The Northern Miner, first published in 1915, during the Cobalt Silver Rush, is considered Canada’s leading authority on the mining industry.
On Oct. 23, 2014, the Government of Canada introduced its long-awaited legislation to mandate disclosure of public payments made by mining and oil & gas companies for the commercial development of oil, gas and minerals. The Extractive Sector Transparency Measures Act follows over a year of industry consultations and an industry and civil society-led roundtable, both of which Davis LLP has covered extensively. With the introduction of the Act, key details for the payment reporting scheme have been clarified, which are reviewed below.
The basic payment reporting obligation
The Act applies to any entity engaged in, or controlling other entities engaged in, the commercial development of oil, gas or minerals anywhere in the world so long as the entity: has publicly listed in Canada; has a place of business in Canada, does business in Canada or has assets in Canada, and that, based on its consolidated financial statements, meets at least two of the following conditions for at least one of its two most recent financial years; has $20 million in assets; has $40 million in revenue; and/or has 250 employees.
Entities covered under the Act must provide the Canadian government with an annual report detailing the payments it has made directly or indirectly to a public body — whether monetary or in-kind — to develop oil, gas or minerals if the total amount of such payments during the previous financial year is at least $100,000 (or such other amount if prescribed by regulation).
The categories of payments include taxes (other than consumption or personal income taxes), royalties, fees, production entitlements, bonuses, dividends (other than to ordinary shareholders), infrastructure improvements and other payments as may be prescribed by regulation.
Heavily debated aspects
The Act clarifies a number of aspects of the payment reporting scheme that were heavily debated and discussed during various industry consultations and roundtables.
The top-five most important provisions of the Act that have been clarified:
1. Verification: The annual payment report will be required to include an attestation made by a director or officer of the entity or an independent auditor or accountant, that the report is true, accurate and complete. This is a significantly relaxed verification standard from earlier discussions where the government had indicated that it was seeking verification solely from independent auditors, akin to accounting standards for annual financial statements. It is expected that verification by a director or officer should lower compliance costs for covered entities.
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