Canada: A Skimmed Plan Nord: Keeping In Line With Quebec's Current Economic Landscape

The Quebec government first launched its Northern Plan, le "Plan Nord", in 2011 with great fanfare. The Plan Nord seeks to develop Quebec's vast territory north of the 49th parallel, which covers 72 per cent of the province or approximately 1.2 million km2. Since the initial announcement, the implementation of the Plan Nord has been stalled in large part owing to two changes in government: a slowdown in the mineral sector and uncertainty surrounding public involvement in financing transportation and energy infrastructure, which are critical to development in the north.

On April 8, 2015, Quebec Premier Philippe Couillard and Pierre Arcand, Minister of Energy and Natural Resources and Minister Responsible for the Plan Nord, jointly announced the Quebec government's reaffirmed commitment to developing the north under a refocused Plan Nord that seeks to reflect today's economic realities and perceived heightened sensitivities around social and environmental impacts.

As part of the re-launch of the Plan Nord, Minister for Mines Luc Blanchette followed up with a statement outlining the measures set out in the 2015-16 budget that are intended to encourage mining activities.

The re-launched Plan Nord—with the incentive measures provided in the budget—and the recently announced Maritime Strategy are the key components of the Quebec government's strategy to stimulate the economy.

The newly launched Plan Nord, covering the period from 2015 to 2035, provides for public and private investment of C$50 billion over 20 years. By way of comparison, the initial Plan Nord provided for investment of about C$80 billion over 25 years. In the revised Plan Nord, C$22 billion will be public funds provided by Hydro-Québec and the government, with the remaining C$28 billion expected from private investments.

In its announcement, the government sets out its overall long-term objectives and a short-term five-year action plan commencing this year. The three overall objectives are to:

  • Develop the diversified economic potential of northern Quebec in a responsible way and for the benefit of the local population living there and Quebec as a whole
  • Support the development of communities in the Plan Nord territory by helping them realize their full potential and enhance their living conditions
  • Protect the environment and preserve the distinctive biodiversity of the area by dedicating 50 per cent of the area to non-industrial purposes, environmental protection and the safeguarding of biodiversity.

Regarding the development of the north's economic potential, the short-term action plan will focus on six priority sectors: mining, forestry, energy, wildlife, tourism and biofoods. It should be noted that all six of these priorities were identified under the initial Plan Nord. In this re-launch, the Quebec government is essentially reaffirming its initial approach to stimulating these sectors.

Below is a summary of the new Plan Nord's initiatives concerning the development of natural resources, as well as the measures set out in the 2015-16 budget.

MINING

In order to promote a stable and predictable environment for mining operations, the Quebec government will maintain the mining tax regime, which entered into force on January 1, 2014. This regime consists of a hybrid royalty scheme with a minimum mining tax based on the value of the extracted minerals (1 per cent to 4 per cent of the output value) and a progressive mining tax calculated on a mine's profits (16 per cent to 28 per cent depending on the profit margins of the mining company). Mining companies will pay the greater of the minimum mining tax or the progressive tax. The Quebec government announced that a portion (yet to be determined) of the royalties will be distributed to the local communities where the operations are taking place. The new Mining Act that was finally adopted in December 2013, after several setbacks, also contributes to creating a stable platform for mining development.

Focus is also placed on diversifying the industry by supporting the development of minerals identified as having enormous potential in the north, such as apatite, lithium, vanadium, diamonds, graphite, rare earth minerals and ilmenite. The Quebec government intends to acquire an equity interest, through the Capital Mines Hydrocarbon Fund, in companies exploiting mineral substances on public lands or who transform such mineral substances in the province of Quebec. The Capital Mines Hydrocarbon Fund, created under the recent budget and managed by Ressources Québec, provides an envelope of C$500 million earmarked for the development of projects north of the 49th parallel.

Given the emphasis on responsible resource development and social acceptability, a mining advisory committee coordinated by the Ministry of Energy and Natural Resources has been created to help foster mining development in a manner that will provide benefits to the communities affected and seek to ensure a transparent and open process. Other initiatives in this regard include increased attention on implementing best practices in terms of minimizing social and environmental impacts by drawing upon existing industry guides and programs, such as the Prospectors & Developers Association of Canada's Guide on Environmental Excellence in Exploration (e3), initially produced in 2003 and since been updated to e3 Plus, which also addresses social and health and safety performance. The Québec Mining Association's program Towards Sustainable Mining is also cited as an example to guide development.

FORESTRY

The Sustainable Forest Development Act, substantial portions of which entered into force in April 2013, introduced a new forestry regime in Quebec intended to implement the highest standards in forestry practices, notably by providing increased access to timber resources for enterprises, encouraging secondary and tertiary timber processing, promoting the emergence of new forestry projects that have gained community support and increasing the participation of local and aboriginal communities in the management of forests. With respect to the latter, steps have already been taken to work more collaboratively in the area of forestry with the Cree of Quebec both under the New Relationship Agreement, more commonly known as the "Paix des Braves" (Peace of the Braves), entered into between the Quebec government and the Cree in 2002, which contains a chapter on forestry, and under the recent Agreement on Governance signed with the Cree in 2012.

The Quebec government has reaffirmed that it will promote the expansion of the value-added wood product processing industry, including forest biomass, which is used to produce bioenergy; green building, which favours the use of wood due to its capacity to store and trap carbon atoms thereby reducing greenhouse gas emissions; and biorefining, which transforms wood materials into a variety of products, such as bioplastics, solvents and paints.

Measures are provided to address issues regarding the spruce budworm epidemic affecting northern forests by providing financial assistance for salvaging affected timber. Finally, as part of the undertakings regarding required infrastructure, talks on cost sharing for access roads led by the regional access committee will continue.

ENERGY

The Plan Nord refers to Quebec's energy policy, which is in the process of being articulated and will be made public in the fall of this year. We can anticipate that there will be an emphasis on energy infrastructure in the north and developing clean and sustainable energy projects to operate mines and supply northern communities that are now relying on diesel generators. Measures in the budget include funds available to assist mining companies to implement measures to adopt renewable energy sources. Also foreshadowing the eventual Quebec energy policy is reference to promoting the potential for liquefied natural gas (LNG), wind energy and biomass for accessible regions in the north, to extend the power transmission grid and ensure a stable supply of hydrocarbons to the Moyenne and Basse-Côte Nord communities. The re-launched Plan Nord has a new emphasis on LNG, natural gas and hydrocarbons, as the former Plan Nord mainly focused on the development of hydroelectric and wind power projects. This is to be confirmed when the new energy policy is released.

TRANSPORTATION INFRASTRUCTURE

An obstacle to developing the north is limited access. Transportation infrastructure including maritime, rail, air and road infrastructure are critical to the success of the Plan Nord. The government, through the Société du Plan Nord assisted by the Ministère des transports, will prepare and implement a transportation plan for all modes of transport in the territory covered by the Plan Nord. Specific objectives are set for each mode of transport. For maritime transport, the re-launched Plan Nord refers to the recent Quebec Maritime Strategy to maximize marine traffic in the St. Lawrence River. For rail transport, there is recognition that the current rail infrastructure is close to capacity and as new mining projects develop, notably in the Labrador Trough, there will be a need to assess the feasibility of a new rail link in the region to link mines with the Port of Sept-Îles. For air travel, the Plan Nord refers to the need to develop a model for air travel that will provide combined benefit for tourism development, environmental surveys and industry-related air transportation. Finally, the road transportation networks need to be improved by investing in the main highways, Route 389 and 138.

ENVIRONMENTAL AND BIODIVERSITY PROTECTION

As under the initial Plan Nord, the re-launched Plan Nord seeks to set aside 50 per cent of the Plan Nord territory by 2035, which will be reserved for non-industrial activities, environmental protection and biodiversity initiatives. The first 20 per cent of the territory to set aside is to be completed by 2020. Plans regarding the creation of national parks, namely the Parc national Ulittaniujalik, Albanel-Témiscamie-Otish and Assinica, together totalling over 35,000 km2, will proceed. Setting aside such a large portion of the territory for non-industrial use has generated concern that potential mineral exploration properties will no longer be open for future development and more importantly that it might end up eliminating potential transportation and energy distribution corridors that are critical to northern resource development. In this regard, it is indicated in the Plan Nord that the Quebec government will seek to gain knowledge about the area's physical and ecological environment in order to identify the most appropriate conservation measures and recognize the potential for development.

FINANCIAL CONTEXT AND BUDGET HIGHLIGHTS

In order to foster the development and improve access to the territory of the Plan Nord, the Société du Plan Nord will receive funding estimated at C$356.7 million over the course of the next five years from the Northern Plan Fund, a special fund financed principally by tax revenues generated from economic activity in the territory covered by the Plan Nord. Additional sums provided by other government departments and partners will increase this amount to C$1.34 billion, of which C$914.2 million will be invested in strategic infrastructure projects and C$425.4 million will go towards the implementation of the priority initiatives in the short-term action plan, as well as towards the administration of the Société du Plan Nord. It is expected that the private sector will add to this financial package to once again kick-start the dream of successfully developing Quebec's rich resources in the north. Over the past year, the Quebec government released nearly C$75 million from the Northern Plan Fund for infrastructure projects, including the execution of the first phase of a study on a new rail link to improve access to the Labrador Trough, an extension of route 167 to the Otish Mountains and reconstruction of the James Bay route.

Other northern development projects may benefit from more general funding initiatives announced in the 2015-16 budget. For example, in the transportation sector, C$200 million has been allocated over five years for investments in ports and intermodal infrastructure projects dedicated to the transport of goods. In the forestry sector, the government announced that it will devote C$542 million in 2015-16 to support the sustainable development of the Quebec forest and protect the future of jobs in the forestry sector. In the energy sector, the government is setting aside C$38 million for projects related to the extension of the natural gas distribution network.

Finally, in the mining sector, a variety of budget measures have been adopted to promote mining exploration:

  • A one-year postponement in the increase of pricing of mineral titles
  • A two-year reduction of the minimum cost of works to be carried out on a claim
  • The government mining investment organization (SIDEX) has seen its mandate renewed until 2025 and its Action-Terrain program will have a C$3 million budget for 2015
  • Funds will be allocated for governmental geoscientific research about the Plan Nord territory
  • The definition of exploration expenses will be expanded to include certain expenses associated with environmental studies and community consultations, thus making them eligible for certain tax deductions.

CONCLUSION

Already characterized as a Plan Nord "on a diet", the re-launched Plan Nord attempts to set realistic goals and a financial package that is in keeping with the current economic landscape. That being stated, the new Plan Nord carries forward many of the same themes and initiatives identified under the 2011 Plan Nord. This is not surprising as the initial Plan Nord was well received by industry. The re-launched Plan Nord provides some renewed hope in attracting new projects, new jobs and a diversified economy in the north, which will benefit the local communities and the province as a whole. There is an enhanced focus on the need to achieve social acceptability when proposing or carrying out natural resource projects and ensuring that such projects respect best practices in terms of sustainability, transparency and community engagement.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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