Quebec government relaunches Plan Nord

VANCOUVER — The newly elected Liberal government in Quebec is returning to the resource roots of the last Liberal government with a budget that restores Plan Nord, the strategy to encourage mineral and energy development in the province’s north that had been cancelled under former premier Pauline Marois.

Marois’ 2012 win took the provincial reins away from the Liberals, who had unveiled Plan Nord in 2011 under then-leader Jean Charest. The original plan envisaged $80-billion worth of government and company investment in northern Quebec resource development by 2036, including $33 billion towards mining and infrastructure.

When Marois scuttled the plan, a raft of new roads, rail lines and power projects that resource developers need to develop large resource projects were left in limbo. Now these ideas are back on the drawing board, after Quebec voters overwhelmingly returned the Liberals to power under new leader Philippe Couillard, who made a slightly revised version of Plan Nord a central part of his party’s election platform.

“We intend to take full advantage of our natural resource endowment,” Quebec Finance Minister Carlos Leitao said in announcing the government’s first budget. “Many other jurisdictions in North America and elsewhere in the world would love to have the kind of natural resources we have.”

As a first step in restarting Plan Nord, the Liberals have committed up to $20 million for a feasibility study on a new rail connection between the port town of Sept-Îles and the iron ore deposits of the Labrador Trough region. The new study will estimate costs and determine whether it would be better to increase capacity on current lines or build a new one.

Canadian National Railway (TSX: CNR) had been working with several mining companies and with the Caisse de Dépôt pension fund on a plan for a rail line and terminal facility, a project with an estimated $5-billion price tag. However, the company suspended planning work last year after low iron ore prices and a lack of infrastructure prompted several project delays.

Iron ore developer Champion Iron Mines (TSX: CHM; US-OTC: CPMNF) welcomed news of the renewed rail feasibility study and Plan Nord’s restart.

“At a time of uncertainty in investment markets regarding the outlook for iron ore, this decision will be seen as a defining point in the history of the mining industry in Quebec,” Champion chairman Michael O’Keeffe said in a statement. “The government should be congratulated on its commitment to promote an initiative conducive to increased employment and new investment. This multi-user rail initiative . . . provides the company with a potentially clearer path towards the eventual delivery of product to the port of Sept-Îles in a competitive and cost-effective manner.”

In its budget the Quebec government also established a new $1-billion natural resources fund called Capital Mines Hydrocarbures that will seek to acquire equity stakes in mining and oil and gas companies so “Quebec society can obtain, as a shareholder, a direct share in the profits,” Leitao said. Legislation governing creation of the fund will be introduced later this year.

Asked why it made sense to invest in resource development during a global commodities slump, Leitao said the province has to be ready when prices rebound.

“The world still needs aluminum, iron ore, and other natural resources,” he said. “It’s totally appropriate to restart the plan.”

The plan is being restarted, but with two important changes. The first is a system for sharing resource revenues with regions. The second is a $1-billion investment in Quebec contractors, to ensure they are up to the construction tasks miners will ask of them. In the budget press conference Couillard said that in doing so, they are aiming to “build a complete mining industry.”

Plan Nord encompasses 72% of Quebec, an area twice the size of France. The area produces all of Quebec’s nickel, zinc and iron ore and a big part of the province’s gold, though it is home to only 2% of the province’s population.

In other Quebec news, the Liberals endorsed a plan to require resource companies to publish payments made to governments. The move is part of a national effort to increase transparency and reduce corruption in the resource sector.

Leitao said the government would work with the Quebec securities commission to structure legislation requiring Quebec-based companies to publish payments on a project-by-project basis, for operations both domestic and international.

The Quebec announcement should give fresh momentum to a promise Stephen Harper made last year to adopt such rules across the country. The challenge is that such matters are regulated provincially. Moreover, some provincial securities commissions — including Quebec’s — are already at odds with Ottawa over the federal government’s goal of building a national securities regulator.

Nevertheless, Natural Resources Canada said it would introduce Publish What You Pay legislation late this year if provincial securities agencies did not move on the issue.

The idea is that large mining companies report all payments above $100,000. For junior companies, the reporting threshold would be just $10,000.

The rules would also apply to oil and gas companies, which are already required to reveal such information in the U.S. and Europe. Since Canadian companies explore for, develop, and mine resources worldwide — some 60% of mining companies are listed on Canadian exchanges, and they operate in more than 100 countries — a Canadian requirement to publish similar payment information would bolster understanding of how much money various governments earn from extractive investments.

This knowledge would help citizens in mineral-rich countries hold their governments to account for resource revenues.

Two of Canada’s two largest mining associations — the Mining Association of Canada (MAC) and the Prospectors & Developers Association of Canada (PDAC) — support the concept. They have joined with two non-governmental organizations — Publish What You Pay Canada and Revenue Watch Institute — to lobby for payment transparency legislation.

MAC and the PDAC say the hiccup was to include First Nations agreements in the initial law. In a letter to Natural Resources Canada in May, MAC president Pierre Gratton and PDAC executive director Ross Gallagher urged a “phased approach” to implementing the transparency laws. In particular they suggest excluding all First Nations until both sides have had time to consult, as a hasty approach could damage relations and call for renegotiating hundreds of benefit agreements with First Nations across the country.