Alternatives North calls for changes to Heritage Fund Act

Alternatives North wants changes to a fund intended to ensure future generations of northerners benefit from mining, oil and gas projects.

A committee of MLAs has begun a statutory 10-year review of the NWT Heritage Fund Act. The legislation regulates the territory’s Heritage Fund, a sovereign wealth fund backed by royalties from NWT non-renewable resource projects.

Sovereign wealth funds often act as a form of government savings account. As the fund grows, it can be used to buy stocks, bonds or other forms of investment intended to gradually grow the territory’s wealth.

Kevin O’Reilly says finding a way to “transform this one-time natural capital into some kind of wealth that can be transferred on to our kids, grandkids and future generations” is critical.

O’Reilly, a former NWT MLA, is one of the founders of Alternatives North, which describes itself as the territory’s social, environmental and economic justice coalition.

He addressed a committee of current MLAs about the NWT Heritage Fund Act on behalf of Alternatives North during a public briefing earlier this month.

“We hope that there is going to be some concrete change that comes out of this,” O’Reilly told Cabin Radio.

He envisages amendments to the legislation that “allow for more money going into the Heritage Fund, that it can grow more substantially, clear rules around the withdrawal, and then some greater transparency and accountability.”

O’Reilly said the current Heritage Fund Act does not set out a minimum percentage of resource royalties that the NWT government must invest in the fund. In practice, he said, cabinet contributes about 25 percent of the resource royalties that the territory keeps annually.

“Not having that defined in the legislation just leaves it open to cabinet’s discretion and I don’t think that’s a good place to be,” O’Reilly said.

In 2024-25, the NWT government contributed an estimated $549,000 to the fund. In its latest budget, the GNWT projects contributing $584,000 in the 2025-26 fiscal year.

‘That’s not very much money’

O’Reilly said the amount of money in the fund needs to be increased. He believes the existing investment policies for the fund are “extremely conservative,” asserting that the fund is losing value against inflation.

The NWT government says it has contributed nearly $41 million to the fund since it was created in 2012. By the end of March 2024, the total value of the fund was around $49.7 million.

O’Reilly said comparatively, non-renewable resources worth more than $20 billion have been extracted and exported from the NWT since devolution in April 2014.

During that time, he said, royalties worth $336 million have been paid to the NWT government, of which the territory has been able to keep $137 million.

“That’s not very much money,” O’Reilly said of the current value of the Heritage Fund.

“It’s less than one percent of the value of the resources that were extracted and exported. That’s not a very good amount to pass on to future generations.”

O’Reilly said Alternatives North believes royalties and taxes on minerals and petroleum need to be increased to “capture a fair share” for NWT residents. He said contributions to the Heritage Fund should also be increased to 50 percent of resource revenues the territory retains.

Alternatives North further advocated for investment policies for the fund to be loosened, which it said would require more risk over the long term.

The group wants a long-term investment strategy to be made public with investments guided by environmental, social and governance standards that encourage ethical and sustainable investment and financing.

How can the money be used?

O’Reilly said the legislation provides no rules governing how the money can be used.

There is still time to figure that out, however. Under the act, money cannot be taken out of the Heritage Fund for another eight years – a restriction Alternatives North hopes remains in place.

The group recommended a public process to develop criteria for spending the money.

O’Reilly said there is a lack of transparency and accountability surrounding the fund, its performance and investment policies.

He said the only public reporting on the fund is through the territory’s public accounts, which give little detail about how the money is invested.

“There doesn’t seem to be any kind of regular oversight, there’s no public role or involvement in the Heritage Fund, its oversight, its management,” he said. “That’s just not a good place to be and that’s not consistent with best practices around the world.”

Alternatives North recommended mandatory annual reporting including an assessment of the fund’s performance and full disclosure of the investments made.

The group said the NWT should establish an independent expert panel to provide oversight of the fund, which is currently managed by wealth management firm CIBC Wood Gundy.

O’Reilly said the committee reviewing the legislation could also be more proactive in promoting its work.

He hopes the committee will acquire an independent analysis before making recommendations on the legislation, noting “there’s a lot of money at stake.”

“There’s a lot that we can learn from how this is done differently and better in other places,” he said.