The Extractive Sector Transparency Measures
Act (ESTMA) has been in force since June 1, 2015.
Entities that are listed on a Canadian exchange or meet certain
size requirements and are engaged in the commercial development of
oil, gas and minerals are required by ESTMA to file an annual
report disclosing certain cash and in kind payments made by them to
domestic and foreign governments. Reports required under
ESTMA must be filed within 150 days of the entity’s financial
year end, and must be accompanied by an attestation by an officer
or director of the reporting entity.
Under ESTMA, every relevant payment in each payment category
must be collected and aggregated to determine whether the $100,000
reporting threshold by category and payee has been reached or
exceeded. ESTMA broadly defines an “entity” as
including corporations, trusts, partnerships and joint
associations, and contains rules which attribute payments made by
subsidiaries to the ESTMA reporting entity that controls them. This
means that companies which are, or may be subject to ESTMA and have
complex corporate structures, or a large number of subsidiaries or
joint venture interests, should already be integrating ESTMA into
their business processes to prepare for their first ESTMA
Recommended measures to prepare for a first ESTMA filing
assessing corporate structure both domestically and abroad to
identify all ESTMA “reporting entities” in the
evaluating ESTMA obligations in relation to foreign
jurisdiction resource revenue transparency legislation applicable
to certain members of the corporate family;
determining how the attribution rules apply to each
entity’s payments and payees;
implementing a payment tagging and tracking process to collect
and aggregate payments by payment category and payee to identify
where the reporting threshold has been triggered; and
developing a strategy as to which entities in the corporate
structure will file ESTMA reports, and whether they will report for
other entities within the corporate family.
In addition to preparing for its first report, an entity subject
to ESTMA should consider how it can manage future regulatory risk
by incorporating ESTMA compliance into its day to day governance
structure and operations. Proactive measures may include:
identifying and training applicable personnel and
ensuring that co-investment agreements, such as shareholder
agreements and joint venture agreements, assign responsibility for
compliance with ESTMA and contractually allocate risk of
assessing each acquisition target’s ESTMA compliance in
its due diligence process; and
integrating ESTMA processes into internal certification and
audit processes to facilitate reporting and allow for the due
diligence defense in the event of inadvertent non-compliance.
While ESTMA may appear to create a short list of new
requirements, actually incorporating the requirements into an
entity’s operations and reporting processes requires
thoughtful analysis and an investment of time and resources. This
is especially so for complex corporate families in multiple
In many cases, the difficult decisions and questions to be
answered do not reveal themselves until the analysis is well
underway, as was shown to be the case recently when representatives
from industry, Bennett Jones and Natural Resources Canada met at
Bennett Jones’ offices in Calgary and Vancouver to discuss
the challenges and questions confronting
companies implementing ESTMA. While many questions were
answered during these sessions, new issues and questions to be
addressed were also identified. We are proactively engaged in
fielding and answering those questions and developing best
practices for ESTMA compliance.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
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.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).