This bulletin will summarily review Bill 55, An Act respecting transparency measures in the mining, oil and gas industries ("Bill 55") introduced at Québec's National Assembly by the ministre délégué aux Mines (the "Minister for Mines"), justa few days before adjournment of the National Assembly's work to September 15, 2015. This bulletin also outlines a few other developments in connection with the Mining Act (Québec) (the "Mining Act").
Announced in the last budget of the Province of Québec (see our bulletin dated April 7, 2015, the “April 2015 Bulletin”), Bill 55 specifies that it aims to discourage and detect corruption and to foster social acceptability of natural resource exploration and development projects.
In order to attain this objective, Bill 55, which, to a certain extent, echoes the Canada Extractive Sector Transparency Measures Act (in force since June 1, 2015), proposes a disclosure regime applicable to any legal person, corporation or other organization (any such legal person, corporation or other organization that is covered by the following requirements, a "Subject Entity") (i) that engages in exploration for or development of mineral substances or of hydrocarbons or, if applicable, in other activities relating to mineral substances or hydrocarbon, or other requirements, determined by a regulation of the Government of Québec (the "Government") (ii) 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 (subject to what may be established by Government regulation) and (iii) that complies with one of the following:
- it is listed on a stock exchange in Canada and has its head office in Québec, or
- it has an establishment in Québec, exercises activities or has assets in Québec and, based on its consolidated financial statements, meets at least two of the following conditions for at least one of its two most recent fiscal years: it has at least $20 million in assets, it has generated at least $40 million in revenue, it employs an average of at least 250 persons.
Bill 55 proposes that the Government be granted the regulatory power to add to such requirements.
Thus, pursuant to Bill 55, a Subject Entity will have to send to Québec's Autorité des marchés financiers (the "Authority") an annual statement (each an "Annual Statement") at latest the 150th day following the end of each of its fiscal years. A Subject Entity must state therein all payments (monetary or in kind) that fall within certain categories described below in relation to exploration or development of mineral substances or hydrocarbons (the "Payments" and each a "Payment"), if the total value of Payments made to a single payee during the fiscal year covered by an Annual Statement is equal to or greater than $100,000.
The form of the Annual Statement will be prescribed by Government regulation, including the manner of presenting or breaking down the Payments (for instance, by project), as well as the procedure for sending such statements. Bill 55 also provides that each Annual Statement shall have to be accompanied by a certificate of a director or officer of the Subject Entity, or of an outside independent auditor, attesting to the truth and accuracy of the information in an Annual Statement and to its being complete.
The word "payee" in Bill 55 refers to: (i) a government and a municipality, (ii) a body created by at least two governments, (iii) the Kativik Regional Government, a Native nation represented by all the band councils, or the councils of the Northern villages, of the communities forming the Native 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, (iv) 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, and (v) any other payee designated as such by a regulation of the Government (those covered by items (i) to (v) above, the "Payees" and each a "Payee"; and the Payees covered by item (iii) above, those covered by item (ii) above, when established by at least two Native group covered by item (iii), and those covered by item (iv) above, when in reference to Payees covered by items (ii) et (iii), the "Native Payees" and each a "Native Payee").
The concerned categories of Payments are described in Bill 55 as being taxes and income taxes (other than consumption and personal income taxes), royalties, fees (including those for rental, for entry, of a regulatory nature and any other consideration for licences, permits or concessions), production entitlements, dividends (other than those paid as an ordinary shareholder of a Subject Entity), bonuses (including signing, discovery of a deposit and production bonuses) and contributions for the construction or improvement of an infrastructure, the Government having the regulatory power to establish other Payment categories.
According to Bill 55 a Payment made to an employee or a public office holder of a Payee and a Payment that is due to a Payee and received on the Payee's behalf by another body that is not a Payee shall be deemed made to the Payee to whom the Payment is due, while a Payment made on behalf of a Subject Entity will be deemed to have been made by such Subject Entity and a Payment made by a legal person, corporation or other organization that is not a Subject Entity, but that is controlled by a Subject Entity, is deemed to be made by such controlling entity.
For the value of a Payment made in kind, Bill 55 proposes that it correspond to the cost of the property or services provided or, if such cost cannot be determined, the fair market value of the property or services.
Bill 55 would further impose the following obligations on a Subject Entity: it must make an annual Statement public in the manner determined by the Government for a 5 year period from the date of its transmittal (a "Transmittal Date") and it must keep records of all Payments made in a fiscal year for a 7 year period following the applicable Transmittal Date.
Bill 55 proposes that a wholly-owned subsidiary Subject Entity of a another Subject Entity will be deemed to have filed its Annual Statement if the parent Subject Entity has transmitted its Annual Statement to the Authority and certain other prescribed conditions have been met.
Also pursuant to Bill 55, the Government may determine by regulation that the requirements of another competent authority are an acceptable substitute because they achieve the same purposes as those of Bill 55 and the conditions allowing for such a substitution, in which case a statement produced in compliance with such other authority's requirements may be substituted for an Annual Statement at the conditions set by Government regulation.
Furthermore, the minister who will be responsible for the application of Bill 55 (the "Minister") will be allowed to enter into an agreement with a government of another competent authority or with one of its bodies, for purposes of implementing Bill 55 or concerning the requirements pertaining to the statements required by such other government or body, such an agreement to contain, amongst others, provisions for the sharing between the Minister or the Authority and such other government or body, of information needed for purposes of said requirements.
Amendments to the Mining Act
Amongst the few amendments proposed by Bill 55 to provisions of other laws, the following amendment to Section 120 of the Mining Actconcerning the content of an annual report of a lessee under a mining lease or the holder of a mining concession to the Minister of Energy and Natural Resources (the "MENR") may be noted: the requirements on information to be provided in such an annual report for a given fiscal year (the quantity and value of ore extracted, the duties paid under the Mining Tax Act (Québec), all the contributions paid, as well as other information set by regulation), is made more specific in that such information will have to be given by mine. Also such a lessee or holder must transmit an annual report in the same delay as that indicated above for an Annual Statement and will be allowed to send such an annual report either to the MENR or to the Authority, in this last case, with its Annual Statement and the Authority then having to transmit, without delay, the annual report to the MENR.
In addition to the powers to investigate already granted to the Authority pursuant to the relevant provisions of the Act respecting the Autorité des marchés financiers (Québec), Bill 55 proposes that the Authority be granted the power to require of a Subject Entity any document or information it considers useful for purposes of the application of Bill 55, including a list of the mining, oil or gas exploration or development projects in which the Subject Entity has an interest and the nature of that interest, an explanation of how a Payment was calculated for the purpose of preparing the Annual Statement, and a statement of any policies implemented by the Subject Entity concerning its obligations under Bill 55.
The Authority may also require that an Annual Statement of a Subject Entity or the records of Payments made during the fiscal year to which such statement relates be audited by an outside independent auditor.
Monetary Administrative Penalties
Bill 55 proposes, in addition to its penal provisions, implementation of a monetary administrative penalties regime applicable to all Subject Entities, some of its features being similar to the already existing equivalent regime under the Environmental Quality Act (Québec).
Without going into all its details, under this iregime, failure by a Subject Entity to comply with Bill 55 or its regulations in the cases and under the conditions set out in them may lead to such monetary administrative penalties being imposed.
Such a penalty may be imposed on a Subject Entity in certain circumstances, and for amounts, set directly in Bill 55, namely (i) $250 in the case of a natural person and $1,000 in any other case, when a Subject Entity, in violation of Bill 55, refuses or neglects to provide information and certain documents, or to file them in the prescribed time, in cases where no other monetary administrative penalty is set for such a violation and (ii) $2,000 in the case of a natural person and $10,000 in any other case when the Subject Entity refuses or neglects to comply with an order imposed on the Subject Entity under Bill 55 or in any manner hinders or prevents the enforcement of such an order.
As well, Bill 55 proposes that the Government may, by regulation, establish the cases when a failure to comply may result in such a penalty, define the conditions for applying the penalties and also set forth the penalty amounts or the method of determining them. The amounts may vary according to the degree to which the standards have been infringed but without exceeding the penalty amounts described at item (ii) of the preceding paragraph, said in Bill 55 to be maximum amounts.
A failure to comply with a provision that can lead to a monetary administrative penalty being imposed shall constitute a separate failure for each day during which it occurs and continues.
The directors and officers of a Subject Entity in default of paying a monetary administrative penalty may be held solidarily liable with the Subject Entity for the Payment, unless they establish they exercised due care and diligence to prevent the failure.
The Minister will develop and make public a general framework for applying such monetary administrative penalties, Bill 55 detailing elements that must amongst others be specified therein.
Other Regulatory Powers
Bill 55, in addition to those already described, proposes to grant other regulatory powers to the Government, for example, to determine the cases in which Bill 55 provisions do not apply with respect to Subject Entities, Payees or Payments, the applicable exchange rate (to Canadian currency) and the provisions of a regulation whose contravention constitutes an offence.
Coming into Force of Bill 55
While Bill 55 contemplates it will come into force on the date of its assent, it also proposes that Subject Entities will not be required to report before June 1, 2017 with respect to any Payment made to a Native Payee and that they will not be required to file an Annual Statement for the fiscal year during which Bill 55 will come into force.
Update on the Mining Act
An Act to Amend the Mining Act (2013, chapter 32) (the “Amending Act”) was adopted on December 9, 2013 (see our December 19, 2013 bulletin, the “December 2013 Bulletin”, for an overview of the Amending Act and the amendments it made to the then applicable legislative provisions, principally, the Mining Act).
While most of the provisions of the Amending Act came into force as of the date of of its assent (December 10, 2013), its Section 127 provides for the subsequent coming into force of some of its provisions, in some cases, at a date to be determined by the Government and, in other cases, on the date of coming into force of the "first regulation" (the "First Regulation") that, after December 10, 2013, amends the Regulation respecting mineral substances other than petroleum, natural gas and brine (the "Regulation").
A draft of such First Regulation, entitled the Regulation amending the Regulation Respecting Mineral Substances other than Petroleum, Natural Gas and Brine (the "Draft First Regulation") was published in Part 2 of the Gazette officielle du Québec of May 6, 2015, page 1303.
We will go through those sections of the Amending Act which came into force by the Government's Order-in-Council number 358-2015 (the "Order-in-Council") and then those which will come into force on the same date as the coming into force of the First Regulation, all in summarizing some of the provisions proposed by the Draft First Regulation. We will then complete with a few comments on other developments in reference to some of the provisions of the Mining Act.
By the April 2015 Order-in-Council the following sections of the Amending Actcame into force on May 6, 2015:
- Section 35, which adds Section 71.1 to the Mining Act whereby the notice of staking or map designation of a mining claim must be filed with a plan of the work to be performed in the coming year and whereby a claim holder must, at each anniversary date of its registration, submit to the MENR a report on the work performed in relation to such claim during the last year;
- Section 38, which replaces Section 75 of the Mining Actsuch that this last section provides that the excess amounts on the minimum prescribed work expenses for a mining claim over its validity period (2 years) may be applied to its six subsequent renewals (two years each, therefore, with the period of validity, 14 years in all) - prior to the coming into force of this amendment, there was no such limit under the Mining Act.
Following the coming into force of the foregoing amendments, Section 108 of the Amending Act, which amends the Mining Actby inserting therein new Section 304.1.1, is the only provision amongst those whose coming into force is determined by the Government the coming in force of which has not yet been so determined.
Once in force, said Section 304.1.1 of the Mining Act will provide that any mineral substance forming part of the domain of the State and found in a parcel of land on which a claim may be obtained and that is included in a mining-incompatible territory (a territory in which viability of activities would be compromised by the impacts of mining), delimited in a land use and development plan in accordance with the Act respecting land use planning and development (Québec) is withdrawn from prospecting, mining exploration and mining operations from the time such territory is shown on the maps kept at the office of the registrar.
The Draft First Regulation
According to the Regulations Act (Québec) and the notice published with the Draft First Regulation, the Draft First Regulation cannot be enacted or submitted for approval prior to expiry of a 45 day delay from its publication. Furthermore, the ensuing First regulation must be published in the Gazette officielle du Québec, the general rule being such a regulation comes into force 15 days after such publication.
Since the 45 day delay referred to above has elapsed, publication of the First Regulation should follow. Although in principle this could occur within a relatively short term, timing is not known more precisely for now. As already mentioned, the coming into force of the First Regulation, amended or not, will mean several provisions of the Mining Act will also then immediately come into force.
The following paragraphs summarize those provisions of the Amending Act (see also the December 2013 Bulletin) which will come into force on same date as the coming into force of the First Regulation and some of the provisions of the Draft First Regulation.
Notices Given by a Claim Holder
The last two paragraphs of Section 65 of the Mining Act, added by Section 31 of the Amending Act, stipulate that a mining claim holder must notify any concerned local municipality, as well as any owner, lessee or holder of lands granted, transferred or leased by the State for purposes other than mining or any lessee of lands that are the subject of an exclusive lease to mine surface mineral substances, of the fact that a mining claim has been granted to such holder if such claim concerns a parcel of land within (in whole or in part) the limits of any lands described above. The delay to so notify is 60 days from registration of the claim and must be given in the manner determined by regulation. In addition, if a mining claim is in a local municipality's territory, its holder will have to notify the municipality and relevant landowners at least 30 days prior to commencing performance of any work on such claim.
Section 5 of the Draft First Regulation proposes to add section 8.1 to the Regulation whereby the mining claim holder's notice of the kind first described in the preceding paragraph must be given using the document that the MENR will make available for this purpose and the claim holder can choose either to transmit such notice to the persons entitled to receive the notice or to publish it in a daily or weekly newspaper distributed in the region where the claim is located, in this latter case, accompanied by a map locating the claim and permitting it to be properly situated.
Discovery of Mineral Substances Containing Triuranium Octaoxide
Section 81.1 of the Mining Act, added by Section 41 of the Amending Act, stipulates that a claim holder who discovers mineral substances containing 0.1% or more of triuranium octaoxide must declare such discovery to the MENR and to the Minister of Sustainable Development, the Environment and the Fight Against Climate Change ("MSDEFCC").
Public Consultation (Projects under 2,000 Metric Tons Per Day)
Section 101.0.1 of the Mining Act, added by Section 52 of the Amending Act, provides that proponents of any metal mine development project having a production capacity of less than 2,000 metric tons per day (excluding rare earth development projects) must, prior to applying for a mining lease and in the manner prescribed by regulation, hold a public consultation in the concerned region. The proponent must then send a report concerning such consultation to the MENR, who shall verify compliance of the consultation with the provisions of the Regulation and if not so in compliance, may impose any additional measure. The rehabilitation and restoration plan must be accessible to the public at least 30 days before the consultation begins.
Section 22 of the Draft First Regulation proposes to add Sections 39.1 to 39.3 to the Regulation in relation to this type of project whereby:
- an announcement of the public consultation by way of a notice, with minimum prescribed information (notably, place and website where the detailed documentation for the whole project may be consulted, the means and delays applicable to submitting comments, the moment and place of the public meeting, which must facilitate participation of the public, the possibility for all to submit written comments within 30 days following the date of the public meeting), the manner of giving the notice (publication in a newspaper distributed in the concerned region, with copy to MENR and the MSDEFCC, the concerned municipalities and to the Aboriginal communities consulted by the Government concerning such a project, as applicable) (Section 39.1);
- the procedure applying to the holding of a public meeting (presentation of the project, possibility for those wishing to speak to be heard, recording of everything that is said at such a meeting) (Section 39.2); and
- transmittal of a report to the MENR and the MSDEFCC within 31 to 90 days from the date the public meeting was held, with certain requirements for its content (indication of the requests submitted by the concerned population and Aboriginal communities and the proponent's proposals concerning such requests, accompanied by a copy of all comments received by the proponent during the consultation). The report must be made available on a website within 15 days of its transmittal to the MENR and the MSDEFCC (Section 39.3).
We remind you that by certain provisions (in force since December 10, 2013) of the Amending Act, all mining development projects having a production capacity of 2,000 metric tons or more per day and rare earths development projects are subject to the environmental impact assessment and review regime under the Environmental Quality Act (Québec) (see the December 2013 Bulletin)
Setting Up of a Monitoring Committee by a Lessee under a Mining Lease
Section 101.0.3 of the Mining Act, added by Section 52 of the Amending Act, specifies that a lessee must, within 30 days from issuance of a mining lease, establish a monitoring committee to foster the involvement of the local community in the manner provided for in such provision.
Section 24 of the Draft First Regulation proposes to add Sections 42.1 to 42.4 to the Regulation whereby certain rules applicable to such monitoring committees are set forth, including circumstances in which a member of such a committee is deemed not to be independent and the following obligations are imposed on the lessee:
- to hold, during the ?rst 2 years of the mining lease, monitoring committee meetings every 3 months and thereafter, every 6 months for the remainder of the term of the lease and of its renewals;
- to assume the expenses related to the operation of the committee and the costs related to its meetings, including travel and, if applicable, accommodation, costs of the committee members;
- to supply technical support needed to the committee, including recourse to external expertise when this is required;
- to produce and make available on a website, at latest on June 30 of each year, a report of the committee's expenses and of its activities for the preceding ?scal year.
Public Consultation (Certain Other Types of Lease)
Section 140.1 of the Mining Act, added by Section 63 of the Amending Act, provides that applicants for a peat lease or a lease to carry on an industrial activity or to engage in commercial export must hold a public consultation in the region where the project is located, in the manner prescribed by regulation. At the MENR's request, such an applicant shall provide to MENR all documents or information relating to the public consultation and if the consultation has not been carried out in the manner prescribed by regulation, the MENR may impose additional measures. The MENR may further include conditions to the lease designed to avoid conflicts with other uses of the territory and to take into consideration comments received during the public consultation.
Section 27 of the Draft First Regulation proposes to add Section 56.1 to the Regulation whereby the provisions of Sections 39.1 and 39.2 thereof (summarized above) are said to apply to such public consultations, with necessary adaptations.
Sites and Lands that Cannot Be the Subject of a Mining Lease
Section 144 of the Mining Act, amended by Section 67 of the Amending Act, prescribes new categories of sites and parcels of lands that cannot be the subject of a mining lease, in addition to those categories already concerned by this prohibition, namely parcels of lands used as cemeteries within the meaning of the Act Respecting Roman Catholic Cemetery Companies (Québec) or on which cemeteries are established in accordance with the Non-Catholic CemeteriesAct (Québec). The categories being added are as follows: a parcel of land subject to an improvement provided for by regulation, a parcel of land withdrawn from prospecting, mining exploration and mining operations, a parcel of land regarding which a temporary suspension notice (Section 304.1 of the Mining Ac) has been issued or a classified (Section 305.1 of the Mining Act) outstanding geological site.
Section 27 of the Draft First Regulation proposes to add Section 56.2 to the Regulation to establish the improvements (those enumerated at Section 14 of the Regulation) concerned by the first additional category of sites and parcels of lands mentioned in the preceding paragraph.
In addition, Section 144 is amended to expressly allowthe MENR to refuse a mining lease or subject its issuance to certain conditions if it concerns certain categories of parcels of lands, for example, a parcel of land situated in an Indian reserve, a parcel of land designated as a migratory bird sanctuary and a parcel of land reserved to the State of the kinds described in Section 304 of the Mining Act).
Other Provisions of the Draft First Regulation
Amongst the other provisions of the Draft First Regulation, Sections 44 and 48 propose amendments to the Regulation concerning the prescribed fees and minimum work expenses, some of which were announced by the Government in its last budget (see the April 2015 Bulletin). We note: (i) the increase of the mining claim registration and renewal fees by 8% from January 1, 2016 and by an additional 8% from January 1, 2017, (ii) the increase of rents for leases to mine surface mineral substances and peat leases by 6% from January 1, 2016 and by an additional 6% from January 1, 2017 and (iii) the reduction of 35%, for a period of 2 years from the date of coming into force of the amendment, on the minimum work expenses that must be performed in relation to a mining claim during one of its validity periods (2 years each). The increases identified at items (i) and (ii) replace respectively those of 16% and 12% which the Government had initially announced would apply as of 2015.
A Few Other Developments in Relation to the Mining Act
The Amending Act added a new chapter to the Mining Act concerning Native communities (see the December 2013 Bulletin), including provisions whereby the MENR must draw up a Native community consultation policy, make it public and keep it up to date. Although some work and consultations have since been conducted by Québec's Ministry of Energy and Natural Resources and other Québec ministries towards drawing-up such a policy, it remains to be seen if the Government will attain its target (fall 2015) for its completion and its being made public.
Finally, AnAct mainly to implement certain provisions of the Budget Speech of 4 June 2014 and return to a balanced budget in 2015-2016 (2015, chapter 8) (the "Omnibus Act"), whose provisions below will come into force on September 1, 2015, makes certain amendments to the Mining Act.
These include an amendment by Section 70 of the Omnibus Act to Section 215 of the Mining Act which presently provides, notably, that (i) documents and information obtained by the MENR from the holder of a mining right for purposes of the application of the Mining Act are public and are made public by the MENR in the manner it sees fit, (ii) the following information is made public once per year for each mining lease, mining concession and lease to mine surface mineral substances: the quantity and value of the ore extracted, royalties paid and overall contributions paid by the lessee or holder during the preceding year, (iii) the rehabilitation and restoration plan approved by the minister and the amount of the financial guarantee required are also made public and (iv) data contained in an agreement entered into between a lessee under a mining lease or a mining concession holder and a “community” are not made public and may only be used for statistical purposes (see the December 2013 Bulletin).
The amendment made by Section 70 of the Omnibus Act specifies that item (iii) of the preceding paragraph applies to data in an agreement with a community "with respect to the contributions or benefits the community receives".
For their part, Sections 71 and 72 of the Omnibus Act, respectively add a provision to Sections 221 and 222 of the Mining Act whereby notwithstanding its Section 215, information supplied in an annual preliminary report (section 221) and an annual activities report (section 222) transmitted to the MENR by every operator, every person engaged in exploration for or extraction or processing of mineral substances and every contractor engaged in mining operations are not made public and may only be used for statistical purposes.
It remains to be seen if Bill 55 and the Draft First Regulation will be amended prior to their adoption and when their provisions, amended or not, will come into force.
Certain interested groups and bodies are expected to produce written submissions and make verbal representations on Bill 55 (inclusive of some who may comment on Payments to Native Payees, in particular, such Payments provided for in agreements with project proponents) within the context of the special consultation and public hearings portion of the parliamentary commission’s work in studying Bill 55. Indeed, hearing dates and times for this purpose and for certain such interested groups and bodies are already scheduled for August 18 and 19, 2015.
It could also be that disclosure of certain Payments often provided for in such agreements may depend on how they are or could be structured. Also, as already mentioned, Bill 55 proposes to grant regulatory powers to the Government which will allow it, on the one hand, to add categories of Payments requiring disclosure and, on the other, to determine cases in which provisions of Bill 55 will not apply with respect to Subject Entities, Payees or Payments.
That being said, it should be interesting to follow the work of the parliamentary commission, and to see if the content of Bill 55 will evolve in the wake of such work.