Government of Québec 2014-15 Budget – Plan Nord is Relaunched
by Viorelia Guzun and Charles Kazaz, Blake, Cassels & Graydon LLP
On June 4, 2014, the newly elected Quebec Liberal government (Government) presented its 2014-15 budget (Budget) in which it followed through on its campaign promise and breathed new life into the Plan Nord.
When it was introduced in 2011, Plan Nord was a long-term program for the economic and social development of Quebec’s territory situated north of the 49th parallel and north of the St. Lawrence River and the Gulf of St. Lawrence, which represents nearly 72 per cent of Quebec’s territory. Plan Nord provided for more than C$80 billion in public and private investments over a period of 25 years. After the election of the Parti Québécois minority government in September 2012, the implementation of the Plan Nord was halted and then revised. It has now been relaunched and put forward as one of the measures that will stimulate economic growth.
The redeployment of the Plan Nord will be overseen by the Comité ministériel du Plan Nord, a newly created committee that is tasked with overseeing its economic, social and environmental aspects. The committee will receive support from the Secrétariat au Plan Nord, whose functions will at some time in the future be taken over by the Société du Plan Nord, a new government corporation to be created for purposes of implementing the Plan Nord.
The Budget proposes several measures aimed at reviving the Plan Nord, including:
- The creation of the Société du Plan Nord. This new government corporation, operating under the purview of the Minister of Energy and Natural Resources and the minister responsible for the Plan Nord, will be tasked with coordinating the Government’s strategy for the responsible and sustainable development of natural resources in northern Quebec, including the development of a strategic plan to implement the Government’s commitments and capital spending for the implementation of Plan Nord. It is expected that a bill creating the Société du Plan Nord will be tabled in the coming months.
- Northern Plan Fund. The Société du Plan Nord will receive funding to support development initiatives for the territory covered by the Plan Nord primarily through the Northern Plan Fund. The fund will be financed principally by a portion of tax spinoffs generated from economic activity on the territory covered by the Plan Nord, in particular from mining, energy and public infrastructure projects. The Government will contribute C$63 million to the fund for the 2014-15 fiscal year and plans to contribute approximately C$2 billion between 2014 and 2035.
- Creation of Capital Mines Hydrocarbures and equity participation in projects. The Government intends to create Capital Mines Hydrocarbures (CMH), a fund that will acquire, on its behalf, equity interests in companies that extract mineral substances in Quebec. The CMH fund will be managed by Ressources Quebec, a subsidiary of Investissement Québec. The CMH will be allocated C$1 billion, of which C$500 million will be allocated to projects on the Plan Nord territory and C$500 million for projects throughout Quebec. The C$1 billion allocation to CMH will be in addition to the C$250 million allocated to Ressources Quebec in the 2012-13 budget, which will bring the total CMH funding for equity participation in Quebec projects to C$1.25 billion. This additional source of funding may be well needed to assist mining companies seeking to secure project financing.
- Study on the development of a rail line to the Labrador Trough. The Government intends to evaluate the need and options for a multi-user rail line from Sept-Iles to the Labrador Trough. The link is intended to open up the iron-ore-rich region and provide the transportation infrastructure necessary to develop several iron ore projects in the area. The Government will contribute up to C$20 million to the study and will be seeking private partners to participate in the cost of the study. The Secrétariat du Plan Nord will soon seek expressions of interest. We note that a feasibility study for such a rail link was initiated in August 2012 by certain private-sector proponents including five mining companies, but then suspended in March 2013 due to market conditions.
- Natural gas supply for northern Quebec and Côte-Nord regions. The Government is seeking to ensure the supply and distribution of natural gas to northern Quebec and the Côte-Nord region (the north shore of the St. Lawrence River) as of 2016. An inter-ministerial committee will be established and tasked with the review and selection of the projects. Several options are available, including transportation of liquefied natural gas (LNG) by sea or land. To ensure quick implementation of the LNG projects, the Government will ensure that the Bureau d’audiences publiques sur l’environnement (BAPE) has the necessary means to conduct a fast-track review process, instead of the full-blown environmental impact assessment and review process.
- C$100 million educational infrastructure upgrades and training programs for residents of the north. This investment will consist of C$90 million apportioned for development projects within the Cree School Board and the Kativik School Board and C$10 million for the training of skilled workers. These investments are in addition to the C$19.4 million already allocated in the financial framework of the Plan Nord for vocational training for First Nations.
- Revival of Québec Tourism Strategy North of the 49th Parallel. This strategy was first announced in 2011. The Government plans to develop northern Quebec as a word-class northern destination, and for such purposes will allocate C$3.2 million in 2014-15 to implement the strategy.
MINING TAX REGIME
The Government has confirmed that the mining tax regime that came into force on January 1, 2014 will continue to apply, with three changes intended to foster mining projects and ore processing in Quebec:
- The processing allowance will include in its calculation the costs of the assets used in the hydrometallurgy purification process
- There will be an adjustment in the procedure for the grading of precious stones; namely, in order to reduce the costs associated with the grading process, the Government intends to show some flexibility on the location of the grading, whereas previously they had to be graded on the mine site. The grading is carried out by agents named by the Government and mining companies are required reimburse the Government of its costs. The Government will now allow precious stones to be graded outside of the mine site, provided that the off-mine site grading is authorized by the Minister of Energy and Natural Resources
- As of April 1, 2015, mining tax audits will no longer be carried out by the Ministry of Energy and Natural Resources; those responsibilities will be transferred to Revenu Québec to achieve efficiency.
As part of the Budget, an announcement was also made that the Québec Taxation Review Board may make further recommendations to the Government to adjust the mining tax regime to encourage the development of the Quebec mining sector.
Quebec will also participate in the federal government’s initiative on new mandatory reporting standards for extractive companies. This initiative, which reflects a global effort towards higher transparency in the extractive industry, would require Canadian extractive companies to publish an annual report of payments of C$100,000 or more on a project basis that are made to all levels of government, including aboriginal band councils. To ensure an approach consistent with the initiative undertaken by other governments, it is intended that the reporting standards will be harmonized with those prescribed by American and European jurisdictions.
Although many of the details relating to the initiative to revive Plan Nord are not yet known, the 2014-15 Budget is an indication of Quebec’s commitment to making northern Quebec a key component of the province’s future economic development.
This article was first published in Blakes.com and is reprinted here with the kind permission of the authors. © Blakes