Premier Pauline Marois is going to great lengths to put the Parti Québécois’s imprint on the development of Quebec’s North.
Ms. Marois and three of her ministers travelled all the way to Chibougamau on Tuesday to meet the press in the small mining and forestry town that sits north of the 49th parallel, in what used to be Plan Nord territory.
But now it’s out with Plan Nord, Jean Charest’s signature economic project, and in with the “Nord pour tous” – North for everybody – as the PQ’s program is now called.
In a blind taste test, however, you would be hard pressed to tell the two plans apart. The government now says it will invest $868-million in infrastructure and social housing over the next five years, almost exactly what the Liberals had allocated to the roads and parks in the North. The only change is that private developers will have to assume a bigger share of the risk when they are the sole users of roads and railways – a flaw the PQ rightly corrected.
In essence, the Quebec government is barely rebranding a program so tainted in bright Liberal red that Ms. Marois’s eyes would hurt just looking at it. But there are some striking differences between the then and the now.
The PQ’s plan has garnered none of the enthusiasm Plan Nord sparked when Mr. Charest unveiled it almost two years ago to the day alongside native leaders and mining executives. And its new mining regime is now pilloried by both environmentalists and mining companies alike.
In the spring of 2011, there was no end in sight for the mining boom, and talk of the expected $80-billion in investments that would create or maintain 20,000 jobs a year barely raised eyebrows. Now, everyone is wondering if the resource economy will simply carry on at a less hectic pace, or if it will fall more precipitously – as all the recent project cancellations seem to point to. And they’re wondering if the new royalties regime unveiled by Finance Minister Nicolas Marceau could knock Quebec out of the mining race.
You couldn’t find a mining executive anywhere near Mr. Marceau on Monday – nor an environmentalist for that matter. Even Quebec’s Natural Resources Minister, Martine Ouellet, a hardliner on mining companies who was coaxed into attending the press conference, couldn’t bring herself to say anything nice about the new royalties regime when asked by reporters.
Just about every interested party criticized the new mining rules by which all companies operating a mine in the province will be forced to pay royalties, be they profitable or not. Common wisdom would say this is a sign that a fair solution has been found. But some compromises are hurtful.
On the plus side, the rules of the game are spelled out, which puts an end to eight months of uncertainty. And the regime, which the Liberals amended only three years ago, should not change any time soon, although that doesn’t say much coming from a minority government.
The supertax on profits, which rises progressively, and the minimum mining tax, which is calculated on the output value at the mine shaft head less expenses, are much milder than what the PQ campaigned on. Also, in a surprise reminiscent of the retroactive tax hikes, Mr. Marceau revealed that mining companies will only have to pay the highest of the two taxes, not both, which was news to all.
You cannot blame Mr. Marceau for taking the changing macroeconomic environment into account. But one cannot help but wonder if the changes, which were made to honour a campaign pledge, are worth all the trouble given how little extra revenue the province will take in. In 2015, the government predicts it will earn $370-million in royalties, as opposed to $320-million with the current regime, a mere 15 per cent more. For environmentalists (and PQ allies) that were hoping for more cash to clean up the abandoned mines, this is a slap in the face.
The tax on profits, whose rate increases when the profit margin exceeds 35 per cent, is a good idea. It will allow Quebeckers to partake into any mining bonanza when the prices of their non-renewable resources skyrocket, as the price of gold had done in the past decade.
The minimum mining tax on production is a bad idea, even if its impact was softened for smaller producers. Under an annual output value of $80-million, the tax rate stands at 1 per cent as opposed to 4 per cent above that threshold.
A tax on production will discourage investment or encourage miners to idle Quebec mines first, at a time when rising costs, harder-to-find financing and falling commodity prices have forced many producers to postpone or cancel projects.
Rio Tinto may well pursue its $5-billion (U.S.) iron ore expansion in Western Australia. But Northern Quebec is no Pilbara. Quebec’s mineral concentration is much lower. Its exploration and exploitation costs are higher because of its harsh winters and difficult access. And the province is further away from China and other major clients than Australia or South America.
With its royalties reform, Quebec has become the costliest jurisdiction in Canada. As the province stands out unfavorably, the Quebec government is jeopardizing an industry that gives highly paid work to some 34,000 Quebeckers, a huge risk that could translate into crumbs for everybody.