Many Companies, Many Governments

Sep 21, 2018

With about 75% of all mining companies in the world headquartered in Canada and some 56% of the publicly traded ones listed on the Toronto Stock Exchange, Canadian laws capture more mining entities than legislation in any other country.

That sounds simple enough, but it’s more complex — and at times more problematic — for the industry than it sounds. Canada is a federation with a central government, 10 provinces and three territories. All of them have regulatory powers in relation to mining.

“From an outsider’s perspective, the way mining is regulated in Canada may appear to be an impediment, but I don’t know that there’s a better model around,” says Tom Fenton of Aird & Berlis LLP in Toronto. “Although there is some redundancy and duplication of effort, especially with regard to environmental regulation, the system seems to work well.”

There are some areas, however, like insolvency, that are a bit of a mess. “You’ve got a mixture of federal bankruptcy laws and provincial laws regarding property tenure and how security is taken that are inconsistent with both the federal laws and amongst themselves,” says Greg McNab of Baker McKenzie LLP in Toronto.

The shifting laws relating to Aboriginal rights also give pause for thought. According to the Fraser Institute, the duty to consult remains “a patchwork” of Canadian policies. “There are some principles that all jurisdictions share, such as the Crown’s taking responsibility for the duty to consult; and yet there are other principles that differ dramatically depending on the province in which a project is located,” the authors write.

For example, BC, Manitoba and Québec are the only jurisdictions that don’t explicitly state in their policies that Aboriginal communities must participate in the consultation process. The policies of these three provinces are still in draft form.

According to McNab, Aboriginal issues are becoming ever more complex. “It’s becoming harder and harder for any party to get a comfort level that will lead to a manageable and consistent solution,” the lawyer says. “And one of the reasons is that we keep inviting more and more people to the table.”

To be clear, no one disagrees that the duty to consult is an important part of project development.

“I have yet to work with a mining company that doesn’t want a strong, useful and productive relationship with its Aboriginal partners,” says Linda Misetich Dann in Bennett Jones LLP’s Toronto office. “What makes things difficult and uncertain is that no universal process has emerged.”
Looking at mining regulation from an overall perspective, what is clear is that provincial governments tend to own most of Canada’s mineral rights, but the private sector, Aboriginal interests and the federal government also hold some. Which is not to say that proponents of a mining project on land owned other than by the federal government can ignore federal laws. 
Indeed, federal and provincial powers can overlap in myriad ways. The federal government’s jurisdiction over Aboriginal rights, trade and commerce, banking, navigation, railways, shipping, inland fisheries and nuclear energy, for example, can overlap with provincial jurisdiction in property and civil rights, natural resources, and local works and undertakings. 

In the Canada Chapter: International Comparative Legal Guide to Mining 2017 found on the firm’s website, Kahled Abdel-Barr and Karen MacMillan in Lawson Lundell LLP’s Vancouver’s office explain the overlap:

“There are, however, some matters that fall within the purview of both federal and provincial jurisdictions. In such a case each level of government may create laws in respect of a particular subject matter insofar as it relates to their jurisdiction. For example, both the federal and provincial governments have their own form of environmental legislation. The federal government may regulate approvals for a proposed mine in an effort to protect fish, and the province may regulate that same proposed mine for reasons relating to emissions that could pollute the environment. Federal and provincial statutes which deal with the same subject matter may co-exist, though if there is conflict or inconsistency between federal and provincial law, in the sense of impossibility of dual compliance or frustration of federal purpose, the federal statute prevails.”

When it comes to offshore exploration and mining, however, the federal government rules. The Oceans Act excludes the application of any provincial law to the territorial sea or continental shelf with respect to minerals or other non-living natural resources. The federal government can, however, enact regulations that give effect to provincial laws.

Meanwhile — and perhaps oddly enough — the federal government has not enacted any legislation governing offshore mineral rights. Foreign investment is another arena within the purview of the federal government. Foreign investors from WTO-member countries who seek direct control of a Canadian company through investment that exceeds stipulated financial thresholds ($1 billion in 2019) are subject to federal government scrutiny under the Investment Canada Act. The threshold is much lower for non-WTO investors, but both classes of investors will face review if the transaction could harm national security.

The federal government has also enacted legislation governing Canadian mining companies’ activities abroad. The Extractive Sector Transparency Measures Act (ESTMA), proclaimed in force on June 1, 2015, has been widely lauded for finally bringing Canada up to speed with the European Union, the United Kingdom, Norway and the United States in promoting transparency and accountability by requiring reporting of payments made to any government or body performing a governmental function in Canada or abroad. 

The ESTMA is also significantly broader than other countries’ laws in its extraterritorial reach, its application to private companies, and the range of recipients for whom reporting is required.

Québec has followed with its own legislation. The law, known as Bill 55, mirrors the ESTMA closely but closes some of the gap created by the omission of TSX Venture listees from federal scrutiny, by requiring businesses operating in the Mining and Oil & Gas sectors in the province to declare all payments made to government bodies and Aboriginal communities.

For the most part, the provinces have jurisdiction over exploration, development and extraction of resources, as well as construction, management, reclamation and closure of mines. The exception is Nunavut and portions of the Northwest Territories where the federal government administers and governs public lands and natural resources. 

Apart from Nunavut, each jurisdiction has distinct mining regulations and mineral tenure systems. These can vary considerably. For example, while most provinces don’t mandate that minerals extracted in the province must be processed locally, there are exceptions: Nova Scotia has that requirement absent governmental exemption; minerals extracted in Ontario must be processed in Canada unless an exemption is obtained; New Brunswick and Newfoundland and Labrador  require the processing of minerals within the province; and some jurisdictions, like Manitoba, encourage local processing with tax deductions.

Provincial laws regarding the right to reconnoitre, explore and mine also vary. While prospector’s licences cannot be subdivided anywhere, mineral claims can be in some jurisdictions, including British Columbia. While subdivision of mining leases is possible other than in British Columbia, the rules differ between jurisdictions.

Royalty regimes are also diverse. For example, Ontario, Québec, Manitoba, and Newfoundland and Labrador feature profit taxes ranging from 5% to 17% while BC, Alberta, Saskatchewan, Nova Scotia and New Brunswick factor in net revenue, net profits or production from mining operations into their regimes.

On the environmental front, provincial laws vary again. Most provinces have set thresholds that trigger assessment rules, but some of them require public hearings. It’s also open to the federal government to do assessments on projects of a prescribed type and size. Because the federal decision can be based on a provincial assessment process in some cases, miners may be able to avoid a multiplicity of proceedings.

The provinces also have jurisdiction in most matters involving workplace health and safety. Some provinces, like BC, have enacted health and safety laws that apply specifically to the mining industry. The Government Employees Compensation Act, however, governs federal workers, although the provinces administer the legislation.

Stakeholders should also be aware that April 2018 saw Ontario implement the third phase of its Mining Act modernization process. The changes will convert Ontario mining lands administration systems to online registration, and establish the online Mining Land Administration System to improve data access and file management. 

Modernization aside, however, Canada’s bifurcated mining regulation regime is not like likely to change. “Canada will never have a single mining regulator,” Aird & Berlis’s Fenton says. 

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