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Mining Equipment Exemption from Municipal Taxes Receives Strict Interpretation
The Court of Québec (Court) recently rendered its decision1 in respect of Bloom Lake General Partner Limited’s (Mining Operator’s) appeal from the ruling of the Tribunal administratif du Québec (TAQ, Québec’s Administrative Tribunal). The Court pointed out that its decision now provides a “decision in principle” on the question of what constitutes mining equipment and access roads to mining operations, which are both exempt from municipal and school taxes. Accordingly, this decision may have significant repercussions on the municipal taxation of mining companies operating in Québec.
As explained below, the Court’s decision endorses a restrictive interpretation of the provision in the Act Respecting Municipal Taxation (Act), which excludes from the property assessment roll mining equipment as well as access roads to mining operations. In other words, the phrases “equipment of mines” and “access road to mining operations” were not interpreted as advanced by the Mining Operator.
Section 65 of the Act excludes, among others, the following immovables from the property assessment roll:2
- “galeries, shafts, excavations, tunnels, or the equipment of underground or open mines”; and
- “an access road to forest or mining operations.”
The Mining Operator argued that the exclusion of “equipment of […] mines” refers to the equipment required for all mining operations – from extraction to processing. Thus, equipment used in activities such as blasting, conveyor transportation, crushing, grinding and concentration would be excluded from the property assessment roll. The Mining Operator further argued that the phrase “access road to […] mining operations” encompasses all of the mining operation’s roads.
The TAQ interpreted the word “mine” to refer only to ground openings or excavations that allow for the extraction of minerals of economic value. Therefore, the TAQ considered that the equipment excluded from the property assessment roll is restricted to that used for ore extraction. As for the exclusion of an “access road,” the TAQ concluded that it is limited to the road connecting the public road to the security booth providing access to the mining operations.
The difference between the Mining Operator’s and TAQ’s interpretation of the relevant provision represented a $314,710,000 difference in the actual value used for purposes of the property assessment roll or, as the Court put it, “a ratio of 1% or 100%.”3
The Court’s Decision
Because this was an appeal from a decision rendered by a specialized tribunal (the TAQ), the Court stated that it could intervene only if the TAQ's decision was found to be unreasonable.
With respect to the meaning of the phrase “equipment of […] mines,” the Court ruled that the TAQ’s decision was not unreasonable, namely because:
- the TAQ could rely on the expert testimony of a witness with a mining engineering PhD according to whom the word “mine” refers only to “ground openings or excavations that serve to extract minerals of economic value”;
- the TAQ was entitled to adopt a definition of the word “extraction,” which defines it as the activity of removing ore. The Mining Operator argued for a broader definition according to which extraction consists of separating an element from the material of which it is a part and therefore the word “mine,” even if considered to refer only to extraction, includes all mining operations;
- the TAQ could consider that the word “mine” does not have the same meaning as the expression “mining operations”;
- even if the word “mine” has a narrower meaning than the phrase “mining operations,” it still refers to immovables such as generators, inverters, reservoirs, dykes, boilers and bridge cranes; and
- the TAQ was justified in considering the definitions of “mine” and “mining operations” provided for in the Québec Mining Tax Act since like the Act, it is a taxing statute.
The Court acknowledged that parliamentary debates suggested that the Minister of Municipal Affairs responsible for the Act intended to reduce the tax burden of “mines.” However, the Court concluded that this objective is achieved simply if some mining equipment is not included in the property assessment roll. Thus, the Court considered the TAQ's conclusion was reasonable that the term “equipment of […] mines” is limited to equipment used to extract ore.
With regard to the expression “access road,” the Court considered that the TAQ had rightly concluded that it was limited to the road that connects the public road to the security post of the mining operations. The conclusion is seemingly based on the French version of the Act, which refers to an “access road to a mining operation” rather than to an “access road of a mining operation.”
In closing, the Court pointed out that it is possible to arrive at a different result from the one arrived at by the TAQ. However, despite the significant economic consequences of the issues in dispute, the Court reiterated that due to the particular nature of this appeal, it could not substitute another decision for that of the TAQ because the latter’s conclusion was not unreasonable.
Impact of the Decision
The Court’s decision will likely have a significant impact on municipal taxation of mining companies operating in Québec. It could even lead some municipalities to review the property assessment roll of mining companies operating in their territory.
The mine in question in this case is an open-pit mine. That said, the Court’s judgment may have an impact on underground mines and access roads to forestry operations since the provision in question also applies to them.
Although there may be a difference between the notion of “mine” and “mining operations,” it is surprising that the concept of “mine” received such a narrow interpretation. This is all the more surprising considering that the legislator intended to assist “mines.”
It remains to be seen whether a judicial review application will be filed. In this regard, other cases demonstrate that it is possible for the Court and the Québec Superior Court to overturn a decision rendered by the TAQ in respect of the Act.4
1 Bloom Lake General Partner Limited / Bloom Lake General Partners Ltd v Ville de Fermont, 2019 QCCQ 7326.
2 Act Respecting Municipal Taxation, section 65, paragraph 1(4)(8).
3 $3,299,000 according to the Mining Operator versus $318,009,000 according to the municipal authority and TAQ.
4 See Vidéotron ltée v Ville de Montréal, 2017 QCCQ 8483, August 1, 2017 quashed by Ville de Longueuil v Cour du Québec, 2019 QCCS 3262, August 5, 2019, currently being appealed to the Court of Appeal of Québec.
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