Dec '14/Jan '15

Quebec’s Plan Nord 2.0

The provincial government moves forward with its revamped northern development program

By Antoine Dion-Ortega

Last June the newly elected Liberal government of Quebec announced it was putting aside a $20-million package in its budget to finance a feasibility study for a new rail line between Pointe- Noire near Sept-Îles, Quebec, and the Labrador Trough. The plan has since gathered momentum with the October announcement that Champion Iron had joined the government of Quebec and Adriana Resources to form the Société Ferroviaire du Nord Québécois (SFNQ), a limited partnership that will look into the viability of a multi-user railway. This is one of a number of initiatives that comprise the reinvigorated, if more modest, Plan Nord.

Champion has good reasons to push for a direct line to the port rather than negotiate access to the existing Quebec North Shore and Labrador Railway (QNS&L), the Iron Ore Company of Canada-owned common carrier that currently services the area. “We don’t want to go to the IOC port in Sept-Îles, we want to connect to Pointe-Noire,” said Suzie Kim, corporate communications and public relations at Champion. The company has already reserved 10 million tonnes of capacity at the new multi-user wharf in Pointe-Noire, which should be fully commissioned by 2015. Besides, an agreement with QNS&L would be “too costly,” said Kim. The company’s inkind contribution to the feasibility study will consist of $6 million worth of sunk costs from its own transportation studies.

Although no timetable for the project has been announced yet, it has already been decided that the SFNQ feasibility study will take a phased approach. Phase 1 will look into the viability of a multi-user railway from the Pointe-Noire multi-user wharf to the Fermont area of Quebec, where Champion has its Fire Lake North iron ore project. Only if this first segment is economically viable would an extension of the railway further north be considered in Phase 2. The second portion of the line would go all the way to Adriana Resources’ Lac Otelnuk iron project in Nunavik, Quebec, some 170 kilometres (km) north of Schefferville.

This phased approach certainly helped persuade Adriana to join in. The company decided not to participate in CN’s feasibility study of a similar railway proposed in August 2012, partly because it was designed for a single line going all the way to Lac Otelnuk, according to Allen Palmiere, president and CEO at Adriana Resources. CN’s project had not planned for enough capacity to allow for the output from Lac Otelnuk, which could reach up to 50 million tonnes per year. “They weren’t in a position to include our tonnage in their volumes, and without our tonnage, they didn’t have a viable railway,” said Palmiere. “The tonnage that is necessary for a railway to be economically viable is roughly 80 million tonnes, which they didn’t have.” CN ended up dropping the project in February 2013.

A piece of a larger puzzle

The SFQN is only one piece of the so-called Plan Nord 2.0, a milder version of the original Plan Nord, which was launched in 2011 by former Quebec premier Jean Charest but hobbled by a change of government and falling commodity prices. The initial plan was supposed to generate $80 billion in private and public investment over 25 years, create or secure 20,000 jobs, and bring $14 million in benefits to government coffers. Much less ambitious, the Plan Nord 2.0 focuses on a 2015– 20 timeline.

Besides the SFQN, the government set aside $63 million in its 2014–15 budget for its Plan Nord Fund to fix Route 389 to Fermont and the James Bay Road to Radisson, and to extend Route 138 on the North Shore beyond Kegashka – all of which serve key areas of Plan Nord territory. The budget also included $1 billion set aside for the Capital Mines Hydrocarbons Fund to finance future venture investments in oil and gas and mining projects, and $100 million for the training of skilled labour in northern and aboriginal communities.

These initiatives are currently going through the legislative process. Bill 11 was submitted on Sept. 30 by the minister of energy and natural resources, Pierre Arcand, to set up the Société du Plan Nord (SPN), which would act as a facilitator for territories in Quebec north of the 49th parallel. Its mandate would be to coordinate the development of natural resource projects in this region and to ensure they are consistent with the government’s long-term vision. “The SPN will act as a one-stop shop for mining companies,” said Jean Masson, associate at Fasken Martineau. “It is currently difficult to develop in northern regions because mining companies must knock at many doors to get their permits, and there are many inconsistencies between the different ministerial policies. Projects thus take too long before being approved.”

The SPN will get its financing through the Plan Nord Fund, which will be mostly funded with income taxes and charges resulting from the exploitation of natural resources in the North, as well as an annual $10 million contribution from Hydro-Québec until 2017. The SPN will have to submit its strategic plan with goals and deadlines for approval by the government. But before that, it will have to consult its shareholders assembly, which will include northern and aboriginal communities. No timetable has been introduced yet.

Finally, the provincial budget plans on a $50-million investment in Gaz Métro to help expand its liquified natural gas plant in Montreal, which is aimed at supplying mining projects in the northern regions.

Quebec Premier Philippe Couillard was swift to promote the Plan Nord 2.0 in person in China at the end of October. He even managed to meet with the Chinese minister of land and resources, Jiang Daming, who committed to spreading the word about the development initiative with the Chinese business community.

The government is clearly betting on a recovery of the iron ore market, which has been slowing down in recent years. “We are dressing up nice for when the prices go up again,” said Masson. “We will need to attract Chinese and Indian investors.”

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