Natural Resources Minister Joe Oliver has announced that Canada plans to impose on mining and energy companies mandatory reporting for payments in excess of $100,000 to Aboriginal and other governments by June 2015.
The federal government’s preference is to implement the mandatory reporting standards through provincial securities regulation. If there isn’t agreement from the provinces, then the federal government will attempt to use federal legislation. The Minister’s March 3, 2014 announcement will affect Canadian mining and energy companies operating in Canada or internationally.
The proposed reporting standards would apply to public and private, medium and large companies in the mining and oil and gas industries operating in Canada that exceed two of the following three thresholds:
(a) $20 million in assets;
(b) $40 million in net turnover; or
(c) 250 employees.
Those companies would have to publicly report all payments of $100,000 and over made to all levels of government, both domestic and abroad, on a project-by-project basis. This requirement would include payments made to Aboriginal entities.
This announcement follows Prime Minister Stephen Harper’s June 2013 announcement, prior to the G-8 summit, that Canada would develop new standards to align with initiatives by other G-8 countries (including the US’s Dodd-Frank Act s. 1504) and recommendations made by the Resource Revenue Transparency Working Group in January 2014 (for more information see our bulletin on those recommendations).
Similar to the disclosure requirements of the national instrument 43-101 regarding the standards of disclosure of technical and scientific information for mineral projects, the federal government is proposing that disclosure of payments to governments be implemented by securities legislation for both reporting and non-reporting issuers. However, if the provinces do not agree to include such requirements in security legislation, the federal government may have to consider other methods of implementation.
Impact Benefit Agreements (IBAs) and similar agreements are used in Canada and internationally for payments by resource companies. The agreements typically require payments and other agreement terms to be kept confidential. However, most include an exception where disclosure of the confidential information is required by law. Therefore, the implementation method chosen by the federal and provincial governments will have to be clear and legislative in nature, rather than policy-based or voluntary, to permit companies that are otherwise bound by confidentiality to disclose payments.
The disclosure of payments will also provide more transparency and information regarding the nature, type and scale of payments that are occurring. More publicly available information will likely affect the outcomes of future negotiations of these types of agreements.