corporation would be able to engage industry in negotiations involving major projects

within the Settlement Area, speaking with one voice for the entire region. It would be able

to do the same with the federal and territorial governments.


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When all of the existing assets and achievements to date, and the potential opportunities

for the future are taken into consideration, it is reasonable to conclude that one remaining

institutional piece should be put in place to strengthen the Sahtus capacity for economic

developmenta Sahtu Development Corporation. It is anticipated that the community-

based economic development corporations within the Sahtu will both be able to realize alarge volume of work, revenue and profits from their involvement in a region-wide

corporation, while continuing to have control of the local work they now have on the go.

One of the lessons to be taken from this survey paper is that a critical mass of financial and

human resources makes a difference. A regional body operating with a larger pool of

capital, managed by experienced professionals, has more resources for responding to

regional and community needs and opportunities over smaller, local enterprises operating

alone. A regional economic development corporation is also more likely to have influence

with government and industry than individual communities.

Another lesson learned is that the benefits of regional development build up over time,

creating wealth that gives a region the flexibility to take advantage of new opportunities,

and the resourcefulness to deal with setbacks. That has been the experience for the

Inuvialuit, for Nunasi Corporation, the Makivik Corporation and the Alaska North Slope,

and for other regions with more recent settled land claims. Whatever problems might arise

in the short term, from the longer term the Sahtu could look back and see how far it has

come.


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CHAPTER 2. Financial and Other Findings from Regional Development Corporations

This chapter summarizes the findings from the review of the regional development

corporations found in the appendix to this report. Readers interested in the background

information on which these findings are based, or have an interest in one or more of theregions surveyed, can go to the appendix. The activities of ten regions with settled land

claims in Canada and Alaska are summarized there, plus the NKMip Band in Osoyoos,

British Columbia, as well as efforts by the Dene and Metis of the NWT in regions without

settled claims, and by the Innu of Labrador.

Sahtu has most of the institutional features found in other regionsa settled claim,

compensation funding and Trust Fund, regional and local councils, and local development

corporations. The one piece that is missing is a regional economic development

corporation. The question to address then becomes, what have other regions accomplished

through their development corporations that might be beneficial for the Sahtu?

Major Findings

1. Broadly speaking, all of the settled land claims have the same goals and objectivestodevelop their economies, improve the social wellbeing of their people, and protect their

land. This is true for Canada and Alaska, and elsewhere in the United States and New

Zealand, reviewed in Chapter 3.

2. Employment and business revenues (wealth generation) are the keys to achievingeconomic and social goals and objectives.

3. Human capacity buildingpreparing land claim beneficiaries for jobs at all levels in anorganization as workers, managers, and business owners, beginning with basic

educationis key to economic success. Learning on the job occurs at all levels in the

workplace and is arguably just as important to success as education and training. (See

more on the role of education, training and workplace learning in Chapter 3).

4. A critical mass of financial and human resources makes a difference. A regionalapproach to economic development allows financial and human resources to be pooled

to develop regional initiatives and support community-based activities. The Inuvialuit

Development Corporation is a good example of this.


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5. The joint venture partnerships that regional development corporations enter into, oftenwith large and experienced industrial corporations, are not just a means to participate

in profitable business operations; they are also an important means of achieving

knowledge transfer to beneficiaries. The Gwichin Development Corporation describesits approach this way: We look for partnerships that promise to deliver profits for both

partners, training for our people and sustainable development for our land.

6. Every region that was surveyed has major industrial activity occurring within theregion or potentially occurring in the near future, and most of the regions surveyed are

participating in these major projects, as well as providing essential services through

local and regional business ventures.

7. Connections with industry matter. As one example, the Labrador Inuit of Nunatsiavutown the company that manages the mining and camp services at the Voiseys Bay nickel

mine. Their example demonstrates the potential for land claims beneficiaries to become

significant participants in an industrial megaproject through their development

corporation.

8. Preservation of the value of the heritage fund against inflation is the minimum, essentialobjective; growth of the heritage fund to meet the social needs of a growing population

and to generate wealth for future projects is the goal of investment management. (SeeTable 1 below.)

9. Professional management of land claims capital transfers must be in place to ensurethat investment portfolios accumulate wealth over time. Sound practice involves:

Close monitoring of investments with frequent review and reporting against aninvestment earnings target;

Delegation to more than one professional investment advisor; Simple, understandable annual reports to beneficiaries, laid out in a consistent

format that shows year-to-year trends (something the Inuvialuit do very well).

10.Regions often struggle at first with their business ventures before they become stableand consistently profitable. The James Bay Crees of Northern Quebec, and the Inupiat of

the Alaska North Slope, are both candid about their business growing pains.


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11.Separation of business activities managed by a development corporation from thepolitical and related responsibilities of the land claim organization is an important

principle. The Gwichin and the Osoyoos Band are very clear about this.

12.There are no limits to the types of ventures a regional development corporation canenter into, from local essential services (e.g., groceries, fuel distribution or hotels), to

regional and national services and industrial ventures (e.g., regional and mainline air

carriers, mining and manufacturing), to public utilities and sophisticated technologies

(e.g., the Tlichos $30M investment in a hydro-electric dam, digital networks and

telecommunications systems), and specialized ventures (e.g., pharmaceuticals research

by Makivik Corporation, venture capital management by the Inupiat of the Alaska North

Slope).

13.Being small does not prevent success. The NKMip Band of Osoyoos, BC fully exploits thepotential of its small land base and is recognized internationally as a model for native

economic development. The Innu Nation of Labrador, without a land claim and

representing just 2,200 people in two communities, has been successful in winning

financial and other concessions from industry and government.

14.Clear development goals make a difference. The Arctic Slope Regional Corporation,whose lands are rich in natural resources, puts it this way: ASRC is committed to

developing these resources and bringing them to market, in a manner that respects

Inupiat subsistence values while ensuring proper care of the environment, habitat and

wildlife.

15.Time matters. The benefits of regional development build up over time, creating wealththat gives a region the flexibility to take advantage of new opportunities, and the

resourcefulness to deal with setbacks and economic downturns.

Financial Achievements of Regional Development Corporations

The data available for the Inuvialuit and Gwichin, the James Bay Inuit and Nunasi

Corporation make it possible to see how business operations conducted over time can

result in substantial net financial growthwealth generation to support the future

aspirations of beneficiaries.


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The data from Table 1 demonstrate how the four regions for which financial information is

readily available have been successful in generating, and maintaining, substantial wealth

for their beneficiaries, in spite of setbacks caused by the recession of 2007-2009.

TABLE 1

Financial Growth of Selected Regional Development Corporations

Region Year Amount

Compensation

Received

Over

Beneficiaries

(Approximate)

Communities Recent

Net Worth

Inuvialuit 1984 $169,500,000 14 years 4,000 6 $362,500,000(2009)

Gwichin 1992 $141,000,000 15 years 2,400 4 $115,300,000(2010)

Nunasi* 19761993

$1.173 billion 14 years 25,000 26 $1.115 billion(2009)

Makivik** 1975 $90,000,000 25 years 10,000+ Inuit 14 Inuit(Nunavik) $180,000,000+

* Nunasi was founded in 1976 on borrowed money, all of which was repaid by 1992. The Nunavut land claimwas settled in 1993.

** The James Bay Agreement of 1975 was for a total of $225 million paid over 25 years to 16,000 Crees andmore than 10,000 Inuit. The Naskapi of northeast Quebec joined through the Northeast Quebec Agreement in1978. The Makivik Corporations portion of the compensation package came to $90 million.

Gwichin Development Corporation

The Gwichin Final Agreement illustrates the point. It provided tax-free capital transfers in

annual installments totaling $141 million over 15 years, less repayment of the negotiation

loans of $8.1 million. The final payment in 2007 resulted in a net balance in the GwichinSettlement Fund, called Gwichin Legacy Capital, of $134.7 million. This amount exceeded

the original fund objective of $132 million.

Due to the global recession, Gwichin Development Corporation assets decreased from

$49.8 million in 2008 to $36.5 million in 2009. Shareholder equity dipped slightly over the

same period from $2.2 million to $2.1 million, and revenues decreased from $6.6 million in

2008 to $5.9 million in 2009. A small loss in 2009 followed a larger one of more than $6

million in 2008. Given the uncertain economic environment and delays in the Mackenzie

Gas Project, the GDC is looking for investment opportunities outside the Gwichin

Settlement Area.

The 2006-2007 Annual Report of the Gwichin Settlement Corporation describes how the

GSC has actively revised the management of federal capital transfers over the years,

especially since 1996, to maximize return on investment. Steps taken include the


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establishment of an Investment Committee, the retention of an external investment

advisor, the establishment of an investment policy that governs how the fund is invested

and managed, and periodic review of the investment mix by the Investment Committee,

resulting in changes. The 2009-2010 Annual Report of the GSC notes that since 1996, when

the fund was first actively managed, the fund has returned approximately 6.4% annually,0.2% ahead of the policy benchmark. However, the fund slightly underperformed its

benchmarks for the four-year period ending in 2010. With losses due to the recession, the

Gwichin Legacy Capital stood at $115.3 million in 2010, representing a shortfall from the

inflation-adjusted level of $139.5 million.

Nunasi Corporation

Nunasi Corporation, established in 1976, pre-dates the settlement of the Nunavut Land

Claims Agreement in 1993.1 Nunasis purpose was to support Inuit to take a prominent

place in the world of Canadian business. Originally, Nunasi Corporation was financed

through debt financing secured through the proposed land claim. The loan was fully repaid

in 1992, a year before the land claim was settled.

Payment of the Capital Transfer from the Government of Canada to the Nunavut Trust was

made in 14 annual payments for a total of $1.173 billion, less repayment of negotiation

loans of $39.7 million by TFN. The final payment was made in 2007.

In fiscal year 2009, the Inuit Trust reported investment income of $38.8 million and adistribution to beneficiaries of $33.6 million on investment assets totaling $1.115 billion.

The Inuit Trust also declared dividends of approximately $463,000. By that same year,

Nunasi Corporation had declared dividends since 1999 of over $3 million.

Over the course of its growth, Nunasi has entered into numerous joint ventures with other

Aboriginal development corporations across northern Canada which have regional

importance or national scope. The investment arms of these regional bodies, including the

three Regional Inuit Associations of Nunavut, often have extensive investments of their

own. The result is a complex web of holdings and relationships. Nunasis flagship

1Back in 1976, the Inuit Tapiriit of Canada, now known as the Inuit Tapiriit Kanatami or ITK, created the

Inuit Development Corporation as the development arm of the yet to be formed territory of Nunavut. ITK also

formed an organization called the Tunngavik Federation of Nunavut (TFN) to negotiate the land claim

agreement. Shortly after that, TFN renamed the Inuit Development Corporation Nunasi Corporation.


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partnership is the equal partnership with the Inuvialuit in the NorTerra Group of

companies. Nunasi also partners with the Gwichin Development Corporation, the

Denendeh Development Corporation, the Yukon Indian Development Corporation, Makivik

Corporation, Sakku Investment Corporation in the Kivalliq Region, and the Labrador Inuit

Development Corporation.

By recent count, Nunasis wholly owned subsidiaries included seven companies operating

retail, helicopter, education and training, and security and courier services. Its joint

ventures involve companies and groups of companies, some of which operate their own

subsidiaries44 companies in allfor a grand total of 53 subsidiaries on the Nunasi

organization chart.

Makivik Corporation

Makivik Corporation is a non-profit entity. It receives, administers, distributes and invests

the compensation money payable to Nunavik Inuit. The initial $90 million paid out under

the compensation package more than doubled over 30 years. Makivik is also now receiving

the $86 million capital transfers and associated funds due under the Nunavik Inuit Land

Claim Agreement(2007) to create the new Nunavik public government, while $55 million

will fund the Nunavik Inuit Trust to make disbursements to individual Nunavik Inuit.

An internal Investment Review Committee (IRC) is responsible for ensuring that Makiviks

capital fund grows over time for use by future generations. The IRC is an advisory group tothe Makivik executive which administers and invests the capital fund in stocks, bonds and

money markets; reviews joint venture projects or proposals including the creation of new

subsidiary companies and loan request applications; and recommends the annual budget to

the Makivik directors based on the projected rate of return from financial investments. The

IRC meets monthly while an investment group monitors the fund and tracks investment

activities daily.

Inuvialuit Development Corporation

The year 2009 was the twenty-fifth anniversary of the Inuvialuit Final Agreement. Since

1984 the Inuvialuit:

Have successfully built up the real value of their heritage fund; Earn large after-tax profits most years; In spite of a substantial loss in 2009 due to the global recession, continue to enjoy

substantial wealth as a collective body;


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Provide significant levels of employment for beneficiaries and a major wage packagein the region;

Fund the operations of the six community corporations; Fund social programs of value to beneficiaries and make charitable donations from

the revenues earned by development corporation businesses; Provide spinoff benefits such as community cleanups, cultural and youth projects

and community events;

Earn the trust of government departments and agencies, which become morewilling to entrust program funding to the IRC. Operational success earns trust and

creates the conditions needed for continuing success.

Table 2 summarizes the overall financial operations of the Inuvialuit subsidiaries in the

Inuvialuit Corporate Group over the most recent five-year period. The table shows that the

Inuvialuit were generating substantial after-tax earnings up until 2008, when the global

recession took hold. In spite of the reduced earnings in 2008 and the loss incurred in 2009,

the minimum cash payout to beneficiaries of $400 each was maintained for those years,

and was much higher in previous years. (In fiscal year 2000, after-tax earnings reached

$52,500,000 and the individual payout to beneficiaries was $850 each.) The individual

payouts to beneficiaries give every Inuvialuit an incentive to take a serious interest in IRCs

activities in the regional, national, and international economy.

TABLE 2

Inuvialuit Corporate Group Financial Performance 2005-2009

Year After Tax

Earnings

(Losses)

Beneficiary Distribution

Total Individual Beneficiaries

2009 ($17,346,000) $1,595,600 $400.00 3,989

2008 3,824,000 1,565,000 400.00 3,912

2007 35,179,000 3,816,155 1,001.09 3,812

2006 36,459,000 2,869,470 770.12 3,726

2005 19,545,000 1,744,651 477.99 3,650

Direct Benefits to Beneficiaries

Employee

Wages

From ICG

ResourcesEquity in ICG Contribution

Agreements

2009 $12,629,242 $17,879,299 $362,584,000 $11,000,000+

2008 13,786,608 21,102,222 381,841,000 11,600,000

2007 13,467,600 20,285,992 382,216,000 8,600,000

2006 11,470,148 17,345,371 350,234,000 8,700,000

2005 11,411,625 18,151,624 315,825,000 6,000,000


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Direct benefits to beneficiaries have been in the range $17-21 million over the five-year

period. Employee wages ranged from $11 million to nearly $14 million annually of that

amount. The remainder was expended on a variety of community projects, support for

education and elders, and donations of various kinds within the region. Total equity in theInuvialuit Corporate Group declined somewhat in 2009 from a high in 2007, but remains

more than double the original land claims settlement at $362.5 million.

Besides its direct business and investment activities, IRCs organizational and managerial

strengths make it an attractive partner for the federal and territorial governments. Both

levels of government have raised the amounts in their contribution agreements recently to

support wellness and social development programs and capacity-building efforts in the ISR.

Table 3 breaks down the results for the three profit-earning members of the Inuvialuit

Corporate Group for the years 2005-2009. The Inuvialuit Land Corporation seldom reports

earnings.

The table records the impact of the 2007-2009 recession on the revenues, profits, wages

and employment numbers, and donations made by the Inuvialuit Development Corporation

(IDC). IDC had revenues of $221 million in 2009, the worst year of the global recession,

when it recorded an after-tax loss of nearly $15 million. That represented a major decline

from 2006, when IDC turned a profit of more than $19 million. In spite of the recession,wages paid to beneficiaries remained at nearly $8.7 million in 2009, paid out to 290

beneficiaries, and donations exceeded $700,000.

The Heritage Fund managed by the Inuvialuit Investment Corporation, the returns from

which fund the administration of the Inuvialuit Regional Corporation and the community

corporations and other expenses, recorded a decline in earnings to $1.9 million in 2008 and

a loss of $6.4 million in 2009, well down from the typical earnings of previous years in the

$8-$10 million range. Benchmarks for earnings set on a four-year evaluation period were

also brought down sharply for 2008 and 2009. Close monitoring of investments, however,

has kept the rates of return close to, or above, the targets.

The slowdown in oil and gas exploration prompted the Inuvialuit Petroleum Corporation to

sell off southern business interests several years ago and invest the proceeds through IIC


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pending better opportunities. Portfolio earnings for the Inuvialuit Petroleum Corporation

are not reported separately from the IIC returns.

TABLE 3

Inuvialuit Subsidiaries Financial Performance 2005-2009

Year Inuvialuit Development Corporation

Revenue After Tax

Profit (Loss)

Wages Paid to

Beneficiaries

Beneficiaries

on Payroll

Donations

2009 $221,146,000 ($14,995,000) $8,690,502 290 $732,000

2008 309,396,000 2,713,000 10,020,000 391 467,000

2007 268,984,000 13,115,000 9,970,000 430 1,114,000

2006 229,314,000 19,403,000 8,400,000 Not reported 1,400,000

2005 187,605,000 8,346,000 Not reported 200 full-timeequivalentpositions

1,600,000

Inuvialuit Investment Corporation

Heritage Fund

Inuvialuit Petroleum

CorporationNet Market

Value

Profit (Loss) Return(4-yr

avg)

Target Portfolio

IIC/Ikhil*

Earnings

2009 $181,926,000 ($6,380,000) 3.0% 3.1% Earnings

down

$89,000

2008 146,932,000 1,904,000 0.8% 1.2% Earningsdown

1,387,000

2007 197,860,000 9,275,000 10.3% 10.6% Not reported 2,975,000

2006 195,000,000 10,505,000 14.1% 12.4% Not reported 2,975,000

2005 176,300,000 7,969,000 10.8% 11.3% Not reported Not reported

* Following the sale of IPCs southern business interests, the proceeds were invested in IIC. IPC also ownsa one-third share in the Ikhil Natural Gas Project which supplies Inuvik.

Recent Regional Development Corporation HoldingsA scan of the Appendix will demonstrate the unlimited range of business ventures the

regional development corporations own outright or have majority, equal, or minority

shareholdings in. Major sectors of the economy in which development corporations have

holdings include: civil and industrial construction; energy development (oil and gas, hydro

development and transmission); hospitality and tourism (hotels, motels, lodges, travel


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agencies); real estate and property management (residential, offices, commercial,

industrial); retail (groceries, fuel, hardware); transportation (regional and mainline air

carriers, inland and marine barging and shipping, trucking).

A range of businesses support the mining and oil and gas sectors: engineering andenvironmental services; logistical and expediting services (road and air freight handling);

helicopter charters; remote camp services; winter road construction; labour supply; heavy

equipment; welding and equipment repair; specialized concrete for underground

operations (North Slave Metis); and others. The Labrador Inuit of Nunatsiavut illustrate the

extent to which a development corporation can be active in a major mining project.

Through its subsidiary Torngait Services Inc., the Labrador Inuit Development Corporation

is a major player in the development and operation of the Voiseys Bay nickel mine.

Torngait Services, in partnership with ATCO Frontec, built, operates and supervises the

Voiseys Bay camp, is responsible for on-site engineering and equipment operation, drilling

and mine mill operations, employee supervision and general labour supply. A recent five-

year contract valued at $47.5 million provided employment for 65 employees, of whom

70% are aboriginal.

The Tlicho entered into a joint venture with ATCO Frontec in 1999 to supply goods and

services to the diamond mining industry outside Yellowknife. After only six years the

Tlicho bought out ATCO Frontec. At the time they had 300 employees and $55M in

revenues according to newspaper reports.

Many specialized sectors of the economy are obvious choices, or present specific

opportunities in various regions: forestry in northern Quebec and Labrador, shrimp and

turbot fishery in Nunavik and Labrador, hydro generation for the James Bay Crees and

Tlicho, power transmission for the Akaitcho and Metis, fire management in the Tlicho and

Sahtu, sealift operations, fur tanning, adventure tourism cruises, quarrying, commercial

agriculture (vineyards and winery as part of a multi-faceted resort and recreational

development at Osoyoos); petroleum refining and distribution (Alaska North Slope).

Some business ventures are meant to enhance the quality of life for beneficiaries: medical

boarding homes in several locations; a pharmacy in Cambridge Bay serving the community

and Kitikmeot region and another pharmacy in Rankin Inlet serving the Kivalliq region;

education and training services in several regions (classroom or workplace based);

preschool and daycare (Osoyoos).


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Sophisticated technology is not beyond the development corporations. PanArctic Inuit

Logistics Corporation (PAIL) operates the North Warning System on behalf of the

Department of National Defence, in partnership with ATCO Frontec. Seven Inuit

development corporations are equal owners of PAIL: the Inuvialuit, Nunasi, Makivik,

Labrador Inuit, Qikiqtaaluk Corporation, Sakku Investments Corporation, and KitikmeotCorporation. Several regions are also involved in bringing high-speed broadband digital

service to 57 northern communities through the Broadband Business Alliance Limited

Partnership (BBALP) contract with SSI Micro: Denendeh Investments Inc., Tetlit Gwichin

Council, Deline Land Corporation, Dehcho Economic Corporation, Tlicho Investment

Corporation, and Akaitcho Regional Investment Corporation.

Social Benefits

A regional development corporation stands to create more and better jobs for Land Claims

beneficiaries. Better jobs mean better incomes and benefits and employment opportunities

for workers. When development corporations develop new businesses they also develop

the talent pool within their region. They stimulate the development of skilled workers,

administrators, and entrepreneurs. The creation of skilled workers, administrators, and

entrepreneurs is dependent on people having the opportunity to gain experience and learn

on the job.

Research has shown that good jobs and incomes are related to a variety of direct and

indirect benefits for individuals and communities. These real and potential benefitsinclude:

Improved family nutrition; Improved mental health; Improved incentives for young people to stay in school and acquire postsecondary

education and skill training;

Improved work experience and job mobility for workers; Reduced dependency on Income Support; Reduced encounters with the criminal justice system; Improved community-level investments in infrastructure and businesses serving

local and regional needs;

Greater local control of economic decision-making and resources and participationin regional industrial activities.


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When regions participate in development activities within their communities, and outside

the region as their businesses generate enough income to do so, they achieve one of the

most important benefits of allthe resiliency to withstand setbacks in the economy and

the flexibility to minimize hardships and rebound as opportunities arise.


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CHAPTER 3. Native Economic Development: Lessons from Elsewhere

Native economic development matters in other countries besides Canada. Research in two

countries with large aboriginal populations is examined briefly here for comparison withCanadian experience. Researchers in the United States and New Zealand have tried to

identify the critical conditions for, and the essential elements of, a successful native

economic development model.

The Harvard Project on American Indian Economic Development

The Harvard Project, based at Harvard University, aims to understand and foster the

conditions under which American Indian nations achieve sustained, self-determined social

and economic development. The Project operates in association with the Native Nations

Institute at the University of Arizona.

Beginning in 1987, through applied research and service activities, the Project has tried to

answer three key questions: What works? Where does it work? And Why does it work? The

questions recognize that some of the many Indian nations in the USA, large and small, have

experienced economic success while others have not.

The research and case studies carried out by the Project identify three key determinants of

economic success:

Sovereignty matters. When Native nations make their own decisions about whatdevelopment approaches to take, they consistently outperform external decision-

makerson matters as diverse as governmental form, natural resource management,

economic development, health care, and social service provision.

Institutions matter. For development to take hold, assertions of sovereignty must bebacked by capable institutions of governance. Nations do this as they adopt stable

decision making rules, establish fair and independent mechanisms for dispute

resolution, and separate politics from day-to-day business and program management.

Culture matters. Successful economies stand on the shoulders of legitimate, culturallygrounded institutions of self-government. Indigenous societies are diverse; each nation

must equip itself with a governing structure, economic system, policies, and procedures

that fit its own contemporary culture.


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Two additional key factors were added later:

Leadership. Nation building requires leaders who introduce new knowledge andexperiences, challenge assumptions, and propose change. Such leaders, whether

elected, community, or spiritual, convince people that things can be different and

inspire them to take action.

Strategic thinking. The Indian nation has moved away from crisis management andopportunistic, quick-fix responses to development dilemmas and toward long-term

decision-making that incorporates community priorities, concerns, circumstances, and

assets.

These five factors do not guarantee success, but they make it more likely. The researchers

suggest that where these key determinants are in place, assets such as education, natural

resources, access to capital, and location in respect to markets are more likely to pay off. On

the other hand, where some of these five factors are not in place, the other assets are likely

to be wasted. The researchers conclude that businesses that are protected from political

interference are more likely to be profitable than those that are not.

The Context for Maori Economic Development

The New Zealand Treasury prepared a background paper by this title in 2005, at the

request of the Maori people for an important assembly (Hui Taumata in the Maori

language). The Maori, located throughout the islands, represent significant numbers andwealth in the New Zealand economy, although lagging the non-Maori majority in ways

similar to Canada and the United States. Maori economic development is understood as a

key contributor to the national, export-based economy, with prospects for growing

participation in the Asian and global economy.

The Maori represent 15% of New Zealands population. Settlement of claims for confiscated

Maori lands made since 1992, a process which still continues, has given the Maori

ownership of significant portions of New Zealands export industries and thereby makes

them important contributors to the national economy. One settlement, for $170 million,

gave the Maori control of at least 20% of New Zealands lucrative fishery quota. Other large

settlements have given the Maori an important stake in agriculture and forestry, also

important sources of export earnings. Maori contribution to the countrys Gross Domestic

Product rose from less than 2% in 2003 to 5.4% in 2006, making them important


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international players. At that time, Maori commercial assets, privately and collectively

owned, were valued conservatively at $16.5 billion.

The Treasury analysts identify five key drivers of Maori economic development:

Skills and talent; Innovation and technological change; Investment; Entrepreneurship; and Sound institutions.

From these five drivers the Treasury Paper identifies three key considerations in

developing an agenda for Maori economic development: developing people; developing

enterprises; and developing assets (which may involve dealing with tensions over the

appropriate use of collectively owned lands and resources).

The paper picks out people as the key determinant of Maori economic development over

the next 20 yearswhether as employees, owners, governors, managers or eldersand

whether acting individually or collectively. The most significant contribution to Maori

economic development over the next 20 years is likely to come from improving the education

and skills of Maori people. The effects of such improvements are likely to be wide-ranging and

long-lasting. They include increased access by Maori to employment and higher incomes, the

effective governance and management of Maori enterprises, and the sustainable development

of Maori commercial assets.

The entrepreneurial skillsleadership, management, and governancein part involve

achieving a balance between commercial management skills and traditional leadership

skills. Also required is balancing stakeholder involvement in decision-making with the need

to respond promptly to opportunities and risks.

The paper echoes the findings of the Harvard Project. The economic activities of individuals

and enterprises can be either supported or discouraged by the rules, systems and institutions

that exist in society. There is a need to focus on these institutional foundations for economic

development, and ensure that they provide an environment in which people and businesses

have incentives to improve their economic participation and productivity. Governments play a

key role in this regard, but so do the formal and informal rules, systems, values and

institutions that exist within Maoridom.


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CHAPTER 4. A Model of Regional Economic Development

The comprehensive land claims settled by aboriginal peoples in northern Canada meet the

criteria for success identified in Chapter 3: sovereignty, institutions, and culture. The terms

of the final agreements recognize sovereignty through ownership of land and resourcesand through financial compensation. Control over land and resources, and substantial

federal transfers of money, create the potential for sound institutional development. The

final agreements set out terms that support the disciplined management of the funding

transferred to run those institutions. Where careful investments are made, even in the face

of major setbacks like the recent global recession, beneficiaries can be confident that over

time their wealth will grow, their social needs will be addressed, and their institutions will

function in ways that support cultural values and aspirations and inspire confidence.

Where leadership and strategic thinking are also present, social and economic success are

more likely to happen than where they are missing.

The regional development corporations in each region have good features that other

regions can learn from and possibly use to their advantage. These features are grouped in

the model below under Governance, Goals and Objectives, Business Development Strategy,

Scope of Activities, and Role of Government. Regions whose website information places a

strong emphasis on certain features are noted.

Figure 1

A Model Economic Development Corporation

Governance Regional emphasis Feature

InuvialuitGwichinTlichoNunasiJames BayNunatsiavut

The Development Corporation, as a birthrightcorporation, is a wholly-owned subsidiary of theaboriginal government.

InuvialuitGwichinTlichoNunasiOsoyoos

The business and investment activities of theDevelopment Corporation are separated from theaboriginal governments political activities throughan independent board of directors appointed by theaboriginal government.


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Governance Regional emphasis Feature

Gwichin Governance policies and practices are clear andimpartial and clearly communicated to beneficiariesand industry seeking access to Settlement Arealands.

Gwichin Clear standards are set which beneficiary-ownedbusinesses must meet to be eligible for contractswith industry or government.

InuvialuitGwichinNunasi

Investment policy includes benchmark rates ofreturn and dispersed professional management andoversight of the investment portfolio.

Gwichin Community economic development initiatives arealso managed by an independent board of directorswhere community economic developmentcorporations exist.

Tlicho All communities in the region are represented on theboard of directors, and the board chair is abeneficiary. Non-beneficiaries with relevantexpertise may be appointed to the board.

Yukon Economic development plans are required.

Goals and

Objectives

All regions Social as well as economic development, withconcern for protection of land, culture and quality of

life.

Most regions Support for the traditional economy as well as forbusiness development and wealth creation.

All regions Emphasis on education, training, and skilldevelopment for beneficiaries.

Business

Development

Strategy

Most regions Ownership of local and regional ventures.

Larger, wealthier

regions

Focus on and investment in regional industrial

projects, multi-region northern services, andnational ventures of regional significance.

Most regions Mix of majority ownership, equal ownership andminority investment with joint venture partners.


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Business

Development

Strategy

Regional emphasis Feature

Inuvialuit

GwichinNunasi

Aboriginal joint ventures with majority, equal, or

minority ownership in businesses aimed at meetingspecific needs of beneficiaries.

Denendeh DC Non-competitive alliances and multiple partnershiparrangements with other aboriginal partners toprovide essential services needed across regions.

Denendeh DCNWT Metis Nation

Commercial lenders

North Slave Metis Targeted industrial investments and training.

TlichoNunatsiavut

Combination of traditional skills with education andtraining.

Nunatsiavut Operational control in industrial megaprojectsthrough ownership and joint ventures.

Alaska North Slope Aggressive approach to exploiting the regionsnon-renewable natural resources.

Scope of Activities Inuvialuit Professional advice to and direct investments incommunity-based initiatives.

Inuvialuit Flexible investment practices in response toeconomic conditions.

Dehcho Regional advisory and educational support for smalland isolated communities.

Osoyoos Tightly integrated utilization of the regions naturaland human resources to meet business, cultural, andeducational objectives.

Role of

Government

NunatsiavutInnu

Yukon

Commitments from governments to planning andparticipation in megaprojects.

Gwichin, Sahtu,James Bay, Yukon

Contracting provisions

Nunavik Access to fisheries licences and quotas and overlapagreements with Nunavut, Crees, and Labrador Inuit.


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CHAPTER 5. Towards A Sahtu Development Corporation

Chapter 2 describes the economic development corporations created by land claim

settlements in northern regions. Chapter 3 summarizes research findings that identify theessential foundations of successful aboriginal economic development. And Chapter 4

presents a conceptual model of a regional economic development corporation taken from

the two preceding chapters. It remains to make an assessment of the Sahtus readiness to

move forward and develop a regional development corporation of its own.

This chapter looks at the assets and achievements of the Sahtu region to date and makes a

brief environmental scan of the potential economic opportunities in the region. The

purpose is to assess the regions capacity to exploit those opportunities, and to identify the

benefits of a regional economic development corporation.

Settlement of the land claim in 1993 confirmed the sovereignty of the Sahtu Dene and Metis

and established the financial and institutional means to build the governance and operational

institutions needed to achieve self-sufficiency in the regionthrough culturally appropriate

programs and services to reach social and economic objectives.

The governance institutions support operational institutions in the communities. The

community-based land and financial corporations have developed local and regionalbusiness ventures, and joint venture partnerships, some of which are partnerships

between the local economic development corporations. These businesses, wholly owned or

joint ventures, have been the means to employment, training, and learning on the job

opportunities for beneficiaries, and the building of relationships with external industrial

corporations active in the Settlement Area.

Chapter 12 of the Land Claim Agreement also commits the federal and territorial

governments to support for business development, contracting opportunities, and learning

opportunities for beneficiaries through employment, training, and education. In other

words, important baseline criteria are in place for developing people, enterprises, and assets.


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Assets and Achievements Significance

Sahtu Dene and Metis LandClaims Agreement (1993)ratified by Parliament throughthe Sahtu Dene and Metis Land

Claim Settlement Act(1994)

Established the sovereignty of the Sahtu Dene andMetis, with surface and subsurface rights to lands inthe Sahtu Settlement Area.

Provided compensation ($130 million over 15years) and guaranteed a share of governmentresource royalties in the Mackenzie Valley.

Identified basic objectivesself-sufficiency, supportfor the traditional economy, and full participation ofbeneficiaries in the mainstream economy.

Created the authority and the revenues to buildculturally appropriate governance institutions andoperational institutions that meet the social andeconomic needs of beneficiaries.

Governance and Operational

Institutions

Regional and local councils and boards withmandates, departments and staff.

Sahtu Secretariatcoordinates regional activities,distributes land claims funding, and functions aspoint of contact for government programs.

Land and financial corporations with mandates,departments and staff.

Participation in co-management boards responsiblefor land and resource management.

Research and publications capacity. Memberships and relationships with other

regions, national and international bodies.

Websites providing information for each communityand enterprise.

Business Ventures Wholly owned and joint venture partnerships,with local and/or regional focus in each community.

Commitments from federal and territorialgovernments to maximize local and regionalemployment and business opportunities (Ch. 12)

Memorandum of Understanding with theGovernment of the NWT to improve contracting

opportunities for Sahtu businesses and training,education, and employment opportunities forbeneficiaries (2007- 2012).

Training of beneficiaries for oil and gas explorationjobs and support for education.

Potential Regional Economic

Opportunities Pipeline construction for the Mackenzie Gas Project

and ongoing oil and gas exploration.

Mackenzie Valley Highway Extension Project.


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Mining developmentof the Selwyn ChihongMinings lead-zinc project at Howards Pass.

Mining exploration in the Great Bear region. Hydro-electric for small-scale community projects

and pipeline-related industrial use.

Potential for alternative energy developments toreplace diesel power generation and reduce powercosts. Includes solar and wind power.

Tourism and managementopportunities related tothe Saoyu/?ehdacho National Historic Site and thefive other projects under study or proposed fordesignation as NWT Protected Areas Strategy sites,and the Canol Heritage Trail.

A brief environmental scan is enough to indicate that the Sahtu region, and each of the

Sahtu communities, is situated in an area of high non-renewable resource potential forlarge-scale industrial development (and potential local spinoff ventures). A decision on the

Mackenzie Gas Project is expected by 2016. A decision to build the pipeline would surely

spur continued exploration work in the region, for which some beneficiaries already have

training. It would also provide contracting opportunities for Sahtu-owned businesses

supplying helicopter, heavy equipment, expediting and camp services, and opportunities

for ongoing maintenance contracts. Construction of the pipeline would almost certainly be

accompanied by government action to extend the Mackenzie Valley Highway, creating

similar opportunities.

Mining activity in the region is also promising and likely to continue, and steps to develop

hydro-electric power and/or technologically sophisticated alternative energy projects are

already being taken. With five areas of ecologically and culturally important land being

actively reviewed for designation as Historic Sites, and a sixth one having been proposed,

every community in the region has potential opportunities for eco-tourism and heritage

development, land and resource management, and scientific research potential to take

advantage of.

One question to answer will be: Is the Sahtu currently in a position to best take advantage

of these opportunities as they unfold? The evidence presented in this discussion paper

suggests that one institution that would put the region in a stronger position is missinga

region-wide Sahtu economic development corporation. A regional development

corporation would allow the communities to pool existing financial resources and


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managerial capacity and, if need be, to hire external expertise to undertake region-wide

projects and support future community-based ventures. A Sahtu Development Corporation

would be able to engage industry in negotiations involving region-wide major projects

within the Settlement Area, speaking with one voice for the entire region. It would be able

to do the same with the federal and territorial governments.

When all of the existing assets and achievements to date, and the potential opportunities

for the future are taken into consideration, it is reasonable to conclude that one remaining

institutional piece should be put in place to strengthen the Sahtus capacity for economic

developmenta Sahtu Development Corporation. It is anticipated that the community-

based economic development corporations within the Sahtu will both be able to realize a

large volume of work, revenue and profits from their involvement in a region-wide

corporation, while continuing to have control of the local work they now have on the go.

One straightforward task that could be assigned to the Sahtu Development Corporation

would be to make it the repository of the Sahtu Business List which outside contractors will

need to be able to access for the Mackenzie Gas Project.

Next Steps

Given the regions experience negotiating a land claim and building governance and

operational institutions with working mandates, the process involved in creating a Sahtu

Development Corporation should pose no difficulties. Major decisions and steps wouldinclude the following:

1. Hold the already proposed regional leadership workshop to consider the merits of theidea.

2. Consult with the community leadership and community residents to obtain feedback. Ifit is clear that there is strong support:

3. Hold a regional leadership vote to establish the Sahtu Development Corporation.4. Nominate individuals to staff and develop the structure and mandate of the new

organization.

5. Establish an office.6. Direct funding into the development corporation for salaries, operations and project

development.

Conclusions


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This discussion paper has examined existing land claim agreements to uncover what it is

within the operating environments of their regional economic development corporations

or similar institutions that might present a model for the Sahtu region. The model

presented in Chapter 4 was extracted from the descriptive summaries of eighteen northern

development corporations and research findings into the essential foundations ofsuccessful aboriginal economic development. The purpose of the survey has been to

identify the governance structures, methodologies, and other features that could ultimately

increase the regions capacity to take advantage of economic development opportunities in

the Sahtu.

It will be up to the Sahtu leadership to decide whether or not a regional economic

development corporation should be created. A simple decision-making model looks at the

strengths and weaknesses of an organization, and at the opportunities and threats the

organization faces in its operating environment. The assets and achievements to date, and

the real and potential opportunities in the region, suggest that the Sahtu has clear strengths

and opportunities, while the weaknesses and threats are internal and easy to overcome.

The evidence presented in this paper suggests that a Sahtu Development Corporation

would fill an institutional gap and could achieve useful outcomes for Sahtu communities,

individuals, businesses, and the existing economic development institutions in the region. It

is anticipated that the community-based economic development corporations within the

Sahtu will both be able to realize a large volume of work, revenue and profits from theirinvolvement in a region-wide corporation, while continuing to have control of the local

work they now have on the go.

The end goal would be to have a suitably sized business to capitalize on big opportunities,

such as a Mackenzie Valley Highway Extension or the Mackenzie Gas Project. At the present

time any project over a few million dollars goes to contractors from outside the region. It is

time for the region to take on this larger work as a collective body. It is time for the Sahtu to

become effective players in the big-picture economy of the region.

One of the lessons to be taken from this survey paper is that critical mass of financial and

human resources makes a difference. A regional body operating with a larger pool of

capital, managed by experienced professionals, has more resources for responding to

regional and community needs and opportunities than smaller, local enterprises operating


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alone. A regional economic development corporation is also more likely to have influence

with government and industry than individual communities.

Another lesson learned is that the benefits of regional development build up over time,

creating wealth that gives a region the flexibility to take advantage of new opportunities,and the resourcefulness to deal with setbacks. That has been the experience for the

Inuvialuit, for Nunasi Corporation, the Makivik Corporation and the Alaska North Slope,

and for other regions with more recent settled land claims. Whatever problems might arise

in the short term, from the longer term the Sahtu could look back and see how far it has

come.


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APPENDIX. Development Corporations in Northern Canada and Alaska

This chapter provides descriptions of economic development corporations in regions of the

Northwest Territories, northern Quebec, and Labrador with settled land claims. Economic

development efforts in regions without settled land claims and pan-territorial developmentcorporations are also examined. Yukon and Alaska are included in the scan, for a total of

sixteen regions in all.

Inuvialuit Regional Corporation

The Inuvialuit Final Agreement (IFA) was signed in 1984 and subsequently brought into

law by the Government of Canada through the Western Arctic (Inuvialuit) Claims Settlement

Actthat same year. It was the first comprehensive land claim agreement signed north of the

60th parallel and only the second in Canada at the time. The IFA gave the Inuvialuit

ownership of 91,000 square kilometers of land, including 13,000 square kilometers with

subsurface rights to oil, gas and minerals. Financial compensation from the Canadian

government totaled $169,500,000 over 14 years. There are approximately 4,000 Inuvialuit

beneficiaries in the six communities within the Inuvialuit Settlement Region (ISR).

The Inuvialuit Regional Corporation (IRC) oversees the political, social, and economic

affairs of the Inuvialuit, with input from six Community Corporations. The mandate of the

IRC is to continually improve the economic, social, and cultural well-being of the Inuvialuit.The corporate goals of the IRC include: the preservation and growth of the financial

compensation flowing from the Final Agreement; the distribution of accumulated wealth to

beneficiaries; and the provision of technical and administrative support to community

corporations and beneficiaries.

The IRC is the sole shareholder in the Inuvialuit Development Corporation (IDC), which is

responsible for economic development activities in the Inuvialuit Settlement Region. IDC is

the sole owner and/or majority partner or minority investor in various joint ventures

totaling more than 20 companies.

IDC is the largest of four income-generating subsidiaries which make up the Inuvialuit

Corporate Group. The other three are the Inuvialuit Investment Corporation (IIC),

responsible for managing an investment portfolio that provides revenue for a range of

programs; the Inuvialuit Petroleum Corporation (IPC), which has a one-third ownership in


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the Ikhil Natural Gas Project; and the Inuvialuit Land Corporation (ILC), responsible for

land use permits, leases, and related matters.

The 25th anniversary of the Inuvialuit Final Agreement was 2009, the most recent year for

which financial information is available. In 25 years the net worth of the InuvialuitCorporate Group has more than doubled, in spite of recent losses caused by the global

recession, to $362.5 million.

Inuvialuit Development Corporation

The first annual report of the IRC, for 1984, described the Inuvialuit Development

Corporation as the vehicle by which the Inuvialuit would achieve greater self-sufficiency

through sound economic and business ventures:

The overall goal of the Inuvialuit Development Corporation is to establish a

stable, long-term economic base which will allow the Inuvialuit to contribute to

and benefit from the regional and national economy. Some of the benefits to be

gained include:

economic growth through investment and profit improvement of regional services greater long-term opportunities for employment and training a more stable economy through recycling of profits and wages through

this region.

The Inuvialuit Development Corporation is an aboriginal birthright development

corporation, a 100% Inuvialuit-owned holding company. Its role is to:

evaluate investment opportunities; monitor and maximize investment in the NorTerra Group of companies, which IDC

owns in partnership with Nunasi Corporation of Nunavut; and

seek ways to grow and diversify the IDC portfolio within the Inuvialuit SettlementRegion.

IDC conducts its business through more than 20 subsidiaries and joint ventures in five

business sectors: energy services, transportation, manufacturing and industrial, northern

services, and environmental services, and property management and real estate. From its

headquarters in Inuvik, IDC maintains the majority of its assets in the Northwest

Territories, and the remainder in southern Canada. IDC is the economic and employment


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engine for IRC. It generates wealth through continued investment activity; it increases

Inuvialuit human resource capacity through formal career development and advancement

programs; and it protects and secures IRCs future through formal business planning, new

venture formation and portfolio management.

FIGURE A-1

Inuvialuit Development Corporation Main Holdings

Sector Companies ServicesEnergy Services Akita Equtak Drilling Ltd. 50/50 equity joint venture between IDC and

Akita Drilling, providing drilling services andcrews in the Arctic onshore and offshore andoutside the NWT

Arctic Oil and Gas Services Inc.(AOGS)

Catering and camp support services toexploration companies. 85% of employees are

Inuvialuit beneficiariesIEG Consultants Ltd. Environmental and engineering services. Joint

venture between IDC and Klohn Crippen BergerLtd.

Inukshuk Geomatics Inc. Engineering and land surveying, land andproject development, training surveyorsIDC partnership with Challenger Geomatics Ltd.

Inuvialuit Oilfield Services (IOFS) Services for the full well lifecycle, from seismicacquisition to well completions, testing, etc.Joint venture with Schlumberger Canada Ltd.

Transportation Aklak Air Regional air carrier

Aurora Expediting Services Ltd. Air cargo and aircraft ground handling anddelivery services. Joint venture partner withBraden-Burry Expediting

Braden-Burry Expediting Air cargo and aircraft ground handling, freightforwarding and related services.

Canadian North National air carrier

Northern Transportation CompanyLtd. (NTCL)

Inland and marine barge services to NWT andNunavut communities and industry.

Manufacturing

and Industrial

Dowland Contracting Ltd. Major construction and project management inthe NWT and elsewhere, including Alaska

Northern Industrial Sales Industrial supplies and equipment

Mackenzie Integrated Tubular

Solutions (MITS)

Full range of pipe products and services. Joint

venture between IDC, NTCL and HallmarkTubulars Ltd.

Weldco Companies WDM, Weldco Hydra-lift, Weldco HeavyIndustries

Northern Services Nasittuq Entry level and trades training for land claimbeneficiaries in northern Canada

Stanton Group Ltd. Food distribution and store operations, campprovisioning and catering onshore and offshore


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Tundra Communications Telecommunications services in ISRpartnership between IDC and Northwestel

Management and

Real Estate

IDC Properties Office, commercial, and residential buildings forrent in the ISR

NorTerra Inc. Management and holding company; IDC and

Nunasi Corporation are equal owners.

The NorTerra Group of companies includes major corporations and significant regional

services that meet fundamental regional needs and operations beyond the ISR. These

companies include:

the Northern Transportation Company Ltd., acquired in 1985 from the Governmentof Canada in partnership with Nunasi Corporation (the founding acquisition of the

NorTerra Group);

Canadian North, a mainline air carrier serving northern and southern Canada; Stanton Distributing, a regional grocery store and food distribution company; IDC Properties, a property management company; Aklak Air, a regional air carrier; Arctic Oil and Gas Services (AOGS), providing catering, fuel, and other camp services

for the Oil and Gas industry, 85% of whose employees are Inuvialuit; and

Dowland Contracting Ltd., with recent contracts to build the super school, theWestern Arctic Research Centre, GNWT office building, and IDC/Coast Guard

building in Inuvik, and construction projects elsewhere.


The Inuvialuit Investment Corporation is responsible for managing an investment portfolio

of stocks and bonds. This portfolio was established with the federal monies paid out as part

of the Inuvialuit Final Agreement. Its mandate is to achieve the highest possible returns

using conservative investment strategies and to increase financial resources to benefit

future generations of Inuvialuit.

IICs specific objectives are to: protect the value of the investment funds; earn a before-tax

real rate of return of 5% over the long term; and manage investment funds on behalf of

other members of the Inuvialuit Corporate Group, the Inuvialuit Harvesters Assistance

Trust, and the Community Corporations.


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The earnings from the investment portfolio support various obligations under the IFA:

funding to operate the Community Corporations; a share of the annual distribution to

beneficiaries; management fees to IRC; and other administrative expenses.

Inuvialuit Petroleum Corporation

The Inuvialuit Petroleum Corporation was created in 1985 with the objective of becoming a

profitable, medium-sized, diversified, and integrated petroleum company. After selling off

southern business interests due to exploration inactivity, IPC has invested the proceeds

through the Inuvialuit Investment Corporation, waiting for a turnaround in oil and gas

exploration. IPC also has one-third ownership in the Ikhil/Inuvik Natural Gas Project,

which supplies natural gas to Inuvik for power and heating. The project is owned equally

by IPC through its subsidiary Ikhil Resources Ltd., AltaGas Services Inc., and Enbridge Inc.

IPC contributed approximately $14 million towards the $44 million project.

Inuvialuit Land Corporation

The Inuvialuit Land Corporation holds title to Inuvialuit lands. It is considered to be a

revenue-generating subsidiary of the IRC, although revenues are small and not reported

every year. The ILC generates revenues through granting oil and gas concessions on

Inuvialuit lands.


The Inuvialuit Development Corporation had revenues of $221 million in 2009, the worstyear of the global recession, when it recorded an after-tax loss of $17.3 million. That

represented a major decrease from 2007, when IDC turned a profit of $13 million on

revenues totaling $269 million. The Inuvialuit Investment Corporation, on the other hand,

recorded net earnings of $26.5 million in 2009, and a net value of $182 million, down from

$193.4 million in 2007. Direct benefits to Inuvialuit beneficiaries included $12.6 million in

wages, while equity in the Inuvialuit Corporate Group was $362.5 million.

Table 1 summarizes the overall financial operations of the Inuvialuit subsidiaries in the

Inuvialuit Corporate Group over the most recent five-year period. The table shows that the

Inuvialuit were generating substantial after-tax earnings up until 2008, when the global

recession took hold. In spite of the reduced earnings in 2008 and the loss incurred in 2009,

the minimum cash payout to beneficiaries of $400 was maintained for those years, and was

much higher in previous years. (In fiscal year 2000, after-tax earnings reached $52,500,000

and the individual payout to beneficiaries was $850.49.) The individual payouts to


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beneficiaries give every Inuvialuit an incentive to take a serious interest in IRCs activities

in the regional, national, and international economy.

TABLE A-1


Year After Tax

Earnings

(Losses)

Beneficiary Distribution

Total Individual Beneficiaries

2009 ($17,346,000) $1,595,600 $400.00 3,989

2008 3,824,000 1,565,000 400.00 3,912

2007 35,179,000 3,816,155 1,001.09 3,812

2006 36,459,000 2,869,470 770.12 3,726

2005 19,545,000 1,744,651 477.99 3,650

Direct Benefits to Beneficiaries

Employee

Wages

From ICG

ResourcesEquity in ICG Contribution

Agreements

2009 $12,629,242 $17,879,299 $362,584,000 $11,000,000+

2008 13,786,608 21,102,222 381,841,000 11,600,000

2007 13,467,600 20,285,992 382,216,000 8,600,000

2006 11,470,148 17,345,371 350,234,000 8,700,000

2005 11,411,625 18,151,624 315,825,000 6,000,000

Direct benefits to beneficiaries have been in the range $17-21 million over the five-year

period. Employee wages ranged from $11 million to nearly $14 million annually of that

amount. The remainder was expended on a variety of community projects, support foreducation and elders, and donations of various kinds within the region. Total equity in the

Inuvialuit Corporate Group declined somewhat in 2009 from a high in 2007, but remains

more than double the original land claims settlement at $362.5 million.

Besides its direct business and investment activities, IRCs organizational and managerial

strengths make it an attractive partner for the federal and territorial governments. Both

levels of government have raised the amounts in their contribution agreements recently to

support wellness and social development programs and capacity-building efforts in the ISR.

Table 2 breaks down the results for the three profit-earning members of the Inuvialuit

Corporate Group for the years 2005-2009. The Inuvialuit Land Corporation seldom reports

earnings.


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The table records the impact of the 2007-2009 recession on the revenues, profits, wages

and employment numbers, and donations made by the Inuvialuit Development Corporation

(IDC). IDC had revenues of $221 million in 2009, the worst year of the global recession,

when it recorded an after-tax loss of nearly $15 million. That represented a major decline

from 2006, when IDC turned a profit of more than $19 million. In spite of the recession,wages paid to beneficiaries remained at nearly $8.7 million in 2009, paid out to 290

beneficiaries, and donations exceeded $700,000.

TABLE A-2

Inuvialuit Subsidiaries Financial Performance 2005-2009

Year Inuvialuit Development Corporation

Revenue After TaxProfit (Loss)

Wages Paid toBeneficiaries

Beneficiarieson Payroll

Donations

2009 $221,146,000 ($14,995,000) $8,690,502 290 $732,000

2008 309,396,000 2,713,000 10,020,000 391 467,000

2007 268,984,000 13,115,000 9,970,000 430 1,114,000

2006 229,314,000 19,403,000 8,400,000 Not reported 1,400,000

2005 187,605,000 8,346,000 Not reported 200 full-timeequivalent

positions

1,600,000


Heritage Fund

Inuvialuit Petroleum

CorporationNet Market

Value

Profit (Loss) Return(4-yravg)

Target Portfolio

IIC/Ikhil*

Earnings

2009 $181,926,000 ($6,380,000) 3.0% 3.1% Earningsdown

$89,000

2008 146,932,000 1,904,000 0.8% 1.2% Earningsdown

1,387,000

2007 197,860,000 9,275,000 10.3% 10.6% Not reported 2,975,000

2006 195,000,000 10,505,000 14.1% 12.4% Not reported 2,975,000

2005 176,300,000 7,969,000 10.8% 11.3% Not reported Not reported

* Following the sale of IPCs southern business interests, the proceeds were invested in IIC. IPC also ownsa one-third share in the Ikhil Natural Gas Project which supplies Inuvik.


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The Heritage Fund managed by the Inuvialuit Investment Corporation, the returns from

which fund the administration of the Inuvialuit Regional Corporation and the community

corporations and other expenses, recorded a decline in earnings to $1.9 million in 2008 and

a loss of $6.4 million in 2009, well down from the typical earnings of previous years in the

$8 to $10 million range. Benchmarks for earnings set on a four-year evaluation period werealso brought down sharply for 2008 and 2009. Close monitoring of investments, however,

has kept the rates of return close to, or above, the targets.

The slowdown in oil and gas exploration prompted the Inuvialuit Petroleum Corporation to

sell off southern business interests several years ago and invest the proceeds through IIC

pending better opportunities. Portfolio earnings for the Inuvialuit Petroleum Corporation

are not reported separately from the IIC returns.

Spinoff Benefits

The managerial expertise and financial capacity of the IRC, combined with its legal

authority and political reach, make it an attractive partner for major corporations,

investors, and government program managers. Between 2005 and 2009, government

contributions to support IRC programs almost doubled, from $6 million in 2005 to over

$11 million in 2009.

The wealth generated by the Inuvialuit subsidiaries enables IRC to be an active partner in

the development initiatives of the six Community Corporations in the ISR. For example, thePaulatuk Community Corporations Paulatuk Development Corporation has recently

expressed an interest in buying a mining camp for lease to Darnley Bay Resources Ltd. and

other mining companies. The regional Inuvialuit subsidiaries are investors in, and partners

with, community initiatives of this type.

In addition to the direct economic benefits created by the various Inuvialuit businesses,

there are spinoff benefits of many types as well, for example:

Environmental backhaul by Northern Transportation Company Ltd. (NTCL) from thecommunities it serves at discounted ratescleanup, removal, and sale of domestic

recyclable waste material; and training of community residents in handling and

disposal of hazardous waste products (16 trainees in Tuktoyaktuk in 2010).


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Career exposure through the Annual IDC Arctic Youth Leadership Expedition: Inuvialuityouth toured NTCL and other Inuvialuit businesses in Hay River in 2010 to gain

awareness of career, education and training opportunities.

Corporate donations by Inuvialuit businesses for social and charitable pu

Documents

Towards A Sahtu Development Corporation: A Discussion Paper