On May 15, 2012, the Québec Government introduced in the National Assembly An Act respecting mainly the implementation of certain provisions of the Budget Speech of 20 March 2012 (Bill 73), an omnibus bill providing for several legislative amendments in view of implementing the 2012 Provincial Budget. A subset of the proposed amendments are meant to implement portions of the Plan Nord, a development project of Northern Québec involving investments of $80 billion over the next 25 years. Bill 73 proposes to:
- amend the Québec Mining Act (the Mining Act) to allow an auctioning process for petroleum and gas licences and leases and to increase the maximum royalties that may be levied from license and lease holders; and
- amend the Act respecting Investissement Québec (the IQ Act) to establish a special fund allowing mainly for the acquisition of interests in mining enterprises.
Amendments to the Mining Act
The proposed amendments to the Mining Act would allow the auctioning of exploration licences regarding petroleum and gas. Currently, exploration licenses are granted by the Minister of Natural Resources and Wildlife (the Minister) to any person that meets the requirements established by regulation and pays an annual fee (i.e., the “first to stake” method). The proposed amendments would give the Minister discretion to determine the time and conditions under which exploration licences for petroleum and natural gas are granted.
Although Bill 73 does not include specific provisions to this effect, it can be assumed from its preamble that this discretion will be used to establish an auctioning process. In respect of a territory that is not subject to an exploration licence, the Minister will have the discretion to institute an auctioning process for production licences if it considers that the territory presents an economically workable deposit or an economically operable underground reservoir. A portion of the income derived from these auctions will go towards repaying the province’s debt.
It is also proposed to increase the maximum royalties that may be charged to lease and license holders. These royalties will increase from 17% to 40% of the well head value, which will be defined as the average retail price, excluding all taxes, less the average transportation costs from the well to the retail outlets, measurement costs and purification costs. It is interesting to note that the 2011 Budget forecasted an increase to a maximum royalty of 35% and stated that new royalty regime would only come into effect once the strategic environmental assessment recommended by the Bureau d'audiences publiques sur l'environnement (BAPE) has been completed1. However, Bill 73 is being presented before the completion of this assessment and it proposes to implement a maximum royalty of 40%.
Amendments to the IQ Act
Bill 73 also contemplates the establishment of a subsidiary of Investissement Québec, the financing arm of the Québec Government, to be named Ressources Québec. Ressources Québec will regroup the currently existing $236 million government equity stake in the mining development and hydrocarbon sectors, including those of the Société québécoise d'exploration minière (SOQUEM) and the Société québécoise d'initiatives pétrolières (SOQUIP). The Québec Government will also contribute $250 million for the capitalization of Ressources Québec.
In addition, Ressources Québec would be mandated to analyse proposed investments to be made out of a new $750 million fund named Mining and Hydrocarbon Capital Fund and to make and manage such investments. An aggregate of $500 million would be reserved for investments in projects located in the territory of the Plan Nord. Bill 73 also establishes the authorization framework and the types of investments, and provides for the establishment of an investment policy and directives in respect of investments to be credited to the Mining and Hydrocarbon Capital Fund. All of the profits resulting from investments will be deposited in the Mining and Hydrocarbon Capital Fund in order to be reinvested in future projects. In all, Ressources Québec has the potential of increasing the government’s equity stake in the mining and hydrocarbon sectors to over $1.2 billion.
Due to lengthy parliamentary committee examination and to the suspension of the activities of the Québec National Assembly for the summer, the enactment of Bill 73 was postponed to the Fall session. If the current Liberal Government calls elections before the Fall session, Bill 73, as well as Bill 142 and Bill 273 will die on the Order Paper and the outcome of the policy changes contemplated by these proposed bills will depend on election results.