Past Executive Director
REDUCING BUSINESS UNCERTAINTY
When you talk to folks in other resource industries like mining, hydro power or forestry, there is an expression you will hear often – investment certainty. You discover very quickly that they are not looking for certainty around markets or the economy – nobody would be foolish enough to believe that those risk factors could be managed. They are talking about greater certainty in the government and regulatory environment. If you are a resource company, you are asking yourself things like “Should I spend money to explore here, or is government likely to turn this area into a park or protected area where my industry will not be permitted to operate?”
For many industries, the uncertainties of the regulatory environment represent a major risk factor that influences business and investment decisions. These risks are a whole additional layer of uncertainty on top of the usual risks of changing markets, access to resources and unpredictable economics. Our industry, resource-based tourism, is no different.
The most significant source of uncertainty for our industry has been the vast range of rules, policies and practices of the Ministry of Natural Resources. Concerns over this came to a head in July of 2005 at a meeting of tourist outfitters in Ignace and led to the formation of the Provincial Resource-Based Tourism Working Group. The immediate issue that brought us to Ignace is a textbook example of how a regulatory practice creates business uncertainty and stifles investment.
Most fly-in outposts are built on crown land under the authority of a Land Use Permit or LUP, and these tenure documents recommended a minimum camp size or guest capacity to meet guest comfort needs. Some years ago, biologists in the northwest region adopted the practice of using this capacity to attempt to predict and then to regulate the impact of the outpost on the fishery of the lake. Although they could not arbitrarily change “bed capacities” while an LUP was in force, transfers of an outpost if it was sold to another operator required issuing a new LUP. MNR officials often insisted that a transfer could only take place if beds were reduced, purportedly because of “sustainability concerns around the fishery”.
These reductions were demanded in spite of the demonstrated long term excellence of the fishery by the operator and the fact that it is simply not in the interest of an operator to damage the key resource that the success of their business operation is tied to. Of course, the effect of this was that either sales fell through or prices were greatly reduced. The long term effect on the industry has been more damaging – greatly reduced investment in upgraded facilities and services in the outpost industry because of investment uncertainty.
The bed capacity issue is only one of several serious investment certainty issues that brought us to the table at the RBT Working Group. We understood immediately that we also needed more secure tenure than one year Land Use Permits and developed a framework for a transition to 30-year renewable leases. However, several other important security issues still need to be resolved in order to make transition to leases attractive.
The value of outpost camps derives from their remoteness, but that remote status can be threatened by every new Forest Management Plan. A system for guaranteeing long term remoteness needs to be found. NOTO has long maintained that the solution is to undertake land use planning on Crown Land in Ontario, something the government committed to during Lands for Life, but never implemented. More recently, a land use exercise has been underway in the Wawa district. Although this exercise has been fraught with problems, if we successfully incorporate “lessons learned”, I believe it could form the template for the kind of land use planning our industry needs to make investment attractive.
Another source of investment uncertainty is the absence of a consistent and comprehensive licensing framework for our industry. With the recent abolition of the Resource-Based Tourism License, there is no longer any formal licensing of our industry, and our various “allocations” are administered by MNR in an inconsistent patchwork. Comprehensive licensing with clear rules would create a tangible business asset, and that would spur investment – think about what milk quotas have done for agriculture. NOTO, with significant help from MNR has produced a detailed position paper on the issue – Moving Forward: A Resource-Based Tourism Industry Fit for the Future.
Nobody could have done anything to protect the industry from the serious economic downturn we have faced over the past several years. However, things will get better economically – some think we may already be turning the corner. Taking advantage of the coming upturn will require significant investment as consumer tastes continue to evolve. Greater investment requires greater certainty. We’ll have to wait to see if government, particularly MNR, is willing to take the next steps to help provide the certainty we need.
This article was taken from pages 5 & 6 of NOTO's "The Outfitter" publication, Spring 2010 Issue