A cross-country drive last week took me through the Wild West, starting in the exploding economy of Estevan, Sask.

Legions of mega-trucks carrying drilling gear, bunk-houses, and other giant machine parts rumbled through town. The hotels were full, at double the GTA rates.

The 24/7 noise and smells of oil and gas followed at every stop through the vast oil and gas fields to the Alaska highway at Dawson Creek, B.C. We continued north-west to Fort St. John, a hub for incoming gas pipelines and the processing facilities that take water and chemicals out of the gas.

I have never seen or felt an economic boom before and this felt like the epicentre – even with drilling activity taking a dip because of oversupply. It was frenetic, mucky and loud. But it came with a sense of hope; even optimism.

In the middle of all this, news that Cleveland, Ohio-based Cliffs Natural Resources was hitting the pause button on Ontario’s Ring of Fire project buzzed through on my BlackBerry. I wondered how laid-off workers in Sudbury were feeling.

The Ring of Fire is the site of the massive planned chromite and nickel mining project in the mineral-rich James Bay lowlands of Northwestern Ontario. In May 2012, Cliffs announced a $3.3-billion investment to build a chromite mine, transportation corridor and processing facility. Ore would be trucked south to Nakina and from there moved by rail to a new processing plant in Sudbury.

This is the province’s hail-Mary pass to a made-in-Ontario resource boom.

Tony Clement, Canada's Treasury Board president and minister responsible for the Ring of Fire, says the project will be the economic equivalent of the Athabasca oil sands, with a potential of generating $120 billion in economic activity. He calls it a "once-in-a-life opportunity to create jobs and generate growth and long-term prosperity for northern Ontario and the nation.”

What came unglued in the Ring of Fire? And what will get it back on track? This is an intriguing public policy story with exceptionally high stakes.

It involves the role of government in private sector mining operations, relationships with several economically and socially disadvantaged First Nations, questions about public versus private investment in infrastructure, such as access roads or railways, and the role of the province in long-term land use planning.

What went wrong?

Cliffs Resources struggled with four issues.

First, the company was overly optimistic about environmental approvals, assuming that these would be relatively straightforward – possibly based on a federal government estimate of a two-year timeline. If this was the only issue, time would have healed it.

Second, while Cliffs wanted to resolve issues and build relationships with the nine First Nations claiming land rights in the area, the company underestimated the time and effort this would take. It was reportedly heavy-handed going-in and seemed caught off-guard by the muscularity of the First Nations, their ease in blocking access to the site, and the shifting winds that accompany changes in political leadership in government.

Third, the project area is isolated and will require either road or rail infrastructure in order to move ore south. This was a huge issue.

Cliffs is a mining company and is not in the infrastructure business. It expected significant government support in building an access road. Given an estimated cost of more than $1 billion, tough calculations would have been made inside government.

Given the fiscal environment, it would make sense for the company to fund a large part of the road. But with that, the government would cede a significant degree of private control over access.

A publicly funded road would be expensive for taxpayers but would permit a broader range of provincial flexibility in meeting development and planning goals, especially in relation to the proposed northern development plan.

It is reported that the province and Cliffs came very close to agreement prior to the shift from the McGuinty to Wynne administrations early in 2013. Following the leadership convention, the new administration wanted to review the landscape.

Fourth, and the real deal-breaker, at least in the short term, is that the province’s mining and lands commissioner ruled against Cliffs’ efforts to obtaining access rights through the most favourable entry corridor into Ring of Fire area. This is a very narrow 350-kilometre land corridor suitable for road development between Nakina and the Ring of Fire. Mining and surface rights on this corridor are held by junior miner KWG.

Mining companies are generally granted surface access over the claims of other miners in order to reach their claims. But in this case the commissioner was persuaded by KWG that building an access road over its claims would impede its ability to properly drill on those claims. This was a huge setback for Cliffs, which is now appealing the ruling. Presumably, though, Cliffs and KWG could sort this out together.

Where do we go from here?

First off, the appointments of Bob Rae as negotiator for the nine First Nations groups and former Supreme Court justice Frank Iacobucci as the province’s representative has built a firm footing for ongoing talks.

Premier Kathleen Wynne’s keen interest in seeing appropriate social and economic benefits for First Nations has resulted in an all-hands-on-deck provincial strategy requiring work from the economic, social and education ministries. Wynne will have raised the federal government’s responsibility in this area as well as the infrastructure issues with Prime Minister Stephen Harper in Ottawa Thursday.

A big change is the province’s launch of a development corporation to manage the infrastructure aspects of the development. This will shift government’s focus away from Cliffs and toward other private sector partners, including pension funds. This is not without the same sort of engineering, land rights and relationship risks already touched on.

The key question is how money can be made from building a road, with one obvious answer being the levying of charges on industrial users.

There are huge mineral deposits in the area and it is probably the case that, if a road is built, many more mining companies will jump in – which would eventually create sufficient critical mass for rail development (which, in comparison with a road, has much higher upfront capital costs, but lower downstream operating costs).

Underlying this issue is the degree to which government should be actively involved in planning and funding infrastructure and development in this sort of remote project. This could be, for example, at the centre of an integrated northern development plan.

On the other hand is the option of leaving it to the private sector to open up Ontario’s wild north-west on the “let her rip” tar sands model.

This is about mega-resources but it also involves mega-policy making. In view of all of this complexity a short pause might be in everyone’s interest. To put it mildly, we can’t afford to screw this up.

I flew back east alongside a young man from Kitchener going home on a six-day break, following 16 consecutive 12-hour shifts in -40 weather in the far north of B.C. This was a certainly a good example of cross-provincial economic benefits but he would rather work in Ontario. I would like that for him too.

Dean: Drilling down on the Ring of Fire

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