Natural Resources Committee on Oct. 31st, 2011

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Harris.

Thank you for your answers, gentlemen.

We go now to Monsieur Lapointe for up to five minutes.

Go ahead, please.

[François Lapointe, NDP, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

My first questions are for Mr. Ugo Lapointe.

Thank you for your presentation. You touched on three points that I'd like to look at some more. First, you talked about royalties and control over investments. Was this mainly Quebec, Canadian or foreign investments? I know there's a huge open-pit mine project to be completely financed by Chinese companies. Could you give us more details about the current situation? Could you give us more details about what your organization would like to see?

[Ugo Lapointe]

The matter of royalties is first and foremost a matter of provincial jurisdiction. That said, the international agreements signed by Canada are important and may have an effect on future provincial and territorial policies. That's why it's important for you to be concerned.

Basically, the debate and the issues raised in Quebec are about non-renewable resources. As I said earlier, they are being exploited for an approximate value of $8 billion this year and $7 billion last year. Of this money, how much profit did the open-pit mines make last year? We can't get these figures from the ministère des Finances du Québec, but the Coalition Pour que le Québec ait meilleure mine estimates that these profits amount to between $2 billion and $3 billion. This money goes directly into the pockets of private shareholders.

We say that these are collective resources. They belong not only to all Quebeckers but also to all Canadians. They are non-renewable. Once they've been extracted, they don't come back. So we are responsible, as collective owners and trustees of this resource for our nation and the Canadian nation, to ensure we receive fair compensation.

As things stand, the royalty regimes in Quebec collected $300 million last year, for profits of $7 billion, which represents 4.5%. If we add Quebec income tax and other taxes to the royalties, we get a total of $700 million. So we can say that in all 10% of the gross worth ended up in Quebec's coffers in 2010. I don't have any figures for the federal portion, but it must be between $100 million and $200 million, maybe $300 million, maximum.

The company PricewaterhouseCoopers estimates that profits from the 40 biggest mining companies in the world has increased by 1,000% in the past eight years. We say that, in view of this huge profit margin, these record profits, Quebeckers and Canadians in general are not getting their fair share of our non-renewable wealth. We suggest basically—

[François Lapointe, NDP, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Lapointe, in your members' opinion, what would be a fair share, approximately, concerning royalties and tax rates?

[Ugo Lapointe]

Yes, exactly.

In reality, we propose to improve the current royalty regime in Quebec, which applies only to profits. We propose to improve on the rate of 16% on profits by adding a rate on the gross product value. This is done notably in Saskatchewan, where a rate of about 3% is applied, and also in the Australian governments, where a rate is applied on the gross value within a range of 3 to 8%. The first thing to do is to apply a gross value rate. Companies have this sort of agreement among themselves when they sell mining shares. That's the first step.

The second step is to get the provincial governments, notably Quebec, to invest in strategic and profitable projects. This could be a variable access equity participation, for example, 25, 40 or 50%. That can be discussed, but the idea is for Quebeckers or citizens to be represented by their government in some strategic and profitable projects.

[François Lapointe, NDP, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

You gave the example of a rate of 3% on gross value. Is that what the mining industry in Australia does?

[Ugo Lapointe]

Yes, that's what the Australian governments do.

[François Lapointe, NDP, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Does this have a negative effect on investments made in Australia, or has any difference been noticed since implementation of the 3% on gross value?

[Ugo Lapointe]

To our knowledge, no. Australia is one of the great mining countries of the world, like Canada. They are probably the two largest mining countries in the world. Investments are booming. Australia is experiencing the same boom as we are these days.

In Australia, the rate is between 3 and 8% of the gross value. However, it is negotiating an additional rate. So a rate of 30% on profits from iron and coal mines would be added to this rate on gross value.

[François Lapointe, NDP, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

I don't know whether you know how Class B shares work; they enable small savers to invest $100, $200 or $300 in big projects in Plan Nord. This type of investment might also be rewarding in that it could ensure us of more profitable diversification of capital and distribution of profits for all Quebeckers and Canadians.

[Ugo Lapointe]

I don't know the measure you're talking about. However, for the Coalition Pour que le Québec ait meilleure mine, it seems important to have a crown corporation or a collective intelligence that can target appropriate projects, gather this wealth and redistribute it throughout the community according to defined social and economic priorities. I think that your proposal is aimed more at individualizing this distribution, and we are not at all interested in that.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Lapointe.

Your time is up.

We'll now go to Mr. Anderson for five minutes.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Thank you, Mr. Chair.

I actually want to follow up on the same line of questioning that Mr. Lapointe mentioned.

I want to talk to the folks in Saskatchewan. Alberta raised the royalties in the petroleum regime, and we know what impact that had in Saskatchewan. It really changed the economy, especially in my area. There's a lot of movement across the border. Folks are moving to Saskatchewan. They've been developing it for the last several years. It has been a great bonus for us.

Mr. Lapointe made the comment that we need to make sure we're compensated for resource development. Do you have any comments to make on that? Are we getting fair compensation for resource development in Saskatchewan? This has been an issue in the provincial election as well, so I'd be interested in hearing your comments.

[Pamela Schwann]

Thanks, Mr. Anderson.

As you're aware, we're still in a provincial election.

From an industry perspective, which is what we represent, what's most important is that the royalty rates need to be competitive and industries that are making investments need to understand the rules of the game at the time they're making these investments. The rules can't change midway. If the rules are changed in the middle of the game, companies will certainly take a very hard look at whether they're willing to start making investments when the rules of the game might change.

There's something else that's important to put into this equation. There are literally hundreds of millions of dollars spent on exploration every year on which we never see any rate of return. Exploration is a very high-risk venture, and that's not appreciated by many people. They see successful mines. They don't see the unsuccessful ventures that happen in exploration more often than not.

Only one exploration play in a hundred really has a hope of being turned into a deposit. You then have the hurdles of getting into a deposit, which won't happen in one or two years. You're looking at 10 to 20 years of investment before you might get a rate of return on your investment.

Those are some of the other factors that need to go into the equation.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

I want to take a couple of minutes to talk about the boreal caribou. I need a little more explanation. You say that no more development can take place in the blue areas until 65% is undisturbed habitat. So you're saying that two-thirds of the land needs to be undisturbed habitat under this plan for development to be allowed. Is that right?

[Pamela Schwann]

Yes, that's our understanding from direct communication with Environment Canada officials.

Of course, the problem is that they consider fire to be a disturbance in the habitat. We have an area of very high forest-fire regimes--and, by the way, the caribou have adapted to that landscape. It's a fire-dominated regime with only 2% to 4% human habitat. The human habitat doesn't really have any impact at all on the area in terms of the caribou population, but the risk of the plan is that they will stop any type of industrial activity or infrastructure development opportunity related to communities as well.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

You also said that fires account for one-half to two-thirds of the disturbance and human disturbance is only 2% to 4%. But they count natural fires as a disturbance, so it would eliminate development up there if this is carried out to its natural conclusion.

[Pamela Schwann]

That's absolutely correct.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Can you give us some recommendations on where we should go on the issue of the caribou?

Mr. Trost actually asked for some recommendations in terms of uranium development as well. Have you had any more thoughts on that?

If you were going to write a report at the end, do you have specific recommendations on these two subjects for us?

[Pamela Schwann]

Under the Species at Risk Act, we would like to see some rethinking and retooling in terms of the ecosystem approach, whereby you would look at the entire landscape rather than one species specifically.

With respect to this plan for the woodland boreal caribou, we really need to think about using a natural process such as fire as an influential part of the model.

In terms of additional uranium development, when you look at what's happening in other jurisdictions that are able to more quickly bring projects on stream, we need to look at a process that is more efficient but not less regimented in terms of environmental protection. We're just looking for a one project-one assessment type of process that will at least allow us to be competitive with other jurisdictions that have similar environmental protection.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

I think I'm out of time.

[The Chair, Conservative, Leon Benoit]

Yes, you are, Mr. Anderson. Thank you.

We'll now go to Madam Day for up to five minutes.

Go ahead, please.

[Anne-Marie Day, NDP, Charlesbourg—Haute-Saint-Charles, QC]

My first question is for Mr. Lapointe.

Mr. Lapointe, do you have an idea of the current scope of private investment in Quebec's far north?

[Ugo Lapointe]

A distinction has to be made between mining exploration, and exploitation and development of a new mine.

Let's talk first about private investment in mining exploration in northern Quebec. More specifically, for 2010, investments in exploration in Quebec amounted to about $576 million. I couldn't give you exact figures, but the large majority of these investments are for projects in Abitibi-Témiscamingue, in northern Quebec and on the North Shore. These regions account for at least 80% of investments.

I don't know if that answers your question.

With regard to mining operations, in recent years, investments for the development of new mines comes to $1 billion or $2 billion a year. It's considerable. Here again, these investments are made mainly in Abitibi-Témiscamingue, in northern Quebec and on the North Shore.

[Anne-Marie Day, NDP, Charlesbourg—Haute-Saint-Charles, QC]

Thank you.

Let's talk about the environment because we know that all economic development has an environmental cost. Is this taken into consideration in the development of northern Quebec?