Mandatory Reporting Standards for the Extractive Sector - Updates

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Consultation

The Extractive Sector Transparency Measures Act (“the Act”) received Royal Assent on and was brought into force on . The Act delivers on Canada’s 2013 G8 commitment to contribute to global efforts against corruption in the extractives sector. The Act requires businesses involved in the exploration or extraction of oil, gas, or minerals to publicly report each year on specific types of payments made to all levels of government, in Canada and abroad.

Natural Resources Canada has developed implementation tools for the ESTMA, in consultation with industry, civil society organizations, as well as Aboriginal experts, and provinces.  These tools are now available for public comment until . The tools can be accessed on the Natural Resources Canada Extractive Sector Transparency Measures Act page.

On , Minister Rickford announced the coming into force of the Extractive Sector Transparency Measures Act.

News Release: Harper Government Delivers on Commitment to Enhance Transparency of Extractive Industry

Backgrounder: Extractive Sector Transparency Measures Act

Summary of the Regional Aboriginal Roundtable Discussions on the Extractive Sector Transparency Measures Act (ESTMA)

Context

Natural Resources Canada on behalf of the Government of Canada held 13 regional Aboriginal roundtable discussions on the Extractive Sector Transparency Measures Act (ESTMA) in (in Ottawa, Toronto, Thunder Bay, Yellowknife, Fort McMurray, Edmonton, Saskatoon, Montreal, Halifax, Winnipeg, Whitehorse, Prince George and Vancouver). The ESTMA will require extractive entities subject to Canadian law and engaged in the commercial development of minerals, oil, or natural gas to report certain payments made to all levels of governments domestically and abroad.

The purpose of the roundtables was to:

  • clarify the reporting requirements being placed on extractive businesses;
  • discuss the relevance of the standards for Aboriginal governments / communities;
  • discuss concerns raised in earlier engagements; and,
  • gather further input regarding implementation.

In total 104 participants representing 83 Aboriginal governments/organizations attended the 13 roundtable sessions across Canada. The following summary is not meant to be an exhaustive accounting of all issues raised, rather it is meant to reflect key issues and concerns raised by all participants.

Summary

Generally, participants were not opposed to the ESTMA's objective of contributing to international efforts to deter corruption in the extractive sector. Many noted a perception that the Act unduly focuses on Aboriginal governments, though officials reaffirmed that this is not the case. The discussions primarily focused on providing clarity on various elements of the Act (e.g., definition of payees, the concept of control) and addressing questions of how the legislation may impact Aboriginal governments.

It was noted that as the Government of Canada proceeds with ESTMA implementation, it will be important to consider differences between Aboriginal governments across Canada. For example, the commitments made in Aboriginal treaties including settled land claims, numbered treaties, modern treaties and pre-confederation treaties, may affect how Aboriginal governments address their natural resources. It was recommended by participants that Aboriginal governments be involved in the development of the policies and implementation of the ESTMA. Some participants held the view that Aboriginal engagement was lacking during the development of the Act.

Most participants recognized that the roundtable sessions did not constitute "consultation" and many noted that given the potential impact on Aboriginal treaties that formal consultation may be required. Many also suggested the need for further engagement with Aboriginal leaders and elders.

The roundtable sessions also provided an opportunity to share concerns regarding potential implications for Aboriginal governments/communities. Key issues raised included:

Federal Transfers:
concern that the information disclosed through the Act, including Aboriginal own-source revenue, may be used by the federal government to recalculate transfer payments to Aboriginal governments. Officials noted that ESTMA is not designed to achieve this outcome, but recognized this issue as a concern that would be considered.
Excessive Reporting:
it was noted that the ESTMA may duplicate reporting required under other federal measures, such as the First Nations Financial Transparency Act, Own Source Revenue reporting, and the Indian Oil and Gas Act. To ensure that Aboriginal government reports are aligned/coincide with industry reports, Aboriginal governments may be pressured to adopt similar reporting requirements to ensure there is no misinterpretation of reports;
Misperception/Misinterpretation:
that without proper context the reported payments by extractive industries may be misinterpreted or cause a misperception of what is actually paid to Aboriginal governments. For example, an industry's donation to an Aboriginal government/community may be included in its reporting under a particular payment category (e.g., infrastructure improvement), and may present the wrong impression of what the Aboriginal community actually received from the development of its natural resources. The result of this misperception/misinterpretation may affect Aboriginal governments' relations with Canadians and industry;
Capacity:
it was noted that given the complexities of the ESTMA and the variety of challenges faced by Aboriginal communities (e.g., social, economic, environmental), Aboriginal governments lack the capacity to monitor extractive businesses' reports and to use the information made available by the Act. Participants called on the Government to consider capacity support for Aboriginal governments to better understand and utilize the information from the ESTMA, as well as help to address some of the concerns raised by Aboriginal governments; and
Aboriginal Economic Development:
participants noted concern that the ESTMA may negatively impact their relationship with industry, hampering efforts to negotiate agreements (e.g., Impact Benefit Agreements) and deterring investment due to excessive reporting requirements. Further, concern was noted that the information revealed by the Act may result in an industry "race to the bottom" (i.e., using the lowest common compensation point) in terms of negotiating agreements.

Perceived Benefits

Participants were also asked to identify potential benefits of the ESTMA for Aboriginal governments. Benefits identified included:

  • increasing understanding of the economic contributions of exploration / extraction activities to Aboriginal communities;
  • determining when extractive businesses are operating on Aboriginal lands and whether they are contributing to Aboriginal communities impacted by their operations;
  • providing information on extractive industry payments to other Aboriginal governments / communities as well as other levels of government (e.g. provincial/territorial, federal);
  • assisting the understanding of how Impact Benefit Agreements are developed;
  • understanding the value of resources so as to level the playing field in the negotiation of agreements with industry; and
  • benefitting international indigenous peoples, who do not have similar relationships with extractive industries.

Next Steps

Following the coming into force of the Act there will be a two year deferral of extractive industries' requirement to report on payments made to Aboriginal governments in Canada. During this time, the Government of Canada will continue to engage Aboriginal governments.

Update

In support of Canada's G8 commitment to develop standards aimed at deterring corruption in the extractive sector, the Government of Canada is establishing new reporting requirements for Canadian extractive companies. On the Government introduced the Extractive Sector Transparency Measures Act (ESTMA) to establish mandatory reporting standards for the extractive sector. The ESTMA received Royal Assent on . The Act delivers on Canada's 2013 G8 commitment to establish reporting standards for the Canadian extractive sector by .

The mandatory reporting standards would require extractive companies, subject to Canadian law, both publicly listed and medium and large private entities, to publicly report on payments of, or above, $100,000 (e.g., fees, taxes, royalties) made to all governments, including Aboriginal governments, related to oil, gas, and mining development at home and abroad.

Companies would post reports on their corporate websites and provide the Government of Canada with web links to the reports. Links to these reports would then be posted on the Treasury Board Secretariat's Open Government portal.

The reporting standards are aligned with other emerging international reporting requirements aimed at addressing corruption through greater transparency in extractive industry payments to governments (e.g., US Dodd-Frank Act and the EU Transparency Directive). To minimize the administrative burden for industry, the Canadian approach would allow for substitution of reports from other jurisdictions with similar reporting requirements.

The Act can be found on the Parliament of Canada website, Division 28 of the Bill and an overview of the legislation can be found on the ESTMA Elements page.

Lastly the ESTMA has also been included as a commitment as part of Canada's Action Plan on Open Government 2014-2016.

Going Forward

As the Government of Canada moves forward with the establishment of the mandatory reporting standards, NRCan will continue to engage provinces and territories, Aboriginal governments, industry and civil society to inform them of progress and to seek their continued input on the implementation of the standards.