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Extraction fees – problem or opportunity?

Extraction fees –


January 23, 2009
By Andy Bateman

What do new extraction rights, aggregate resource fees and aggregates levies have in common?

What do new extraction rights, aggregate resource fees and aggregates levies have in common?

These are examples of fees applied to aggregate extraction, usually resulting in a significant flow of funds from aggregate producers to government, all in addition to municipal and other taxes. Extraction fees can usually be relied upon to trigger a lively debate within the aggregate industry, with some arguing that such fees help to demonstrate the economic importance of aggregates to the public. Others see them as just another regulatory burden.

Aggregate producers in Quebec have apparently given a mixed response so far to a new provincewide extraction right (duty) which took effect on January 1, 2009. Under the new right, all producers will be paying 50 cents per tonne to the local municipality in which an operation is located. The collected funds are to be used to improve municipal roads impacted by aggregate operations, with $40 million flowing to the municipalities if total provincial aggregate production reaches 80 million tonnes.

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In Ontario, aggregate resource fees charged to producers currently total 11.5 cents per tonne, consisting of 6 cents to the lower-tier (local) municipalities, 1.5 cents to upper-tier municipalities, 3.5 cents to the Crown and 0.5 cents to the abandoned pit and quarry fund (MAAP). Provincial and municipal governments are the recipients of more than $20 million annually in various licence, permit and royalty fees. The Ontario Aggregate Resources Corporation is responsible for the disbursement of the fees and utilises public cheque presentations to municipalities as valuable opportunities to showcase the industry.

Across the Atlantic, the U.K. experience is predominantly anti-fee,  with the British Aggregates Association still fighting an aggregates levy that is due to increase to the equivalent of about $3.40/tonne on April 1, 2009. The fight may soon be over and the levy scrapped as the European Court of Justice has recently overturned a 2006 Court of First Instance ruling that the Government levy was lawful.

So, are extraction fees a problem or an opportunity? Your comments are invited.