Iqaluit, Nunavut: Just two years into its lifespan, Nunavut's new film agency may have chased away the territory's most successful production company.

In late May, Igloolik Isuma Productions - makers of Atanarjuat: The Fast Runner and the recently wrapped The Journals of Knud Rasmussen - announced that they were laying off five full-time staff and closing their office in the tiny hamlet of Igloolik, Nunavut, indefinitely.

Isuma cofounder and director of photography, Norman Cohn, blames the shutdown on contradictions within Nunavut Film's funding policy that cost the company $155,000 in rebates. The money had been earmarked as an operating budget for between projects.

Last year, Isuma applied for and expected to receive $175,000 in labor rebates and $18,000 in youth training funds for Knud Rasmussen, a history piece and a copro with Denmark. The producers later learned that a previous $200,000 grant they had received from Nunavut Film for the same film made them ineligible for labor rebates.

"We knew the money was there, and we knew there weren't other film companies in Nunavut who would claim all of it, so of course we operated all year based on the assumption that we would get somewhere between $150,000 and $200,000 from Nunavut Film," says Cohn. Cohn codirected Knud Rasmussen with Isuma president Zacharias Kunuk.

Nunavut Film responded by offering $155,000 more in base project funding. That fit within the film policy, but it was money that Cohn couldn't accept because his financing was already locked.

"They want to give us money, but they want to give us money for a train that's already left the station," he says.

Isuma is making plans for a $3.5-million feature to be shot in 2006, but unless Nunavut Film guarantees some form of funding within eight to 10 weeks, Isuma could take Before Tomorrow, and the 50 jobs that go with it, to northern Quebec.

Telefilm Canada has already committed $1 million to the film, and Isuma will apply for the remainder of its funding this fall. Cohn says Isuma also needs $350,000 from Nunavut Film before the project's budget is locked.

Nunavut Film, however, is now in a state of paralysis. Territory officials - although working to fix the policy that cost Isuma its labor rebate - are also delaying the 2005/06 funding agreement that Nunavut Film needs in order to confirm its operating budget.

The agency still hasn't received an agreement from the government of Nunavut, its sole source of funds, even though it's now four months into the new fiscal year.

Sheila Pokiak, Nunavut Film's director since late January, says she's in an awkward position when filmmakers come to her for funds.

"Is Nunavut Film operating in somewhat of a vacuum right now? Yes we are," she says.

Policy revisions are expected to take several weeks or months to clear a thorny bureaucracy. Meanwhile, Pokiak is reconsidering Nunavut Film's role as a professional film funding agency.

"The [government of Nunavut] is not as supportive to this industry as we need it to be. If we really want to see this program succeed, we need that flexibility and we need the government to recognize that this is how the industry works," Pokiak says.

"Otherwise, we should not offer industry programs so much as provide grants to projects... moving more closely in line with an agency like Canada Council for the Arts."

Government of Nunavut officials referred media questions to Nunavut Film.