The Extractive Sector Transparency Measures Act (ESTMA) came into force on June 1, 2015. Due to a two-year phase-in period, payments made after June 1, 2017, to Indigenous payees must now be reported.
For most extractive companies engaged in the commercial development of oil, gas or minerals in Canada or elsewhere, those payments must be reported by May 30, 2018.
This bulletin provides a refresher about compliance under ESTMA, more precisely relating to payments made to Indigenous payees.
Reporting requirements under ESTMA
The general obligation under ESTMA is that every entity covered by ESTMA, not later than 150 days after the end of each of its financial years, shall provide Natural Resources Canada (NRCan) with a report disclosing the reportable payments made during that year to any and all payees identified under ESTMA. The report will be posted on NRCan’s website.
An entity is a corporation or a trust, partnership or other unincorporated organization (a) that is engaged in the commercial development of oil, gas or minerals in Canada or elsewhere; or (b) that controls a corporation or a trust, partnership or other unincorporated organization that is engaged in the commercial development of oil, gas or minerals in Canada or elsewhere. Companies engaged only in the transportation or processing of oil, gas or minerals are not covered by ESTMA.
A reportable payment is any payments within a prescribed category of payment (taxes - other than consumption taxes and personal income taxes; royalties; fees - including rental fees, entry fees and regulatory charges, and fees or other consideration for licences, permits or concessions; production entitlements; bonuses - including signature, discovery and production bonuses; dividends - other than dividends paid as ordinary shareholders; infrastructure improvement payments) that are made to the same payee, if the total amount of all those payments during the financial year is at least $ 100,000.
A payee is any government in Canada or abroad; a body that is established by two or more governments; any trust, board, commission, corporation or body or authority that is established to exercise or perform, or that exercises or performs, a power, duty or function of government for a government or body referred to above. From June 1, 2017, this includes Indigenous payees.
The notion of Indigenous payee
The notion of “payee” is broadly defined under ESTMA, and includes the following Indigenous entities:
- Any government in Canada or abroad - The following would fall under this category: any group or organization with power to make laws in relation to natural resources or the management and exploitation of those resources; or a government that has been recognized in federal, provincial, or territorial legislation.
For example: The Nunavut Government
- A body that is established by two or more governments - The following would fall under this category: treaty associations, tribal councils, or Chiefs’ councils established by a government.
For example: The Cree Nation Government; the Algonquin Anishnabe Nation tribal Council
- Any trust, board, commission, corporation or body or authority that is established to exercise or perform, or that exercises or performs, a power, duty or function of government for a government or body referred to above
The following would fall under this category: Indigenous Trusts or Indigenous Development Corporations
For example: Makivik Corporation.
Examples of reportable and non-reportable payments to Indigenous payees
Examples of reportable payments to Indigenous payees include:
- A financial payment made to an Indigenous community on execution of an impact and benefit agreement (IBA)
- The construction of a community center for the benefit of an Indigenous community located in the vicinity of a mining project, where this undertaking is made pursuant to an IBA as a condition for the commercial development of the mine
- The payment of royalties pursuant to an IBA
- Payments for goods or services where the amount paid is higher than market value due to preferential procurement provisions pursuant to an IBA, provided as a condition of the commercial development of oil, gas or minerals
Examples of non-reportable payments to Indigenous payees include:
- Voluntary donations or sponsorships, e.g. to a hockey team located in an Indigenous community located nearby oil and gas operations of an extractive company (i.e. where the donation or sponsorship is not a legal obligation arising pursuant to an IBA)
- The purchase of equipment required for commercial operations at market value from a local Indigenous corporation (commercial-to-commercial transaction)
NRCan has published a Guidance (PDF) to help businesses in the extractive sector understand the requirements of the ESTMA and a specific Info Sheet (PDF) about payments to Indigenous payees in Canada.
NRCan has emphasized that the assessment of reportable and non-reportable payments is a matter of substance over form. Extractives companies should always consider the facts and circumstances of their operations and the jurisdiction under which they are operating. Feel free to contact the authors of this bulletin if you need any assistance with determining whether you are required to report any payments made.
 Extractive Sector Transparency Measures Act, SC 2014, c 39, s 376, s. 29.