Commentary: Understanding Bill 43

Bill 43 is the third attempt to reform Quebec’s Mining Act in the last five years. The first two bills were tabled by the Liberal government, but were not passed. This latest bill (Bill 43), tabled by the minority Parti Québécois (PQ) government, would be a major overhaul of the Mining Act, and its importance should not be understated. The prices of metal are falling and mining investments are slowing around the world. At a time when Quebec’s reputation as a mining-friendly jurisdiction is being questioned and critics from all sides are calling for a reform, Bill 43 could have an adverse impact on mining investment in the province.

Regulatory uncertainty

It is in this context that the government of Pauline Marois has proposed a PQ version of the Mining Act and an overhaul of the way in which mining royalties are collected. The plan, which was referred to during the election period as the “North for All” plan, is a remodelling of the Liberals’ Plan Nord.

During the election period and the following months, drastic measures were proposed by the Minister of Natural Resources, Martine Ouellet, which were heavily criticized on the fiscal front. At the time, the PQ was criticized for aggressively seeking to maxi­mize royalties from ex­ploiting natural resources, affecting the industry’s ability to properly function.

In the face of such criticism, the minority government rapidly reviewed and corrected its policy, which resulted in Bill 43, which was submitted to Parliament at the end of May 2013.

But the reaction caused by the initial proposals — coupled with the already existing regulatory uncertainty from the previous failed bills — made the mining industry uneasy. It responded by retrenching its position that the status quo should be maintained, and took on a much more suspicious view of any potential reforms.

In a global market with fierce competition to attract mining projects, mining companies have the luxury of operating in the legislative system which is most favourable to them. Up until 2011, Quebec had placed itself in an excellent position thanks to the regime it had in place. However, since then, Quebec’s position as the jurisdiction of choice for miners has tumbled. In 2010, the Fraser Institute ranked Quebec as the top jurisdiction for mining companies. It has since fallen to number 11. Despite the increased regulatory hurdles, we believe that drop is more a re­flection of the mining industry’s natural aversion to the regulatory uncertainty that has been prevailing in the province rather than opposition to the content of Bill 43 itself.

New proposals

Under Bill 43, mining companies would need to perform and submit feasibility studies before being granted a mining lease, including a study of the feasibility of processing the ore in Quebec. No leases would be granted until the lease has received a certificate of authorization from Environment Quebec and approval of the restoration and rehabilitation plan. A committee would need to be charged with follow-ups and maximizing economic spinoffs within 30 days of obtaining the lease. They have to keep this same committee until the complete execution of the works planned, in order to oversee the im­plementation of the restoration and rehabilitation plan.

The rehabilitation work under the plan would have to be secured by a guarantee covering 100% of the anti­cipated costs, as opposed to the current guarantee of 70%. Bill 43 imposes three installments — the first of which must represent 50% of the total guarantee, and must be given within 90 days of the approval of the plan. The two subsequent installments of 25% would have to be produced the following two years on the anniversaries of the plan’s approval.

Certain mining companies would need to submit a yearly report to the minister indicating the quantity and value of the ore extracted over the course of the preceding year. This information would be made public annually, for each mining lease, mining concession and lease to exploit mine surface mineral substances.

These heightened legal requirements would impose mandatory public consultations when the lease aims to exploit, or if it is necessary to carry out an industrial acti­vity or to engage in commercial export. It would also require an environmental assessment for all construction and operations of mineral processing plants, as well as for mine development and operation projects.

Bill 43 contains a general clause stating that First Nation communities must be consulted, but contains no specific provisions on the procedure for or weight of such consultations. It would also provide that any Impact and Benefit Agreements (IBAs) concluded between mining companies and First Nation communities must be made public.

Bill 43 does however contain provisions that grant extended powers to regional county municipalities (RCMs). Notably, RCMs would be allowed to declare certain zones incompatible or conditionally compatible with mining activities. However, these decisions remain subject to approval by the Minister of National Resources to ensure they conform with the government’s policy directions.

Finally, Bill 43 would empower the government to refuse a lease, or put an end to one, for public interest reasons, and would be able decide to auction off certain rights.

Reaction

One of the most hotly debated points of Bill 43 is the requirement that a feasibility study for processing ore in Quebec be submitted before obtaining a mining lease. The Quebec Mining Association, as well as the Quebec Employer’s Council, are concerned with the increase in costs and the delays this would cause. This provision would create uncertainty as to the effect of the study — would companies be forced to process ore in Quebec at greater cost as long as it is feasible?

In addition, the provisions regarding First Nation consultation do not respond to the needs of either the mining industry or First Nation communities. The act contains no specific provisions about how consultation must be performed, which gives little power to First Nations to be properly involved in the process, and could lead to litigation down the road for mining companies. Moreover, the requirement that IBAs be made public means that they would be standardized, instead of letting different communities request solutions tailored to their needs.

However, many of the other measures in the act are in line with industry best practices. For instance, economic spinoff committees are often set up to facilitate dialogue with local and First Nation communities, and the increased financial guarantee is a cash-flow issue, and not an actual hurdle to investment.

Conclusions

It is true that the PQ’s rhetoric preceding the tabling of Bill 43 gave the mining industry serious cause for concern. Coming at a downturn in the industry worldwide, the PQ govern­ment should have taken greater care to reassure the mining industry during its announcements of planned reforms. Instead, they focused on their desire to generate more royalties and force the industry to do more of its transformation in Quebec. Faced with that message, the mining industry felt uneasy. However, the PQ has a history of pursuing an aggressive leftist agenda in the media, but then eventually tempering its ideals and tabling more practical solutions.

Moreover Bill 43 is far from being passed, and needs the approval of at least one of the opposition parties before it can become law. The resulting law could be more favour
able to the mining industry, and in any case, the regulatory uncertainty that the PQ’s election-period rhetoric created would be put to an end, which is a plus for all parties involved.

— Pascal de Guise is a partner at Borden Ladner Gervais LLP practising in the following groups: Public Company Mergers and Acquisitions, and Securities, Capital Markets and Public Companies. His practice focuses on mergers and acquisitions, venture capital and investment capital, public offerings, going-private transactions and corporate governance and compliance issues. Pascal can be reached at pdeguise@blg.com or (514) 954-3167.

Yaël Lachkar is an associate at Borden Ladner Gervais LLP. Yaël is a member of the Construction and Engineering Group and is also involved in Team North© for her interest in Mining Law and the Public Policy and Government Relations Group, where she focuses on the regulation of lobbying activities. Yaël can be reached at ylachkar@blg.com or (514) 954-3173.

Misha Benjamin is an associate in Borden Ladner Gervais LLP’s Montreal office. His practice focuses on general corporate law, mergers and acquisitions, finance, securities and regulatory compliance. Misha can be reached at mibenjamin@blg.com or (514) 954-3181.