Quebec blocks uranium project

A recent lawsuit filed against the Quebec government for blocking a uranium project raises uncertainty among developers in the province, as the government there begins to implement its Plan Nord initiative and inches closer to defining its principle of “social acceptability.” The lawsuit, which seeks $190 million in damages, was filed on Dec. 11 by Strateco Resources. The company claims ...
Quebec blocks uranium project
Socially acceptable? Uranium mining thwarted

A recent lawsuit filed against the Quebec government for blocking a uranium project raises uncertainty among developers in the province, as the government there begins to implement its Plan Nord initiative and inches closer to defining its principle of “social acceptability.”

The lawsuit, which seeks $190 million in damages, was filed on Dec. 11 by Strateco Resources. The company claims that, from 2007 to 2012, it invested an average of $20 million annually and obtained more than 30 written authorizations from the province. Strateco alleges that the Quebec Minister, by invoking social acceptability, “created a mandatory and dominant criterion that does not exist in the law.”

“Sometimes [social acceptability] may be used as sort of a veto for some projects,” says Jean Masson, a lawyer at Fasken Martineau DuMoulin LLP. “So there will be a long discussion about the meaning of social acceptance in Quebec during the next year.”

In November, prior to the decision to block the uranium project, Energy and Natural Resources Minister Pierre Arcand announced that the government would launch a consultation process on the social acceptability of projects related to exploitation of natural resources. It expects to have guidelines by the fall of 2015.

“In order to be able to develop natural resources, you have to have social acceptability,” says Erik Richer La Flèche, an M&A lawyer at Stikeman Elliott LLP. La Flèche contends that the company was a victim of circumstances related to the shifting political atmosphere. “A consensus sort of formed [with the previous and current government, along with First Nations] and it forced the hand of the government to essentially block this mining [project],” La Flèche says. “The political environment changed; the type of activities that were acceptable changed.”

Marc Brouillette at BCF LLP represented municipalities for the province’s past three mining projects. He says social acceptability has been brought up in each of those instances. “We ... meaning investors, social economic associations, communities, municipalities ... have been asking the government to define the concept of social acceptability,” Brouillette says. “Every time you have a project in a certain community, whatever mineral it is, the concept of social acceptability is confronted to the reality in that community. Some say it should be done through a referendum; some say it should be done through a petition.”

The Quebec government’s
Sustainable Development Act defines 16 principles that, Brouillette says, help define social acceptability, including health and quality of life, the environment and cultural heritage.

The province’s reaction to fracking proposals in the province also illustrates the issue. On Dec. 15, Premier Philippe Couillard said “the social acceptability [for fracking] is not there,” after concluding that the economic benefits of hydraulic fracturing techniques in the case of the Utica shale gas formation would not outweigh the environmental costs.

In 2009, residents of remote Sept-Îles called on the provincial government to stop uranium exploration in the region. At the time, Jean-Pierre Thomassin, the director general of Quebec’s mining exploration association, told the media that a moratorium on exploration would be unlikely due to compensation the province would have to pay companies that invested in the province, adding “no one will come to Quebec for exploration” if that happened.

Fasken’s Masson says that investors may be wary of the poor optics a government decision like this creates, regardless of the mineral being explored. “It doesn’t make a difference between uranium and other minerals,” he says. “It’s just the feeling that [the company’s rights] have been expropriated by the government without any form of compensation.”

Observers say that the Quebec government has sent conflicting signals as it attempts to move forward with its Plan Nord initiative — encouraging development in some areas while simultaneously blocking it in others. That, in turn, has raised concerns among potential developers regarding the certainty of their investment.

“At a time when it’s very difficult for juniors to raise capital in general, this decision by the Q uebec government is a concern because it’s more difficult for Quebec companies [to raise] capital than other junior companies in Canada,” says Masson.

Quebec was the No. 1 jurisdiction in the world for mining activity between 2007 and 2009, according to a March 2014 survey by the Vancouver-based Fraser Institute. It sunk to fifth in 2011, 11th in 2012 and 21st in 2013. “What we’ve seen in Quebec is a climate of extreme regulatory uncertainty,” says Kenneth Green, co-author of the survey. “And that factor, particularly in a developed country like Canada, tends to have a very heavy influence on perceptions of the hospitality for investment of the jurisdiction.”

Lawyer(s)

Jean Masson