Québec Premier Jean Charest announced the launch of The Plan Nord in May 2011. The Plan provides for the development of territory of Québec located north of the 49th parallel over the next 25-years. It is an ambitious project that will push back Québec's natural frontiers, opening up a vast territory rich in natural resources to discover and develop.
The Government of Quebec is firmly committed to the implementation of the Plan. It has taken numerous steps within weeks of announcing the Plan, including introducing legislation providing for its implementation, entering into governance agreements with certain Aboriginal communities and announcing access infrastructure contracts. In addition, amendments to the Mining Act have been introduced and are currently undergoing a public consultation process.
Furthermore, over the summer, Premier Charest actively promoted the Plan in the United States, the United Kingdom, Belgium, Germany, China and Japan.
The Plan Nord will be deployed over an immense land mass covering 72% of the territory of the Quebec which is equivalent to almost 1.2 million km² – an area twice the size of France. The Plan does not include the Towns of Rouyn, Val-d'Or or Chibougamau; however it does include the Towns of Sept-Îles, Port-Cartier and Baie-Comeau. A map of the territory is attached.
The territory covered by the Plan is comprised of 3 regions that are distinguished by their geological features and inhabitants:
- The James Bay Region (Eeyou Istchee) to the east where Cree communities are concentrated and gold, diamond, uranium, zinc and copper deposits are found;
- Nunavik to the north where Inuit communities are located and nickel and copper deposits are found; and
- The North Shore and the Labrador Trough, where the Naskapi Nation and Innu communities are located and iron, copper, zinc and nickel deposits are found.
The Plan is an ambitious project for the development of the North and will hinge on creating partnerships with local communities and sustainable development. The Plan calls for a development project that is integrated socially, economically and environmentally that will be implemented over a long period of time. Its title "Building Northern Quebec Together – The Project of a Generation" accurately reflects the Government's will to implement the project.
One of the strengths of the plan is its breadth of its social acceptance. Before announcing the Plan the government engaged in a consultation process that allowed broad consensus to be achieved among the various stakeholders. The ability of projects to succeed under the Plan will depend on the strength of the consensus reached at the time the Plan was designed and the ability for that consensus to be maintained over time.
The mining industry which will be the driving force behind the Plan's implementation must properly appreciate the Plan's underlying guidelines and principles. Therefore, it is important to understand: (i) the social context and the measures that have been provided for partnering with local communities; (ii) the measures to develop economic potential, especially in the mining sector; (iii) the infrastructure that the government intends to build within the territory; (iv) the financial framework and in particular the Fonds du Plan Nord; (v) the environmental approach based on sustainable development; and (vi) the responsibilities of the proposed Société du Plan Nord.
Social Context and Partnerships with Northern Communities
One of the underlying principles of the Plan Nord is to ensure that local and regional communities are the main beneficiaries of wealth that is generated from the development of the territory. Contrary to other jurisdictions there is no black box.
The Québec territory that lies north of the 49th parallel is sparsely populated: 124,550 people inhabit a territory of close to 1.2 million km². That said, the Aboriginal population in the area is growing; nearly 45% of the population is under 25 years of age. The government intends to adapt its programs to reflect the demographic reality of the north by prioritizing access to education, employee training, housing, as well as social, cultural and health services. To do so, the government intends to maintain strong relationships with the First Nations and Inuit that are founded on mutual respect and partnership. The Plan's first five-year plan (2011-2016) has over $382 million earmarked for social housing and other social projects in the territory.
From the time of its inception, the First Nations of Northern Québec and the Inuit have been considered important stakeholders in Plan Nord. They participated in discussion tables so that their views and concerns relating to economic and social development and consideration of their culture and traditions where taken into account in the development of the Plan.
It is important to note that a large portion of the Plan Nord territory is governed by treaties and modern agreements between the Government of Québec and Aboriginal communities that have been concluded over the last 30 years. Additional agreements respecting governance were reached in 2011, and others are being discussed.
Contrary to other Canadian jurisdictions, a contractual framework has been established between Québec and its Aboriginal communities that is adapted to 21st century realities. The Aboriginal communities' support for Plan Nord is based on compliance with those agreements. Mining companies that seek to develop projects in Northern Québec must forge relationships early on in the process and reach agreements with the Aboriginal communities. For example, the agreements entered into between Xstrata Nickel and the Inuit in 1998, between New Millenium and the Naskapi Nation in 2010, and the recent long-term collaboration agreement reached in late 2010 between Goldcorp and the Cree Nation are precedents that bode well for the future.
Measures for Developing Economic Potential
Plan Nord establishes measures for developing the economic potential of the territory, with a particular emphasis on the forestry, wildlife, tourism and bio-food sectors.
Northern fruits such as wineberries and cloudberries are all fine and well, but their potential to create wealth is negligible compared to that of the mining sector. It is expected that mineral development will be the core economic activity in the territory.
Measures to develop the economic potential of this vast territory will be set out in five-year plans and financed in large part by the Fonds du Plan Nord that is described below.
The mining industry – driving economic development
Since 2000, mineral exploration expenses in Québec rose an average of 65% annually, peaking at $441 million 2008. The Plan Nord territory has seen unprecedented mineral exploration work: in 2008, more than 50% of mineral exploration expenses in Québec were spent in the Plan territory, and over 78% of mining claims were granted in Northern Québec. In 2009, 50% of all investment in mineral exploration and mining, ($958 million) was made in the Plan territory.
This exploration work resulted in what observers have qualified as a new mining camp in the James Bay (Eeyou Istchee) Region, and the discovery of major iron deposits in Nunavik and the Labrador Trough.
The Plan Nord document identifies 11 mine development projects throughout the Plan Nord territory totalling more than $8.4 billion in investment and generating upwards of 11,000 jobs during the construction phase, followed by 4,000 permanent jobs during the operational phase. The following is a list of major projects in the territory that have been announced:
In the James Bay James (Eeyou Istchee) Region:
- Goldcorp Inc.'s Eleonore Project: a gold mine development requiring an investment of over $1.4 billion was announced last February and should create 1,000 jobs during the construction phase and 600 permanent jobs over the 25 years of the anticipated life of the mine. The project is located about 350 km north of Matagami, and 100 km east of Wemindji.
- Stornoway Diamond's Renard Project is slated to become Québec's first diamond mine. Its completion will require an investment of $450 million and will create 300 permanent jobs.
- Strateco's Matoush Project, a uranium mine that is in the advanced exploration stage.
On the North Shore and in the Labrador Trough:
- On May 20, ArcelorMittal announced that it would be investing $2.1 billion to expand its mining complex in Mont-Wright and its Port Cartier plant, thereby increasing its iron ore production from 19 to 24 million tonnes by 2013. This investment will generate 8,000 jobs during the construction phase and 800 jobs during the operational phase.
- On March 6, New Millenium and Tata Steel announced that they have reached a framework agreement to develop the LabMag (located in Newfoundland and Labrador) and KeMag iron minerals deposits. Completion of the KéMag project will require an investment of $4 billion and will create 750 permanent jobs.
- Yara, a Norwegian company, and Investissement Québec are investigating the development an apatite deposit in Sept-Îles.
- Xstrata Nickel has announced that it will be expanding its Raglan Mine by investing $530 million to develop an additional deposit and modernizing the related infrastructure in order to increase its nickel concentrate production from 26,000 to 32,000 tonnes per year by 2014.
- On August 30, Jilin Jien Nickel Industry announced an additional investment of $400 million to develop a nickel deposit located near the Inuit community of Kangiqsujuaq. The total investment will be increased to $800 million and will result in 270 permanent jobs when production starts in 2012.
- Adriana Resources, in partnership with China's WISCO, is contemplating an investment of over $10 billion to operate the Lac Otelnuk project in Nunavik, between Shefferville and Kuujjuaq. The project will require more than $10 billion in investment, and the construction and infrastructure needed to extract and ship the minerals (including an 815 km railroad connecting the site to the Sept-Îles port). This will be the largest mining project in Canadian history.
Paving the way for development over a vast territory poses considerable challenges in terms of transportation and telecommunications infrastructure. With respect to transportation infrastructure, the Plan Nord proposes an approach put forward in the 2009 in the Québec Mineral Strategy.
It proposes an integrated development approach for infrastructure and will entrust the Société du Plan Nord with coordinating public investments in the territory based on the following principles: (i) priority will be given to development projects that are defining; and (ii) the contribution of private partners to the financing of public infrastructure that is built initially for its benefit. A formula for equitable cost sharing between private partners, users and the government will be established for major projects. This approach will allow the infrastructure network to be built as the territory develops. In addition, it will result in a smaller environmental footprint and meet the government's financial framework.
However, until such time as the projects are completed and the partnership agreements are signed, the government intends to consolidate its existing infrastructure network. The Plan's first five-year plan provides for infrastructure investment of $1.193 billion between 2011 and 2016. The following is a list of major public road infrastructure projects in the territory that have been announced:
In the James Bay (Eeyou Istchee) Region: $279 million will be used to extend Route 167 to Mont Otish, which will facilitate the completion of the Stornoway, Strateco, Abitex, Western Troy and Eastmain Resources projects.
On the North Shore near the Labrador Trough: the government intends to repair Route 389 between Baie-Comeau and Fermont to facilitate the development of resources in the region of Fermont, Lac Bloom, Mont Wright and Fire Lake ($201.5 million over 5 years for a project that will ultimately total $415.5 million) and the extension of Route 138 from Natashquan to Blanc Sablon ($251 million).
In Nunavik: $57 million will be devoted to studies on creating a land link, most likely a railway, connecting Kuujjuaq and Shefferville. In addition to opening up Nunavik, an additional objective is to create a north-south access route to the Labrador Trough that would facilitate exploration and development of the territory's mining potential as well as the hydroelectric development of the Caniapiscau River (1,600 MW).
In addition, $112 million will be directed to repairing infrastructure at airports currently serving the area.
Finally, as further evidence of the government's long-term view, Québec will allocate $33 million over the next five years to conduct feasibility studies for a deep water port in Whapmagoostui-Kuujjuarapik combined with a land link to Radisson to facilitate a Northwest Passage to international maritime traffic.
Under Plan Nord, the Government of Québec has committed to developing 3,500 MW of additional energy at an estimated cost of $25 billion to meet the needs of northern communities and industrial projects. Mining companies that are active in the territory and whose projects will be connected to the Hydro-Québec power grid have reached or are negotiating connection agreements. For other mining projects, as part of its mandate Hydro-Québec will develop and operate hydroelectric projects that are not connected to its grid to respond to the energy needs of specific industrial projects. There is no indication as to how these projects will be financed.
The Financial Framework
The financial framework of Plan Nord was announced in the 2011 budget speech and some additional elements are set out in the Plan Nord and in legislation currently before the National Assembly.
Above and beyond the investments allocated to infrastructure under the Plan Nord's first five-year plan (2011-2016), two budgetary measures are of interest to the mining industry and are worth mentioning: the establishment of the Fonds du Plan Nord and Investissement Québec's equity participation in mining projects over the next five years.
Creation of the Fonds du Plan Nord
Completion of Plan Nord over a 25-year period will require continued government support to develop infrastructure and funding that is permanent, predictable and reliable both for the government and stakeholders.
Borrowing a concept put forward by the mining sector, the recent budget announced the creation of the Fonds du Plan Nord (the "Fund") a fund dedicated exclusively to the implementation of Plan Nord.
The purpose of Fund is to allow the government to act as economic activities develop within the territory by ensuring that funds will be available to finance opportunities as they arise.
The Fund will be funded by a portion of the tax revenues generated from economic activities carried out in Northern Québec. These tax revenues will result from new mining projects, new Hydro-Québec projects and public infrastructure projects.
Contributions that will be required from private and public partners to fund infrastructure built for their own use will also serve as a source of revenue for the Fund.
Details as to how the Fund will operate are set out in Bill 10. Fundamentally, the government will set aside a portion of the revenues it receives from the development of natural resources up to an annual maximum of $75 million generated from income taxes, $75 million from corporate taxes and $20 million from public utility taxes in the Fund. Hydro-Québec will also contribute $10 million annually.
In its 2011 budget, the government indicated that it plans to transfer more than $2.1 billion in tax revenues over the next 25 years to the Fund. Of that amount, $683 million will be directed towards financing the infrastructure of the Plan Nord's first five-year plan (2011-2016).
Bill 10 also sets out stringent requirements for the Fund: amounts debited from the Fund so as to contribute to strategic infrastructure or services must be approved by way of an Order-in-Council adopted on the joint recommendation of the Minister who proposes the infrastructure or services and the Minister of Finance, after consulting with the Minister of Natural Resources and Wildlife. To ensure the transparent management of the Fund, the Order-in-Council must be tabled before the Québec National Assembly.
The implementation of the projects financed by the Fund will be carried out by the new agency created to coordinate public investments in strategic infrastructure and telecommunications discussed below – the Société du Plan Nord.
Investissement Québec earmarks $500 million for equity participations
Québec's Minister of Finance announced that $500 million would be made available to Investissement Québec to be used for equity participation in high-benefit projects leading to the development of the Plan Nord territory.
The program is flexible as to the nature of this equity participation, which can take on the form of joint ventures, capital stock, convertible debentures and other types of interests. The exact form will be determined based on the risks involved, the anticipated return, and the parties' desired degree of involvement.
Investissement Québec's flexibility will be subject to oversight and government approval of equity interests exceeding 30% of a project's cost, business takeovers, or an equity interest of exceeding $50 million.
Sustainable development and environmental protection are at the core of the Plan Nord: the territory is particularly sensitive, and the north's ecosystems are complex due to the vastness of the territory and the dynamics of the changing climate. As a result, environmental protection is a guiding principle of decisions made at each analytical phase and project milestone.
Certificates of Authorization
Mining projects will be carried out in compliance with Québec's environmental legislation and regulations after rigorous social and environmental assessment conducted by agencies created under the JBNQA or, further south, by the Bureau d'audience publique sur l'environnement ("BAPE").
A complex, multi-step process that will vary from project to project must be completed before obtaining the Certificates of Authorization needed to carry out mining projects.
In the James Bay (Eeyou Istchee) region, projects will be subject to a two-step process: COMEV, a tri-partite body (Cree, Québec and Canada), will first determine whether the scope of the environmental and social assessment procedure and COMEX, a body consisting of representatives of the Cree and the Government of Québec, will proceed with the examination process.
In Nunavik, the evaluation and assessment of projects proceeds through an impact assessment process carried out by the Kativik Environmental Quality Commission.
On the North Shore and on lands not covered by agreements, projects are examined under the general environmental protection regime of the BAPE.
Projects may also be subject to the environmental assessment process of the federal government.
One of the Plan Nord's objectives is to prohibit all industrial projects on 50% of the territory and to create a network of protected areas covering at least 12% of the Plan Nord territory by 2015. To achieve this goal, the government has initiated public consultations that will be end on October 12, 2011. Individuals and groups are welcome to participate on-line, submit a brief or attend the public sessions that will be held in the three regions of Plan Nord territory, as well as in Montréal and Québec City.
Société du Plan Nord
Completing such a complex and ambitious project on a vast territory will require a high degree of coordination. As a result, the Société du Plan Nord is to be created, whose incorporating statute is currently being examined by the National Assembly. The intended purpose of the Société du Plan Nord is to contribute to the integrated and coherent development of the area in keeping with the 5-year plans prepared by the government. To that end, the Société will be required to establish a strategic plan that will, along with its annual capital and operational plan, be subject to government approval. Once all these authorizations have been obtained, the Société may use the funds granted to it to contribute financially or otherwise to the projects mentioned in its strategic plan and engage in infrastructure development and operation.
Other than the approvals mentioned above, the Société will be largely autonomous since a majority of its 15 directors will be independent of the government and its President and Chief Executive Officer will be appointed on recommendation of the Board of Directors.
It will be interesting to follow the Bill's progress when the National Assembly reconvenes on September 20.
The Plan Nord is a societal project that will shape Québec for generations to come; its many challenges are ambitious and visionary, certainly a worthy test of Quebeckers spirit and determination. The Plan Nord will be a source of pride as great as the James Bay hydroelectric project was in the 1970s.
Quebeckers have been waiting impatiently for the Plan Nord. The speed with which it was put into motion – the successive announcement of projects, the promotion of the plan abroad, agreements with Aboriginals, the introduction of legislation required to implement the Plan and the conclusion of a road construction partnership agreement – all within a short three-month period confirms that the government is serious about this initiative.
The mining sector will undoubtedly be the driving force behind Plan Nord. As such, it is expected that the Plan will develop as opportunities arise in this industry.
That said, we note the following:
- The success of the Plan and the development of the mining projects on the territory will depend on whether permits can be issued within reasonable and foreseeable timeframes. At the moment, the Ministry of Sustainable Development, Environment and Parks lacks the resources to diligently examine the projects that have been submitted for review. One solution may be imposing a service fee for analyzing and examining major projects in the Plan Nord territory.
- Plan Nord does not discuss the cost of connecting to Hydro-Québec's main grid and the funding of power plants dedicated to certain projects. Because of the vast distances, the cost of connecting will be greater for some projects than the cost of road access, a fact that could, in some cases, compromise certain projects. Clearly, Hydro-Québec's tariff model is not adapted to Northern Québec's vast stretches of land. Since Hydro-Québec has neither the mission nor the mandate to provide electricity at a discount, government stakeholders should try to find a formula that will help mining projects fund their connection to Hydro-Québec's main grid by bringing osts to more acceptable levels.
- Finally, Bill No. 14 amending the Mining Act is the source of some concern in the mining industry. The recommendations presented by the Québec Federation of Chambers of Commerce in its brief tabled before the parliamentary committee should be considered. A copy of that brief is available at www.fccq.ca.