Aug '13

Eye on Business

Quebec’s new Mining Act would increase uncertainty and costs

By Charles Kazaz

In late May, the Government of Quebec unveiled its long-expected new Mining Act (Bill 43), hot on the heels of recently announced changes to its mine royalty regime. This is Quebec’s third attempt in four years to revamp its mining legislation. The two previous efforts (in December 2009 and May 2011) were met with strong opposition from municipal, environmental and mineral development stakeholders.

This new bill seeks to maintain the current mineral tenure system, including the rights and obligations of mining rights holders. But, with that said, it proposes a number of technical changes that threaten to drive up costs and undermine confidence of miners expecting their long-term investments to be rewarded.

For example, the bill would require companies to conduct a feasibility study on the processing of ore in Quebec, when applying for a lease and at the time of each renewal. Based on the feasibility study, the ministry may call for an agreement to maximize economic spinoffs in Quebec. In addition, a monitoring and maximization committee that includes regional government representatives will monitor the work performed to maximize jobs, contracts and other economic benefits for local communities. Failure to comply with an agreement can constitute grounds for the revocation of a mining lease. In contrast, Ontario requires that ores be treated and refined in Canada, unless an exemption is obtained.

Quebec’s proposal raises concerns about the scope of the feasibility study. There is no indication as to the extent of downstream processing that must be considered as part of a study. Also, the requirement for a feasibility study at the time of renewal creates uncertainty for operating mines, as this may allow the refusal of a lease renewal after significant capital investment has been made in mine development.

The bill also grants the minister broad powers to refuse or terminate mining leases for reasons of public interest. Where the lease is terminated, the minister must grant a lessee a lease on another parcel of land that would presumably have similar value, failing which the minister will be required to compensate the lessee for the loss suffered. Since the notion of “public interest” remains undefined, these powers will affect the security of tenure that a title holder seeks when developing and operating a mine.

The proposed legislation also calls for all mineral processing plant construction and operation projects, as well as mine development projects, to be subject to an environmental impact assessment (EIA) regardless of the nature of the product or of the project’s production capacity. In addition, a lease cannot be issued until a mine closure plan has been approved and environmental approvals have been issued. It is intended that the mine rehabilitation plan be publicly available as part of the EIA review process. The purpose is to ensure that environmental approvals to operate the mine will be issued before a lease is granted.

Earlier this year, the natural resources ministry proposed to amend its regulations to increase financial assurance requirements for mine closure. The bill proposes incorporating these changes into the legislation. Financial guarantees must cover 100 per cent of the closure cost of the entire mine site rather than the current 70 per cent of the closure cost for accumulation areas. Also, the guarantee must be paid in the first three years of mining operations rather than the current regime’s requirements, which allows the assurance to be paid in ­instalments based on the life of mine. These proposed measures are in line with financial assurance requirements in other Canadian jurisdictions.

Previous attempts to amend the Mining Act were delayed because of opposition from exploration companies to the demands of local municipalities to have a greater say in land-use decisions that involve mineral development. The proposed bill will allow regional county municipalities (RCMs) to designate lands on their territory as incompatible with mining and on which prospecting, exploration and operations cannot be carried out. The powers given to RCMs will affect the security of tenure and create a degree of uncertainty for mining rights holders. In response to this concern, the bill provides that local land-use designations be subject to review by the ministry.

Public consultations on the bill are scheduled for late August and early September. Stakeholders and opposition ­parties have not shown strong support for the bill, and amendments will likely be proposed. Given the desire for predictability when developing and operating a mining project, some of the proposed changes will need to be clarified and perhaps pared back. With the current minority government in Quebec, support of at least one major opposition party will be required, making it difficult to predict if and when the bill will pass.

Charles Kazaz is a partner at Blake, Cassels and Graydon LLP and specializes in mining and environmental law.

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