03/06/2012 01:46 EST | Updated 05/06/2012 05:12 EDT

Quebec Taking Drill to Mining Industry

Just when the Quebec economy is sadly poised to start feeling the pinch of an economic downturn, the Liberal government of Jean Charest is on the eve of passing a controversial law that seeks to reform the current mining regime of the province.

The consequences of adopting Bill 14 could be to effectively turn away much needed investments and could even worsen the downturn.

Kowtowing to demands expressed almost exclusively by local and regional municipal politicians, the government is about to hit its mining and exploration sector similarly to the way British Columbia slammed its own sector in the early 90s, consequently losing decades of high economic returns generated by an unprecedented natural resource boom. B.C. is only now setting a balanced agenda that will again promote and stimulate exploration and mineral development in the province.

Quebec's Bill 14 aims to transfer to municipal governments -- all 1,200 of them -- the fiduciary powers that the Canadian Constitution grants provinces over their natural resources. Each local entity will be able to veto mineral exploration and mining on their territories. The Quebec government seeks to ban such activities on all municipal lands used for urban, recreational, and resort purposes as well as in areas where mining exploration is viewed as incompatible with just about any other land use.

Consequentially, the future development of mineral resources would fall prey to a balkanized regime where stability of governance rules and the reliability of mining titles would be replaced by the "marketization" of access to a resource that belongs to the greater community and not to the benefit of the local few.

According to an in-house study done by the Quebec Mineral Exploration Association (AEMQ) in January, over 600 distinct title owners will see approximately 8700 held claims located in these areas become obsolete, thus potentially pulverizing over $650 million of cumulated investments and putting at risk $500 million in exploration expenditures that Quebec, Canadian, and foreign investors pour into the province on any given year.

Never mind that the government has stated that it will not recognize potential economic prejudice to the rightful owners of these titles, but if prejudice does occur, the government plans to compensate the indirectly expropriated titles at a purely token level, throwing out the notion of just and fair compensation.

Exploration investors are already slowing down and even pulling back the earmarked funding of 2012 exploration programs in the province, thus threatening a sector that currently represents over $8 billion or 2.4 per cent of Quebec's GDP, nearly 54,000 well-paid jobs, and approximately $300 million in yearly net tax revenues (EB Data 2008).

Many companies are now looking at launching various legal measures to ensure their rights are respected in the event that Bill 14 is adopted. The absence of a fair and equitable compensation program could also be a breach to international agreements on reciprocal treatment afforded to investors by the North American Free Trade Agreement (NAFTA). Such disregard by the Quebec government could fuel potential court battles raised by American and Mexican investors about to lose the value of their mining titles.

Quebec's economic stakeholders, including the powerful Federation of Chambers of Commerce, still hope that Premier Charest will pay more attention to the arguments raised by his more sophisticated key economic Ministers such as Clément Gignac (Natural Resources), Sam Hamad (Economic Development), and Raymond Bachand (Finance) than to those of some of the former mayors and municipal councillors that currently occupy other Cabinet positions.

As the world converges to Toronto to attend the biggest exploration and mining show on the planet (PDAC 2012) where Quebec will continue to promote the mineral richness of a vast country North of its 49th parallel with its Plan Nord project, one wonders how exploration companies will explain to the thousands of investors attending the international trade show that all is still well in the Belle Province.