On December 16, 2014, the federal Extractive Sector
Transparency Measures Act (the "Act") received royal
assent. The Act requires all entities involved in the
commercial development of oil, gas or minerals, in Canada or
elsewhere, to report payments made to domestic or foreign
governments annually and make the information contained in those
reports public. The Act requires reporting to Aboriginal
governments in Canada, but delays the requirement to report
payments to those bodies until two years after the Act is brought
into force by Order in Council.
For many oil, gas and mining companies, the Act will impose
significant annual reporting obligations. The exact nature of
those obligations remains to be determined by regulations.
Generally, reporting is triggered if an entity meets specified
criteria and it makes certain kinds of payments in excess of
reportable thresholds to defined Payees.
Companies listed on a Canadian stock exchange are required to
report. So are entities with locations, operations or assets
in Canada if, in their last two financial years, they met two of
the following three thresholds: $20 million in assets, $40 million
in revenue or an average of 250 employees. Other entities may
be required to report by regulation. An entity can be a
corporation, trust, partnership, or other unincorporated
As "Payees" is defined very broadly, payments to a
wide range of government boards, authorities, commissions,
corporations and bodies will trigger reporting.
The Act does not specifically include "Aboriginal
government" in the definition of Payees, but s. 29 makes it
clear that reporting to an Aboriginal government will be required
two years after the Act is brought into effect by Order in
Council. The requirement to report payments to Aboriginal
governments will cause some ripples. As standard practice,
IBAs include confidentiality provisions prohibiting disclosure of
payments to First Nations. Undoubtedly some will prefer that
those payments remain confidential, while others will welcome the
increased marketplace transparency for IBA negotiations. And,
no doubt what constitutes an "Aboriginal government" and
their boards, authorities, commissions, corporations and bodies
will be carefully pondered by many.
Payments are grouped into eight categories:
taxes, other than consumption taxes and personal income
fees, including rental fees, entry fees and regulatory charges
as well as fees or other consideration for licences, permits or
bonuses, including signature, discovery and production
dividends other than dividends paid as ordinary
infrastructure improvement payments; or
any other prescribed category of payment (section 2).
Entities must report a category of payments to a payee if the
aggregate value of all payments in that financial year for that
category exceeds a threshold of $100,000 or a threshold prescribed
by regulation. Payments can be monetary or in kind. If
the payments are in kind, their value is determined by the cost to
the company or, if that cost cannot be determined, the fair market
Entities must also make the information contained in the report
publicly available in the manner and form specified for a period of
five years or a period of time determined by the regulations.
In some instances, if an entity is bound by another
jurisdiction's reporting requirements, the report submitted to
that jurisdiction may be an acceptable substitute.
Contravening the Act can trigger substantial penalties.
Fines of $250,000 per day can be issued for every day that an
entity has failed to comply with the Act.
As the Act allows the federal government numerous opportunities
to more clearly and specifically define reporting requirements
through regulations, exactly what reporting obligations companies
will face will be determined when regulations are
promulgated. For example, the regulations can specify when
the Act's provisions do not apply to entities, payees or
payments and the manner and form reporting may take.
Companies to whom the Act will apply should review the regulations
carefully when they are promulgated to determine exactly how the
reporting obligations apply to them.
Canada is a constitutional monarchy, a parliamentary democracy and a federation comprised of ten provinces and three territories. Canada's judiciary is independent of the legislative and executive branches of Government.
The Government of Alberta recently announced a number of policy changes that will impact the Alberta Electricity Market, composed of its generators, transmitters, distributors, retailers, electricity consumers and wholesale electricity market.
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