Changing regulations and uncertainty about protected areas hurts Quebec in latest Fraser Institute study

December 6, 2013

A recent report from the Fraser Institute found that uncertainty about protected areas and environmental restrictions, combined with increased regulation and tax changes, has damaged Quebec’s image in the eyes of mining investors.

The report, "Quebec's Mining Policy Performance: Greater Uncertainty and Lost Advantage," from the independent, non-partisan Canadian public policy think-tank highlights four key barriers to investment in Quebec and the potential impacts to the province.

“When a jurisdiction loses mining investment, it loses jobs for skilled workers, wealth that goes along with those jobs, and the subsequent government revenue. If Quebec wants to prevent further decline and recapture its status as a top global mining jurisdiction, its government needs to reconsider its mining policies,” said Kenneth P. Green, project director and senior director of natural resource studies at the Fraser Institute.

Once considered one of the leading jurisdictions in the world as rated by the Fraser Institute, investors are now being deterred from the region because of policy change and uncertainty involving protected areas such as wilderness zones, parks and archeological sites. These changes include commitments to protect 12 percent of Quebec's northern territory (nearly 1.2 million square kilometres) and intentions to exclude up to half of the territory from industrial use, the report found.

“Uncertainty over protected areas effectively disqualifies land for exploration and mining, and douses any potential economic benefits such as job-creation. Uncertainty may also discourage exploration investment in and around potentially protected areas where the risk of increased protection looms,” said Alana Wilson, study author and senior economist with the Fraser Institute’s Centre for Natural Resources.

The study also looks at environmental impact assessments and public consultation, and warns against the politicization of the process.

“Uncertainty in environmental regulations deters investment by threatening projects with new restrictions and prohibitions, creating the perception that special interests-rather than sound science-guide policy decisions,” Green said.

Since 2010, Quebec has introduced two major changes in taxation-increasing mining duty rates to 16 percent from 12 percent of annual profits, and basing profits on individual mines rather than across operations held by a single owner. Now, losses incurred at one mine can’t be used to reduce annual profits at another.

The study also looks at possibly lowering the corporate tax rate and reconsidering restrictions that limit credit for exploration work.

Regulatory duplication and inconsistency has increased steadily over the past five years despite the recent defeat of Bill 43, which would have created more layers of regulation.

The report found that in 2011, mining and mineral manufacturing accounted for $10.2 billion, or 3.4 percent, of Quebec's GDP and employed 85,568 workers in the province.


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