Canada Passes Oil and Mining Payment Transparency Law

Governance and development experts welcome law, but note key provisions still missing

NEW YORK, 17 December 2014 – Experts at the Natural Resource Governance Institute welcomed Canada’s new law requiring oil, gas and mining companies to disclose their payments to governments. They warned however that the Extractive Sector Transparency Measures Act, which became law last night after receiving royal assent by Canada’s governor general, is still missing key provisions that would bring Canada into line with an emerging international standard on disclosure.

Canada’s new law requires oil, gas and mining companies to publicly disclose the payments they make to governments around the world. The rules apply to companies listed on Canadian stock exchanges as well as large privately held companies. The new legislation is meant to fulfil a G8 pledge made in 2013 by Prime Minister Stephen Harper, and means Canada joins the ranks of a growing number of countries including the United States and in Europe which have mandated transparency of extractive payments by companies to governments. The new laws have been designed to help people in resource-rich low- and middle-income countries hold their governments accountable for the management of revenues from the extraction of hydrocarbons and minerals.

"Canada has taken an important step towards improving governance in natural resource-rich countries," NRGI president Daniel Kaufmann said. "This new law has the potential to bring real openness to an industry which should drive economic development but has typically been shrouded in secrecy. However, for this law to be effective, the Canadian government must now develop strong implementing measures."

"While we are disappointed that Canada has stopped short of other countries by not requiring project-level reporting in its underlying legislation, it is encouraging that government officials have publicly stated that such vitally granular information will be required by the legally enforceable administrative tools which will accompany the law," said NRGI economic analyst Andrew Bauer. "We hope that in the enforcement of this welcome law Canada will align with other countries that have similar legislation such as the United Kingdom which finalized its rules earlier this month."

"Project-level reporting will allow communities to calculate their share of government revenues from oil and mining projects in their own backyard, and will provide investors with much-needed transparency when managing risk in the sector," Bauer added.

In the wake of the bill’s passage into law, the Canadian government will now draft administrative tools that will serve to implement it. The NRGI experts encourage the government to draft administrative tools that define "project" based on the contractual relationship between companies and government, and which ensure that company reports are available in a centralized, open data format so that all users from community groups to journalists to large institutional investors can easily access the information.

In order to align with international standards, the Canadian government should not create regulations that curtail the public availability of information and should not provide for any exemptions from disclosure, NRGI experts said. "It is essential that the Canadian government resist any attempts, particularly from some elements of the oil industry, to weaken the rules through regulation," explained NRGI senior advocacy officer Joseph Williams.

As part of the Resource Revenue Transparency Working Group, NRGI worked with Canada’s largest mining associations, the Mining Association of Canada (MAC) and the Prospectors and Developers Association of Canada (PDAC), and the civil society coalition Publish What You Pay-Canada to make strong recommendations to lawmakers on key features in the new law.

The NRGI experts welcomed the government of Canada’s commitment to work with all stakeholders in the development of the administrative tools, which they said must result in detailed disclosure of payments so that citizens in developing, resource-rich countries have greater clarity on the natural resource revenues that their governments are receiving. This improved transparency will help citizens more easily demand that their governments use these public funds to fight poverty and create sustainable economic growth, rather than lose them to corruption or mismanagement, the experts said.

"Canadian oil and mining companies operate in more than 100 countries,” noted Kaufmann. “Canada has signaled to other countries yet to move on this issue that it is time they also introduced similar requirements."

For more information, please contact:

Joseph Williams
Senior Advocacy Officer
Natural Resource Governance Institute
jwilliams@resourcegovernance.org

Andrew Bauer
Economic Analyst
Natural Resource Governance Institute
abauer@resourcegovernance.org

Bremen Leak
Communications Officer
Natural Resource Governance Institute
+1 (646) 670-3466
bleak@resourcegovernance.org

Notes for editors:

  • Government official’s statement on project-level reporting: "Engagement will also continue with stakeholders on the development of the template and industry guidance for reporting payments on a project basis that will be required to comply with the act." Mark Pearson, Director General, External Relations, Science and Policy Sector, Department of Natural Resources, speaking at the House of Commons Standing Committee on Natural Resources, November 18th, 2014. http://www.parl.gc.ca/HousePublications/Publication.aspx?DocId=6777882&Language=E&Mode=1&Parl=41&Ses=2

  • The Extractive Sector Transparency Measures Act is expected to come into force no later than June 1, 2015, with company reports beginning in May/June of 2017 for companies with a financial year ending December 31.

About NRGI

The Natural Resource Governance Institute, an independent, non-profit organization, helps people to realize the benefits of their countries’ oil, gas and mineral wealth through applied research, and innovative approaches to capacity development, technical advice and advocacy. We work with government ministries, civil society organizations, journalists, legislatures, private sector actors, and international institutions to promote accountable and effective governance in the extractive industries. Learn more at www.resourcegovernance.org.