Aggregate Industry Must Comply with ESTMA
May 18, 2017 at 2:39 PM
The Extractive Sector Transparency Measures Act came into force as of June 1, 2015. Reporting entities as defined by the Act (see below) are required to submit reports for each of their financial years beginning after June 1, 2015. Reports are due 150 days after year-end.
Members have expressed concern that the nature of the payment disclosures under ESTMA, specifically the payments to TOARC, provide proprietary, competitively sensitive information. OSSGA has been in communication with NRCan over the past several months to voice our concerns and to ask for an exemption from TOARC as a “payee” under the Act.
Yesterday, in response to our letter of May 9th, OSSGA received notification that NRCan has determined that the industry must comply with the legislation. The letter stated that:
Regrettably, following a review of the facts and circumstances surrounding payments to TOARC, we have determined that your proposed solution of exempting aggregate producers from reporting payments to TOARC does not conform to the requirements of ESTMA and is therefore not feasible at this time. There is currently no basis for an exemption of this nature under ESTMA, as such payments are required to be disclosed under that Act.
NRCan proposes trying to address your concerns within the parameters of the current legislation. To this end, we offer the following considerations:
- By virtue of section 9(3) of the ESTMA (Deemed payee), it may be that payments to TOARC are attributable to the Government of Ontario, in which case payments would be reported at the provincial government level.
- Payments must be attributed to one of seven payment categories in the ESTMA. Entities should look to the substance, rather than the form, of payments in determining which payment category is applicable. It may be that payments to TOARC, while titled otherwise, are similar in substance to other payments made to the Government of Ontario and should be aggregated and reported as such.
- The Technical Reporting Specifications defines a “project” as “activities that are governed by a single contract, license, lease, (…) if multiple such agreements are substantially interconnected, this shall be considered a project”. It also states that, where a payment is not attributable to a specific project, it may be disclosed in the report without disaggregating and allocating it to a specific project. Payee-level disclosure for such payments is sufficient.
Once applied to ESTMA reporting, it is possible that the aforementioned considerations would enable aggregate producers to meet their reporting requirements under the Act, while limiting concerns with regard to reporting specific payments made to TOARC.
OSSGA will continue to press this issue by expressing its concerns to the Competition Bureau and by seeking legal advice on other potential alternatives. However, please be advised that based on the letter from NRCan, as far as the federal government is concerned, members affected by this legislation should know that they are currently expected to comply. Fines for non-compliance are up to $250,000 per day.
Is my company a reporting entity?
The Act requires that all extractive businesses subject to the Act report certain payments such as taxes, royalties, fees, and production entitlements of $100,000 or more to all levels of government in Canada and abroad (including TOARC). The Act applies to extractive entities subject to Canadian law and engaged in the commercial development of oil, natural gas, or minerals (including materials from pits and quarries). Companies subject to the Act include:
- Companies listed on a stock exchange in Canada
- Companies that are doing business in Canada and meet two of the following three criteria in one of their two most recent financial years:
- At least $20 million in assets
- At least $40 million in revenue
- Employ an average of 250 employees
Additional information resources including reporting guides and technical reporting tools for the ESTMA are available at the following link: www.nrcan.gc.ca/ESTMA.