203
dozen new funds are being considered (Bauer, 2014a). Natural Resource Funds are a growing trend
for oil-, gas- and mineral-rich countries as a vehicle to transfer and save a portion of resource
revenues. Canada’s Northwest Territories (NWT), rich in non-renewable resources, established the
NWT Heritage Fund through legislation in August of 2012. In a recent survey of all identified
natural resource funds in the world, the NWT’s fund was listed as one of the newest and the
smallest operational fund in the world (Bauer, 2014a). Although the NWT fund currently is modest
in size, a resource revenue windfall is on the horizon. This paper explores the governance measures
and regulations that are needed to build agreement on the fund’s objective and to establish strict
rules for fund deposits, withdrawals, investment strategy, transparency, and oversight. Successful
strategies from funds that have benefitted citizens are examined, including Norway, Chile, Alaska,
and Ghana, and their approaches considered within the unique context of the NWT. The issues and
options explored in this paper are designed to inform decision-making and to position the NWT
Heritage Fund as a world class tool to manage mineral revenues in the public’s interest.
The Lessons of History
Throughout the last century, Canada’s Arctic has experienced a number boom-bust cycles, which
have forever altered the land. This is one consequence of reliance on single-industry natural
resources (Briones et al. 2013). Single-industry economies, including the whaling industry, fur trade,
gold rush, and recent non-renewable natural resource initiatives, have defined these cycles (Pretes
1984). Periods of rapid economic growth, followed by even faster decline, are an outcome of the
North’s economic dependence on a few natural resources whose value and availability are prone to
fluctuations. More recently, petroleum extraction and mining initiatives have been the driver of
boom-bust cycles. For instance, from 1999 to 2003, rising commodity prices and the start of
production at the Ekati and Diavik diamond mines increased the sector’s economic contribution to
the NWT by 173%; when prices collapsed during the global financial crisis from 2007-09, the sector
contracted by 37% (NWT Bureau of Statistics 2014).
What’s more, in the case of non-renewable natural resources, availability is finite and depletion
inevitable. A clear example of the risk of a single-industry economy is the abandoned mining town
of Pine Point, NWT; the closure of the town’s mine led to a parallel shutdown of its community.
Today, all that remains are the outlines of the roads that once connected Pine Point’s twelve
hundred residents, and an altered landscape that can no longer yield minerals nor sustain a
community (Irlbacher-Fox 2013).
The NWT’s new Heritage Fund represents an opportunity for the territory to move beyond the past
struggles of many Canadian provinces to manage oil and mineral revenue windfalls and develop a
culture of public savings from resource revenues (Simpson, 2011). The NWT Heritage Fund could
provide a mechanism to move past boom-bust cycles, and to preserve a finite source of wealth for
future generations. This paper examines key policy considerations for the territorial government as it
implements fund governance, management frameworks, and legislation. Drawing lessons from best
practices in fund development from other jurisdictions,1 recommendations are outlined which
support the NWT Heritage Fund’s primary objective: to save for the benefit of future generations.
Daitch, Schwann, Bauer, Dias & Fan Li