Here's some news that will delight many Quebecers, but others worry about: according to the annual survey of mining companies by the Fraser Institute, the global mining industry ranked first position in Quebec among the 72 jurisdictions studied in the report in terms of quality of its mining policy.

However, dark clouds looming on the horizon for the mining industry in Quebec. Indeed, recent changes appeared after the completion of the investigation, may significantly alter the investment climate of the province in the coming years.

Activists opposed to the industry denounced the fact that Quebec remains a particularly welcoming place for exploration and mining in spite of their efforts. However, many are residents of indigenous areas and dependent on that industry for their jobs will rejoice considering a prosperous future.

Bill 79 amending the Mining Act, tabled in the National Assembly in December 2009, proposes to strengthen, among other things, the regulatory framework for the environment, particularly as regards the restoration of mining sites. The public consultation committee, which will precede the adoption of this bill, is sure to grab media attention in Quebec for several months and to echo the arguments of activists opposed to mining. The recent provincial budget has increased unexpectedly tax rate from 12% of annual profit before the budget to 14% now, finally reaching 16% in 2012 and changed the rules of deduction of mining companies which will the effect of harming the industry.

Mining companies are not against paying taxes and comply with reasonable rules, but worry when faced with uncertainty and consequences. So while they had already invested millions of dollars in projects that were based on a calculation of costs based on tax rates and the rules they believed stable, they must now reconsider their assessments.

This uncertainty is bad for the industry. In fact, companies spend over the years considerable sums on the sites before you start making profits. Changing the rules mid-term can destroy the viability of projects in which mining companies have already invested millions of dollars.

Quebec should bear in mind the case of British Columbia. The political environment was hostile to the industry in the 90s. Since then, the government of the province has spent many years trying to repair the damage. Yet, despite these efforts, British Columbia gets more low scores in our investigation and the uncertainty born during this period still haunts the industry.

Countering Uncertainty

Opposition to a climate of uncertainty in the field of regulations should unite and industrial ecologists. Indeed, the uncertainty of the regulatory process open to political manipulation. Bad projects supported by powerful sponsors may be accepted as good projects which can contribute to prosperity and job creation, are paralyzed by bureaucracy.

The tax uncertainty may also have good reason to mining projects. A project can be viable with the current tax level, but in case of uncertainty regarding tax law, mining companies can simply allow the project to vegetate rather than risk of unexpected increases in the level of taxation as it just happened in Quebec.

Mining has played a key role in the growth and prosperity of Quebec. It remains an important development in our regions. But so far this has not prevented the government from taking measures that could reverse a trend hitherto largely positive development of the mining industry in Quebec in terms of economic prosperity and job creation.

* Fred McMahon is vice president of research at the Fraser Institute. Jean-Francois Minardi is senior analyst of public policy at the Fraser Institute.