Explorers with Canadian ties have new reporting obligations
As of 1 June 2015, the Canadian government requires oil and gas companies within their jurisdiction to report payments of CAD $100,000 or more that have been made to any government body.
The new obligations are part of the Canadian government’s Extractive Sector Transparency Measures Act (ESTMA). These measures reflect Canada’s commitments made with its G8 counterparts to coordinate efforts to regulate ethical conduct of companies in the extractive industry that are operating internationally.
ESTMA applies to specific businesses engaged in the commercial development of oil, gas, or minerals (e.g., exploration or extraction activities) that are either:
1) listed on a stock exchange in Canada; or
2) operating in Canada, and meet two of three size-related criteria in one of their two most recent financial years:
a. at least CAD $20 million in assets;
b. CAD $40 million in revenue;
c. employs an average of 250 employees, during the two-year period.
Payment categories are:
- Taxes (excluding consumption and personal income taxes);
- Fees, including rental, entry fees, or other considerations for license; permits, etc.;
- Production entitlements;
- Dividends, other than dividends paid to ordinary shareholders; or
- Infrastructure improvements.
Reports are required annually, filed 150 days following the entity’s financial year-end, detailing the specific projects that the payments relate to and what government body received payments. A parent company may report on behalf of a wholly-owned subsidiary.
Extractive entities are required to report annually on payments made to governments relating to the commercial development of oil, natural gas, or minerals, at home and abroad. Payments will be broken down in the report on a project basis. The definition of project will be provided in an administrative document. The reports must also be made publicly accessible and retained for seven years.The Act also provides that the Canadian Government may accept reports prepared in another jurisdiction as satisfaction of ESTMA requirements. The assessment of measures taken in other jurisdictions is currently in progress to ensure the consistency of ESTMA. Other G8 members have, or are currently working towards, similar measures for extractive sector companies.