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Community benefit agreements (CBAs), also referred to as impact and benefit agreements, are common resource governance tools that are negotiated across the globe between private project developers and local, often Indigenous, communities whose land must be accessed or disturbed for major extractive resource projects (O’Faircheallaigh, 2013). A relatively recent body of scholarship has focused on the benefits received by local communities from CBAs and their associated natural resource development projects. According to the literature, CBAs have the potential to help facilitate economic and social development of Indigenous and non-Indigenous communities by providing revenue benefits (Adebayo and Werker, 2021; Agbaitoro, 2018; Alcantara and Morden, 2019; Bocoum et al., 2012), employment and training opportunities (Adebayo and Werker, 2021; Agbaitoro, 2018; Fidler and Hitch, 2007; V. Gibson, 2008; O’Faircheallaigh, 2006), contracting opportunities for local businesses (Adebayo and Werker, 2021; O’Faircheallaigh, 2010a; Shanks and Lopes, 2006; Wanvik, 2016), new community infrastructure (Agbaitoro, 2018; Cameron and Levitan, 2014; Glasson, 2017; O’Faircheallaigh, 2006), and impact mitigation measures (Craik et al., 2017; Fitzpatrick, 2007; Kielland, 2015; O’Faircheallaigh, 2010b, 2017). A smaller group of studies have focused on the benefits of negotiating CBAs for project developers, including increasing project certainty and reducing the potential for conflict by securing consent from local Indigenous communities (Bruckner, 2015; Dorobantu & Odziemkowska, 2017, 2017, 2017; Fidler, 2010; Henisz et al., 2014; Prno and Slocombe, 2012). There is a need, however, for research that focuses on the costs of negotiating CBAs for project developers.
To the best of our knowledge, this is the first study to date to estimate the cost of a CBA for a private project developer, estimating the cost of the Mary River Inuit Impact and Benefit Agreement (IIBA) for a project developer, Baffinland Iron Mines Corporation (Baffinland), that was a CBA negotiated with the Qikiqtani Inuit Association (QIA) regarding the Mary River Iron Mine.1 This case study has received some attention in the past with studies analyzing community benefits from the IIBA (Adebayo and Werker, 2021; Loxley, 2019) and the economic viability of the mine (Loxley, 2019; West and Lépiz, 2021). These previous studies, however, do not analyze the impact of the IIBA on Baffinland. In addition to estimating the cost of the IIBA, this study estimates the impact of the IIBA on the economic viability of the mine and evaluates the cost of the IIBA relative to total after-tax project cash costs and relative to a hypothetical cost of conflict. Conflict is prevalent in extractive natural resource development industries and CBAs are believed to help reduce conflict (Agbaitoro, 2018; Dorobantu and Odziemkowska, 2017; Dyck, 2013; Haggerty et al., 2023; Le Meur et al., 2013; O’Faircheallaigh, 2017; Sternberg et al., 2020).
CBAs negotiated in Canada are legally binding through contract law and set out obligations for project developers and local communities (Browne and Robertson, 2009; Cameron and Levitan, 2014; Fidler, 2008; G. Gibson and O’Faircheallaigh, 2010). Although CBAs are only legally required in certain regions in northern Canada in accordance with lands claim agreements (Coppes, 2016), CBAs are negotiated for virtually every major extractive resource project developed in Canada and are becoming increasingly common all around the world (O’Faircheallaigh, 2013). Some attribute the prevalence of CBAs to private developers recognizing the right of communities to free, prior, and informed consent as affirmed by the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) (Cascadden, 2018; Mahanty and McDermott, 2013; Papillon and Rodon, 2017) while others attribute the prevalence of CBAs to project developers managing social risk and attempting to satisfy consultation and accommodation requirements to obtain approval (Caine and Krogman, 2010; Cameron and Levitan, 2014; Grégoire, 2013). Ultimately, federal and provincial governments have a legal duty to consult and accommodate local Indigenous communities but some aspects of this duty can be delegated to private project developers (Newman, 2014; Peach, 2016). While the Canadian government has taken steps to recognize UNDRIP, legislation does not require consent from local Indigenous communities in order for consultation and accommodation requirements to be satisfied and for projects to be approved (Bankes, 2020).
Theoretically, CBAs have the potential to build mutually beneficial relationships between private project developers and (our focus here) Indigenous communities and to facilitate sustainable community development. The benefits provided to a community from a CBA are likely to be influenced by a number of factors including the fiscal mechanisms used (e.g., profit-based or volumetric royalty), the size of the project, the profitability of the project, the predicted adverse impacts of the project, the bargaining power held by each party, and, ultimately, the objectives of each party (Dale, 2020; Dorobantu and Odziemkowska, 2017; Gunton et al., 2021; Gunton and Markey, 2021; Odziemkowska and Dorobantu, 2021; O’Faircheallaigh, 1998, 2021). While CBAs can benefit communities and project developers, the benefits provided to communities, and the reduction in the likelihood of conflicts, often come at a cost to project developers (Dorobantu and Odziemkowska, 2017; Odziemkowska and Dorobantu, 2021).
In Section 2, we outline the theoretical framing for this study. In Section 3, we introduce the case study and summarize our methodology. Then, we present our assessment of which provisions of the IIBA generate incremental costs and which do not and present the to-date realized costs of the IIBA, which help inform the assumptions of our case study analysis. Next, we present the results of our analysis, estimating the incremental costs of the IIBA over the project’s lifetime. We then discuss the significance of the results in Section 4 and present conclusions in Section 5. While our case focus is on the Canadian North, we hope that the theoretically-informed study finds resonance with other jurisdictions host to CBAs.

How costly is a community benefit agreement for a private project developer?

Resource Key: JD2YA2X9

Document Type: Journal Article

Creator:

Author:

  • Cameron Gunton
  • Eric Werker
  • Mark A. Moore
  • Sean Markey

Creators Name: {mb_resource_zotero_creatorsname}

Place:

Institution:

Date: March 2025

Language: en

Community benefit agreements (CBAs), also referred to as impact and benefit agreements, are common resource governance tools that are negotiated across the globe between private project developers and local, often Indigenous, communities whose land must be accessed or disturbed for major extractive resource projects (O’Faircheallaigh, 2013). A relatively recent body of scholarship has focused on the benefits received by local communities from CBAs and their associated natural resource development projects. According to the literature, CBAs have the potential to help facilitate economic and social development of Indigenous and non-Indigenous communities by providing revenue benefits (Adebayo and Werker, 2021; Agbaitoro, 2018; Alcantara and Morden, 2019; Bocoum et al., 2012), employment and training opportunities (Adebayo and Werker, 2021; Agbaitoro, 2018; Fidler and Hitch, 2007; V. Gibson, 2008; O’Faircheallaigh, 2006), contracting opportunities for local businesses (Adebayo and Werker, 2021; O’Faircheallaigh, 2010a; Shanks and Lopes, 2006; Wanvik, 2016), new community infrastructure (Agbaitoro, 2018; Cameron and Levitan, 2014; Glasson, 2017; O’Faircheallaigh, 2006), and impact mitigation measures (Craik et al., 2017; Fitzpatrick, 2007; Kielland, 2015; O’Faircheallaigh, 2010b, 2017). A smaller group of studies have focused on the benefits of negotiating CBAs for project developers, including increasing project certainty and reducing the potential for conflict by securing consent from local Indigenous communities (Bruckner, 2015; Dorobantu & Odziemkowska, 2017, 2017, 2017; Fidler, 2010; Henisz et al., 2014; Prno and Slocombe, 2012). There is a need, however, for research that focuses on the costs of negotiating CBAs for project developers.
To the best of our knowledge, this is the first study to date to estimate the cost of a CBA for a private project developer, estimating the cost of the Mary River Inuit Impact and Benefit Agreement (IIBA) for a project developer, Baffinland Iron Mines Corporation (Baffinland), that was a CBA negotiated with the Qikiqtani Inuit Association (QIA) regarding the Mary River Iron Mine.1 This case study has received some attention in the past with studies analyzing community benefits from the IIBA (Adebayo and Werker, 2021; Loxley, 2019) and the economic viability of the mine (Loxley, 2019; West and Lépiz, 2021). These previous studies, however, do not analyze the impact of the IIBA on Baffinland. In addition to estimating the cost of the IIBA, this study estimates the impact of the IIBA on the economic viability of the mine and evaluates the cost of the IIBA relative to total after-tax project cash costs and relative to a hypothetical cost of conflict. Conflict is prevalent in extractive natural resource development industries and CBAs are believed to help reduce conflict (Agbaitoro, 2018; Dorobantu and Odziemkowska, 2017; Dyck, 2013; Haggerty et al., 2023; Le Meur et al., 2013; O’Faircheallaigh, 2017; Sternberg et al., 2020).
CBAs negotiated in Canada are legally binding through contract law and set out obligations for project developers and local communities (Browne and Robertson, 2009; Cameron and Levitan, 2014; Fidler, 2008; G. Gibson and O’Faircheallaigh, 2010). Although CBAs are only legally required in certain regions in northern Canada in accordance with lands claim agreements (Coppes, 2016), CBAs are negotiated for virtually every major extractive resource project developed in Canada and are becoming increasingly common all around the world (O’Faircheallaigh, 2013). Some attribute the prevalence of CBAs to private developers recognizing the right of communities to free, prior, and informed consent as affirmed by the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) (Cascadden, 2018; Mahanty and McDermott, 2013; Papillon and Rodon, 2017) while others attribute the prevalence of CBAs to project developers managing social risk and attempting to satisfy consultation and accommodation requirements to obtain approval (Caine and Krogman, 2010; Cameron and Levitan, 2014; Grégoire, 2013). Ultimately, federal and provincial governments have a legal duty to consult and accommodate local Indigenous communities but some aspects of this duty can be delegated to private project developers (Newman, 2014; Peach, 2016). While the Canadian government has taken steps to recognize UNDRIP, legislation does not require consent from local Indigenous communities in order for consultation and accommodation requirements to be satisfied and for projects to be approved (Bankes, 2020).
Theoretically, CBAs have the potential to build mutually beneficial relationships between private project developers and (our focus here) Indigenous communities and to facilitate sustainable community development. The benefits provided to a community from a CBA are likely to be influenced by a number of factors including the fiscal mechanisms used (e.g., profit-based or volumetric royalty), the size of the project, the profitability of the project, the predicted adverse impacts of the project, the bargaining power held by each party, and, ultimately, the objectives of each party (Dale, 2020; Dorobantu and Odziemkowska, 2017; Gunton et al., 2021; Gunton and Markey, 2021; Odziemkowska and Dorobantu, 2021; O’Faircheallaigh, 1998, 2021). While CBAs can benefit communities and project developers, the benefits provided to communities, and the reduction in the likelihood of conflicts, often come at a cost to project developers (Dorobantu and Odziemkowska, 2017; Odziemkowska and Dorobantu, 2021).
In Section 2, we outline the theoretical framing for this study. In Section 3, we introduce the case study and summarize our methodology. Then, we present our assessment of which provisions of the IIBA generate incremental costs and which do not and present the to-date realized costs of the IIBA, which help inform the assumptions of our case study analysis. Next, we present the results of our analysis, estimating the incremental costs of the IIBA over the project’s lifetime. We then discuss the significance of the results in Section 4 and present conclusions in Section 5. While our case focus is on the Canadian North, we hope that the theoretically-informed study finds resonance with other jurisdictions host to CBAs.

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