It is commonplace for governments to receive royalties in return for natural resource development. Usually, it is the national or federal government that holds the royalty rights. Sometimes, as in Canada, royalties are collected at the provincial level. Rarely, if ever, do the royalties go to the local communities where the resources are actually extracted. However, going forward, there is a strong case to be made that local communities that are most affected by resource development should be entitled to a more direct share of the royalties. The short history of the wind industry provides a good example of how this can be beneficial to everyone involved.
Wind farms usually have a small geographic footprint but, due to their size, can often be seen for miles. This is why It is not uncommon for residents who live within sight of proposed wind farms to hold up development if they don't like the idea of seeing a wind farm from their homes. One country that has overcome this obstacle is Germany. In Germany, local residents often have ownership stakes in wind farms being built in their community. In fact, most wind farms in Germany are owned by small locally owned co-ops. By allowing local residents to participate in the benefits of the project, concerns over the visual impact of windfarms disappear quite quickly.
This issue is spilling over into the traditional energy sector too. For example, it used to be that local residents would not need to be consulted when it came to permitting large infrastructure or energy projects. However, modern permitting guidelines now stress local consultation with all stakeholders. This has already held up many projects and is likely to be a major issue going forward. One solution might be to give local communities that are directly impacted by such resource development projects, a share of the royalties to be collected. This would better align the interests of project developers and the communities affected as it did in the wind sector in Germany.
Another good reason to direct royalty revenue to locally affected communities is to attract the skilled labour needed to build out the projects. Here in BC, many natural resource developments occur in remote sparsely populated areas and companies struggle to attract skilled labour. One of the reasons remote northern communities struggle to attract people is because, compared to Vancouver, they are perceived as having subpar infrastructure assets when it comes to things like schools, hospitals, and recreational facilities. If resource royalties were directed to the local communities however, the tables would be turned and communities like Prince George, Fort St. John, and Kitimat could entice people out of the lower mainland with higher quality infrastructure and services.
BC is on the cusp of natural resource development boom. But it is by no means a sure thing. One policy tool government should seriously consider is directing royalties directly to the communities where development is occuring. This would help attract the people needed to develop the projects. It would also go a long way toward building local support in the communities most affected by natural resource development.
