Resources push Northwest Territories to top of heap

Gary Park

Petroleum News Calgary correspondent

A possible construction start on a Mackenzie Valley natural gas pipeline and diamond mining will turn the Northwest Territories into Canada’s economic pacesetter until at least 2006, says Toronto-Dominion Bank economist Derek Burleton.

Already one of the hottest economic regions, the Northwest Territories should grow by 7 percent a year from 2004 to 2006, easily outstripping other regions, and if the gas line gets approval the “sizzling growth performance would likely extend into the next decade,” he said.

Burleton is confident that unresolved Native land claims and environmental issues will be resolved, clearing the way for construction of the Mackenzie project and opening the door to a chain of spin-off benefits, including hydroelectricity, telecommunications and tourism.

But there is a current blip for the territories’ 42,000 residents, with real gross domestic product slipping to 3 percent this year before rebounding to 13 percent annually from 2000 to 2003.

That stemmed from a short-term slowdown following completion of the Ekati and Diavik diamond mines, but work is scheduled to start next year on the third diamond mine at Snap Lake, which is due to be in full production by 2007.

Perhaps the biggest trouble spot is the failure so far by the Northwest Territories government to reach a revenue-sharing deal with the Canadian government.

As a territory rather than a province, the Northwest Territories turns over 100 percent of its resource royalties and is totally dependent on the senior government for covering its C$900 million a year budget.

Burleton suggested the territories may be forced to introduce a sales tax or use public debt markets to cover more of its needs.