Stephanie Zimmerling, MASc Mining Engineering // April 6, 2015
The Canadian Government has introduced the Extractive Sector Transparency Measure Act (ESTMA) into parliament. The Act will have companies, subject to Canadian Law, annually report any payments larger than $100,000 made to any level of government in Canada or abroad. In developing this framework, the regulations and standards of the US, the EU and the EITI were reviewed to ensure ESTMA somewhat aligned. While Prime Minister Stephen Harper committed to transparency and the implementation of EITI at the last G8 summit, the EITI framework does not align appropriately with Canada’ unique mining industry regime. ESTMA is Canada’s response to transparency in the extractive industry in Canada.
Last week I sat in on a presentation by Borden Ladner Gervais held by the Management & Economics Society of the Canadian Institute of Mining. As part of the event a presentation on Reporting for Mining Companies under the new Extractive Sector Transparency Measures Act was delivered. The presentation was effective in explaining what the Act entails and the who, what, when, why of the reporting framework. As described in the presentation, ESTMA will come into effect on June 30, 2015. Reports will be published annual by companies reporting on one full-year of payments. ESTMA applies to entities that are engaged in commercial development of oil, gas or minerals in Canada or elsewhere that are either listed on the Canadian stock exchange, hold assets in Canada and hold at least 2 of the following criteria: $20 million CAD in assets; at least $40 million CAD in revenue or; employ an average of 250 employees.
Who must report is somewhat complicated. The presentation highlighted that parent companies may report on behalf of their subsidiaries that are required to report. Additionally, reporting entities must report on payments made by non-reporting entities that they control, if the company is participating in the extractive sector. In simpler terms, it depends who is on top. If a Canadian company is operating in Australia, the Canadian company must report on its operations overseas. If a non-Canadian company is operating in Canada and satisfies the criteria mentioned above, the company only needs to report on their Canadian operations.
What payments must be reported includes payments made to government “payees”, with payments being broken down on a project basis. Payees include Canadian and foreign governments, including subnational and local levels. This also includes boards, commissions, corporations, trusts or other authoritative bodies that perform duties on behalf of a government. It is important to note as well that payees include aboriginal and indigenous governments.
Companies will need to make their reports publically accessible by posting them on their website. Should a company not have a website, the Minister will specify an alternative approach. The Minister also has jurisdiction to determine whether other legislated reports from the US or EU can be submitted to satisfy the reporting requirements under ESTMA. This could be applied if a Canadian company is operating in the US or the EU.
With the launch of ESTMA approaching, it will be interesting to see how the transition plays out and the response from the Canadian extractive industry.
An example of an ESTMA report can be found here: http://www.statoil.com/no/InvestorCentre/AnnualReport/AnnualReport2014/Documents/DownloadCentreFiles/01_KeyDownloads/2014%20Payments%20to%20governments.pdf