Ontario to Mine for More Revenue

Last week’s provincial budget promised a mining sector review “to ensure Ontario receives fair compensation for its non-renewable resources,” a proposal advanced by this blog and the United Steelworkers before appearing as a Drummond recommendation.

The relevant budget section begins with the following observation: “Ontario has the highest value of mineral production of any province or territory in Canada.” Similarly, this blog had noted: “Ontario has the most valuable mineral production of any Canadian province or territory.”

It also noted that Ontario’s budget typically lumps the Mining Tax together with “Other Taxes.” Last week’s budget at least disclosed that “Ontario collected approximately $140 million in mining tax in 2010–11.”

That significantly exceeds the $82 million reported by the Mining Association’s own study (Table 2), which I had previously quoted. It’s also worth noting that the budget’s “Royalties” line, $145 million in 2010-11, includes the Ontario diamond royalty and some revenue from quarries. However, I am told that it mostly comprises water and stumpage fees.

A more detailed breakdown of resource revenue is still needed. (Ironically, the provincial budget featured a whole section on “transparency.”) However, the available information suggests that Ontario collected around $200 million of mineral revenue in 2010-11.

The value of minerals extracted is also rising. I had previously cited Natural Resources Canada’s 2010 figure of $8.1 billion for Ontario. Last week’s provincial budget reported a 2011 estimate of $10.7 billion. So, it might have been around $9 billion for the 2010-11 fiscal year.

In conclusion, resource companies apparently paid about $200 million to extract about $9 billion of minerals from Ontario’s mines and quarries. A 2% return is less bad than the 1% I had estimated before the budget. But as one of northern Ontario’s favourite daughters would say, “That don’t impress me much.”

Bring on the review!

Erin Weir is an economist with the United Steelworkers union and a CCPA research associate.

UPDATE (April 4): Interviewed on CityNews and BNN (video)

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