Mandatory Reporting on Extractives (CA0036)

The Government of Canada will introduce legislation on mandatory reporting standards for the extractive sector that require the reporting of certain payments made to governments related to the commercial development of oil, gas, and minerals.

Commitment 7. Mandatory Reporting on Extractives (✪)

Commitment Text:

The Government of Canada will introduce legislation on mandatory reporting standards for the extractive sector that require the reporting of certain payments made to governments related to the commercial development of oil, gas, and minerals.

As a country with abundant natural resource wealth, Canada understands the necessity of openness and accountability in resource development both at home and abroad. Responsible development attracts investment, helps enhance the reputation of Canada's extractive firms, and strengthens international partnerships.

In 2013, G8 leaders noted that in many developing countries there is huge potential for economic growth based on abundant natural resource reserves. The Government of Canada is meeting its international commitment to establish mandatory reporting standards by 2015 for the extractive sector and doing its part to contribute to raising global standards of transparency. Raising global standards of transparency will improve accountability in the sector and reduce corruption and other illicit activities.

The Government of Canada will establish reporting standards for the extractive sector, requiring extractive entities to report on certain payments made to governments in Canada. Extractive entities are often required to make such payments to cover licence fees, rental and entry fees, royalties, and other costs. Mandatory reporting standards will increase Canadians' awareness about how extractive companies' revenues are spent, which supports transparency and social responsibility and helps to combat corruption.

By creating an open reporting environment, with clear and understandable information made available to the public, greater transparency and accountability in resource development can be achieved everywhere Canadian extractive firms operate.

Deliverables to be completed in 2014-16:

• Introduce new legislation that will require extractive entities to implement mandatory reporting standards and report annually on payments to all levels of government, domestically and internationally.
• Ensure stakeholder engagement on the establishment and implementation of these mandatory reporting standards.
• Require extractive entities to publish data on the payments they make to governments in Canada and around the world.

Responsible institution: Natural Resources Canada

Supporting institution(s): None

Start date: November 2014   End date: 30 June 2016

Editorial note: This is a starred commitment, because it is measurable, clearly relevant to OGP values as written, of transformative potential impact, and was substantially or completely implemented.

Commitment Aim:

This commitment aims to establish legislation based on stakeholder engagement, to improve reporting standards for the extractives industry. Under the legislation, extractive entities would be required to publish data on the payments they make to governments in Canada and around the world.

STATUS

Mid-term: Substantial

The first milestone was met in the first year of the second action plan cycle. The Extractive Sector Transparency Measures Act was assented to on 16 December 2014 and came into force on 1 June 2015. Engagement activities referenced under milestone number two were ongoing at the time of the mid term progress report. The third milestone was fulfilled by the passing of the new legislation requiring extractive entities to publish data annually within 150 days after their fiscal year end - with the exception of aboriginal governments, which have a two-year deferral.

End of term: Substantial

Natural Resources Canada (NRCan) consulted with provinces, industry and civil society stakeholders in an effort to fulfill milestone number two and to develop implementation tools to support adherence to the Extractive Sector Transparency Measures Act. These consultations were used to develop Guidance and Technical Reporting Specifications that were published online 1 March, 2016.  ^{Extractive Sector Transparency Measures Act, http://www.nrcan.gc.ca/mining-materials/estma/18180}  Engagement sessions were held in 11 cities and were attended by 70 industry representatives, over 20 civil society representatives, and more than 40 aboriginal governments and national aboriginal organizations.  ^{Summary of sessions http://open.canada.ca/en/consultations/mandatory-reporting-standards-for-extractive-sector-what-we-heard}  The Government of Canada published a ‘What we Heard’ document based on these engagement activities.  ^{Summary of sessions http://open.canada.ca/en/consultations/mandatory-reporting-standards-for-extractive-sector-what-we-heard}

According to government, engagement activities are ongoing to ensure compliance with the new legislation and to better understand the impact of the legislation on specific communities.

Did it open government?

Access to information: Major

The Extractive Sector Transparency Measures Act (ESTMA) came into force on 1 June, 2015. The legislation sets out a framework for transparency in the extractive sector that will lead to the flow of new information stemming from its new reporting guidelines.  Reporting requirements apply to companies that are or have securities listed on a stock exchange in Canada, have a place of business in Canada, do business in Canada, or have assets in Canada. Companies must also meet two of the three following minimum size-related thresholds to be included in required reporting: in at least one of its two most recent financial years, the company must (1) have at least C$20 million in assets, (2) have generated at least C$40 million in revenue, and/or (3) employ an average of at least 250 employees.  ^{Natural Resources Canada, http://www.nrcan.gc.ca/mining-materials/estma/18802#A2}

While the new legislation and reporting does necessitate reporting which supports increased transparency, civil society actors interviewed for the mid-term progress report wanted to see the government go further by implementing the Extractive Industries Transparency Initiative (EITI): “While the Government of Canada has supported EITI, it does not implement the standard. Implementing the standard would, among other things, foster citizen engagement as well as simplify and improve the ability for stakeholders to locate information regarding the extractive industries. Under EITI, there is “a centralized repository where records can quickly be downloaded and compared.” Under the current situation captured by the existing commitment, Canada’s ‘compliance’ involves each company maintaining its own records ‘somewhere’ and will require anyone interested in actually figuring out what is going on to track down each one individually.  ^{Canada Progress Report 2014-2015, http://www.opengovpartnership.org/wp-content/uploads/2001/01/1.Canada14-15_English_Final_0.pdf}

It can however be noted that NRCan offers a central repository of links to reports.  As reports are submitted to NRCan under the ESTMA, they will be found at http://www.nrcan.gc.ca/ESTMA.

Civic participation: Major

The Government of Canada has engaged with a number of actors including the provinces, the extractive industry and civil society in an effort to develop guidance and technical specifications regarding transparency in extractive industries.  ^{Tools for Extractive Businesses, http://www.nrcan.gc.ca/mining-materials/estma/18192}   This engagement was carried by Natural Resources Canada even prior to the passing of the ESTMA. According to the government, stakeholder compliance engagement is ongoing and is expected to continue in the initial years of implementation.

It followed good engagement practices by publishing both the comments it received as well as a ‘What we Heard’ document synthesizing the feedback provided.

Carried forward?

This commitment was carried forward to the third action plan under Commitment 17 ‘Implement the Extractives Sector Transparency Measures Act.’ Milestones include:

• Undertake outreach activities with reporting entities to ensure awareness and understanding of processes for publishing their reports based on a consistent template and format.
• Improve public access to published reports through a common online window.
• Seek broader alignment of ESTMA with other jurisdictions in Canada and around the world.  ^{Canada’s Third Biennial Plan to the Open Government Partnership 2016 – 2018, http://www.opengovpartnership.org/wp-content/uploads/2001/01/Canada_AP3.pdf}