In 2015, the government of Québec introduced legislative changes that have a direct impact on the mining industry. In October, An Act respecting transparency measures in the mining, oil and gas industries came into force (Act). By the end of the year, significant changes had also been introduced to the province's Mining Act. Each of these legislative developments is described below.
Coming into force of An Act respecting transparency measures in the mining, oil and gas industries
The government of Québec fulfi lled a commitment announced in the March 2015 budget when the Quebec National Assembly passed An Act respecting transparency measures in the mining, oil and gas industries on October 21, 2015. The Act follows the coming into force of the federal Extractive Sector Transparency Measures Act (ESTMA) on June 1, 2015, although the disclosure regimes they each introduce vary in certain ways.1
As its title suggests, the Act aims to impose measures to discourage and detect corruption and to foster social acceptability of natural resource exploration and development projects.
The Act sets forth a disclosure regime applicable to any legal person, corporation or other organization (Entity) that engages in exploration or development of mineral substances or hydrocarbons, or engages in other activities relating to mineral substances or hydrocarbons, that holds a permit, a right, a licence, a lease or another authorization for such exploration or development activities, or that controls such an Entity, directly or indirectly and in any manner whatsoever, and that complies with one of the following:
- it is listed on a stock exchange in Canada and has its head offi ce in Québec, or
- it has an establishment in Québec, exercises activities or has assets in Québec and, based on its consolidated fi nancial statements, meets at least two of the following conditions for at least one of its two most recent fi scal years: (a) it has at least $20 million in assets, (b) it has generated at least $40 million in revenue, or (c) it employs an average of at least 250 persons.
The Act requires an Entity to submit an annual statement within 150 days of the end of each fi scal year to Québec's Autorité des marchés fi nanciers (Quebec's security commission) (AMF). The statement must include all payments that fall within certain categories related to exploration or development of mineral substances or hydrocarbons if the total value of payments made to a single payee during the fi scal year for a specifi c category is equal to or greater than $100,000. Both monetary and in-kind payments are covered for purposes of the annual statements requirements.
The form of annual statements, the manner of presenting or breaking down the payments, as well as the procedure for the transmittal of such statements will be prescribed by government of Quebec regulation.
The Act currently sets out the following categories of payments:
- taxes and income taxes, other than consumption and personal income taxes;
- fees, including regulatory fees, fees for rental or entry, or any other consideration for licences, permits or concessions;
- production entitlements;
- dividends, other than those paid as an ordinary shareholder of an Entity;
- bonuses, including signing, discovery of a deposit and production bonuses; and
- contributions for the construction or improvement of an infrastructure.
An Entity must make an annual statement public in the manner determined by the government of Quebec for a period of fi ve years from the date of its transmittal. The Entity must also keep records of all payments made in a fiscal year for a seven-year period following the applicable transmittal date.
A payment made on behalf of an Entity is deemed to have been made by such Entity. A payment made by a legal person, corporation or other organization that is not an Entity, but that is controlled by an Entity, is deemed to be made by such controlling Entity. Moreover, a payment due to a payee and received on the payee's behalf by another body that is not a payee is deemed made to the payee to whom the payment is due, such as is a payment made to an employee or a public office holder of a payee.
The Act also states that the following people and bodies count as payees:
- a government;
- a body established by two or more governments;
- a municipality or the Kativik Regional Government;
- an Aboriginal nation represented by all the band councils, or councils in the case of northern villages, of the communities forming the Aboriginal nation, the Makivik Corporation, the Cree Nation Government, a Native community represented by its band council, a group of communities so represented or, in the absence of such councils, any other Native group (any of the preceding and the Kativik Regional Government (Aboriginal payee); and
- any board, commission, trust or corporation or other body that exercises, or is established to exercise, public powers or duties of government for a payee described above.
There are mechanisms to avoid duplication of the disclosure requirements. The Act provides that a wholly-owned subsidiary Entity of another Entity will be deemed to have filed its annual statement if the parent Entity has transmitted its annual statement to the AMF and provided that certain other prescribed conditions have been met. Further, if another competent authority is determined by the government of Quebec to be an acceptable substitute because it achieves the same purposes as the Act, a statement produced in compliance with such other authority's requirements may be substituted for an annual statement, provided certain prescribed conditions are met. While the Act duplicates, to a large extent, the requirements of ESTMA, to our knowledge, no such determination has been made yet. In addition to ESTMA, the European Union adopted in 2013 its Transparency Directive Amending Directive, which has to be implemented by each of the EU members, and s. 1504 of the United States Dodd-Frank Act, which is not in force, provides for the implementation of a similar regime. It remains to be seen to what extent an Entity will be exempt from the requirements of the Act based on these similar regimes.
The Minister responsible for the application of the Act, which will be determined by the government of Quebec, is allowed to enter into an agreement with a government of another competent authority or with one of its bodies, for purposes of implementing the Act or concerning the requirements pertaining to the statements required by such other government or body. Such an agreement must contain, among other things, provisions for the sharing of information needed for purposes of said requirements between the Minister or the AMF and such other government or body.
In addition to the powers to investigate already granted to the AMF pursuant to its implementing statute, the AMF now has the power to compel an Entity to provide it with any document or information it considers useful for purposes of the application of the Act. This includes a list of the mining, oil or gas exploration or development projects in which the Entity has an interest and the nature of that interest, an explanation of how a payment was calculated for the purpose of preparing any annual statement, and a statement of any policies implemented by the Entity concerning its obligations under the Act. The AMF may also require that an annual statement or the records of payments made during the fiscal year to which such statement relates be audited by an outside independent auditor.
For enforcement, the Act establishes an administrative monetary penalty regime similar to those already in place under various statutes, such as the Environmental Violations Administrative Monetary Penalties Act (federal), the Environmental Quality Act (Québec) and the Income Tax Act (federal). The Minister has the authority to designate who the administrative monetary penalties will be imposed on when an Entity fails to comply with the Act.
The Act also gives authority to the government of Quebec to create regulations that can exclude a certain Entity, payee or payment from the application of the Act, as well as to determine applicable exchange rate (to Canadian currency) and regulate what contraventions constitute an offence.
While the Act received assent on October 21, 2015, an Entity is not required to file an annual statement for the fiscal year ending in 2015. Further, an Entity is not required to report with respect to payments made to an Aboriginal payee before June 1, 2017.
Key Changes to Mining Act
On May 6 and December 31, 2015, the government of Quebec brought into force significant changes to the Québec Mining Act.
As of May 6, 2015, s. 71.1 of the Mining Act requires holders of mining claims in Québec to submit to the Minister of Energy and Natural Resources, on each anniversary date of the registration of a claim, a report on the work performed in the previous year. This obligation is in addition to the existing obligation to renew the claim.
Also on this date amendments to s. 75 of the Mining Act came into force. These amendments modify the rules regarding the minimum cost of work to be performed on lands that are subject to a claim in Québec. In the past, any amount spent in excess of the prescribed requirements for the term of the claim could carry over and be applied to subsequent terms. Now, any excess can only be carried over for six subsequent terms. This modification limits the ability of claim holders to conduct significant work in a short period of time and then sit on their claim rights for decades without conducting additional exploration work.
Other changes came into force on December 31, 2015 following the publication on December 16, 2015 of the Regulation to amend the Regulation respecting mineral substances other than petroleum, natural gas and brine (Amending Regulation). The Amending Regulation triggered the coming into force of certain provisions of An Act to amend the Mining Act (Amending Act), which was enacted several years ago. These provisions, which came into force pursuant to s. 127 of the Amending Act, relate, in particular, to:
- the notice that the claim holder must now send to the owner, the lessee, the holder of the exclusive lease to mine surface mineral substances and the local municipality of the claim, within 60 days after registering the claim;
- the declaration that a claim holder is now required to make to the Minister of Energy and to the Minister of Sustainable Development, Environment and Parks, of any discovery of mineral substances containing 0.1% or more of triuranium octaoxide within 90 days after the discovery;
- the public consultation that the proponent of a metal mine project that has a production capacity of less than 2,000 metric tons per day must conduct before submitting the application for a mining lease with respect to such a project; and
- committees to foster the involvement of the local community in the mining project that any lessee of a mining lease must establish.
Finally, we note that the government of Quebec, pursuant to one of the provisions of the Mining Act, which came into force on December 10, 2013, must draw up, make public and keep up to date an Aboriginal community consultation policy specific to the mining sector. Although the policy in its final form has yet to be made public, the Ministry of Energy and Natural Resources has published a draft version and held a workshop in November 2015. The ministry is now seeking input on the draft, and it intends to consult all Aboriginal communities.
1. Editors Note: For more on the ESTMA, see the article entitled "Payment Disclosure Now in Force: What Extractives Need to Know" on page 20.
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