Model ESTMA Reporting Policy

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Introduction 
1. Best practices 
2. General provisions 
3. Objectives of the policy 
4. Preparation of ESTMA reports 
5. Report submissions 
6. Record keeping 
7. Internal measures respecting violations 
8. Review period 
9. Responsibilities

Introduction

The Model ESTMA Policy has been developed by Natural Resources Canada (NRCan) to help entities implement internal policies and procedures for reporting under the Extractive Sector Transparency Measures Act (ESTMA, or “the Act”). To demonstrate compliance with ESTMA reporting requirements and due diligence, NRCan recommends that entities implement robust internal ESTMA reporting policies to determine if payments made in relation to the commercial development of oil, gas or minerals are reportable under the ESTMA. Entities reporting under the ESTMA are not required to implement ESTMA reporting policies.

Each section of the Model ESTMA Policy provides an overview of the considerations that entities should give to various elements of the ESTMA. These considerations should also be read in consultation with the ESTMA legislation, the Guidance Document and Technical Reporting Specifications (TRS). Examples are included within each section of the Model ESTMA Policy as illustrations of the types of provisions entities should consider in their own reporting policies.

The Model ESTMA Policy is intended to be practical and illustrative. It is recommended that entities implement reporting policies for the ESTMA in a way that is consistent with their business lines and operations. As such, entities may decide to follow only those sections of the Model ESTMA Policy that apply specifically to them, or to include other relevant provisions that are not described in this document.

1. Best practices

As a general recommendation, ESTMA reporting policies should describe the internal processes and decision-making used to determine if payments fall within the scope of the ESTMA. ESTMA reporting policies might also be helpful in centralising a company’s ESTMA guidelines and formalising guidance and procedures to ensure that the entity’s reporting complies with the requirements of the ESTMA.
To that end, some relevant subject areas that this policy might encompass include, but are not limited to:

  • The application of the ESTMA’s definition of “payee” to ensure that payments are properly attributed to government entities and are aggregated to the same payee.
  • Consideration of payments based on their substance, rather than their form, or their alignment with the ESTMA payment categories, to determine their reportability under the ESTMA.
  • The applicability of any social or infrastructure payments made as a condition of the entity’s operations or in exchange for no opposition to a project, if applicable.
  • The system of internal controls and validation procedures to facilitate compliance with the ESTMA and its requirements.
  • The company’s ESTMA reporting policy should also encompass each of the additional recommendations included in this report and should also be revised periodically as the facts and circumstances of the entity’s operations changes.

Depending on their operations and circumstances, entities are also encouraged to include any additional provisions outlined in this document to supplement their ESTMA reporting policies, as well as any other internal guidance or interpretations of ESTMA requirements.

2. General provisions

This section describes some general provisions about the ESTMA reporting policy that entities could implement to guide the policy’s interpretation and use.

Example provisions

Effective date

  • This policy takes effect on [insert date].

Authorities

  • This policy should be implemented in accordance with the requirements of the Extractive Sector Transparency Measures Act, the Technical Reporting Specifications, and the Extractive Sector Transparency Measures Act Guidance – each subject to amendment.
  • Where there is conflict or incompatibility between this Policy and legislation, the provisions of the legislation take precedence.

3. Objectives of the Policy

Entities might also include a statement in their ESTMA reporting policies that establishes the rationale for the reporting policy’s implementation. The following provisions are examples of the types of purpose statements that might support the policy’s implementation:

Example provisions

This Policy applies to [Entity Name] given that it meets the definition of a Reporting Entity under the ESTMA and therefore it must consider, on an annual basis, whether payments it has made to governments in Canada and abroad qualify as reportable payments under the ESTMA. The objectives of this Policy are to:

  • Provide guidance and procedures to ensure that [Entity Name] complies with its legal obligations, as set out in the Extractive Sector Transparency Measures Act, to publicly disclose, on an annual basis, certain types of payments made to governments in Canada and abroad.
  • Foster a culture that supports and promotes Canadian and international efforts to raise transparency and reduce corruption in the global oil, gas and mining sectors.
  • Increase public, employee and stakeholder trust in the credibility and reliability of [Entity Name]’s accountability respecting the payments they make to governments in Canada and abroad.
  • Set out expectations regarding the design, conduct, management, review and communication of financial reporting practices, and related activities.

4. Preparation of ESTMA reports

On an annual basis, entities that have made payments reportable under the ESTMA must prepare a report following the reporting and publishing specifications specified in the TRS. The following subsections provide examples of the processes and considerations entities should undertake when determining if they have made payments reportable under the ESTMA.

4.1 Considerations of reportable payments and payees

ESTMA reporting policies should establish the basic procedures for reporting payments. For instance, entities should include provisions ensure that payments are accurately broken down and aggregated, and that decisions around categorization of payments are clearly documented. Entities might also describe their considerations of the facts and circumstances to determine whether a particular organisation meets the criteria of a payee.

Entities might also add clear directions around issues such as:

  • the attribution of payments made to a payee indirectly (i.e., made through an intermediary)Footnote 1.
  • aggregation of payments made to a same payeeFootnote 2, and
  • social paymentsFootnote 3.

More information about the classification of payments, and considerations around the definition of ‘payees’ can be found in the ESTMA Guidance document.

Example provisions

  • [Entity Name] will determine if any Reportable Payment is attributable to one of the following payment categories, based on substance over form:
    • taxes
    • royalties
    • fees
    • production entitlements
    • bonuses
    • dividends
    • infrastructure improvement payments
  • [Entity Name] must identify and aggregate all the payments made within one of the payment categories to a single Payee. If that amount meets or exceeds C$100,000, it must be included in an ESTMA report.
  • [Entity Name] shall complete both the Payments by Payee and Payments by Project spreadsheets when completing its report.
  • [Entity Name] will consider facts and circumstances to determine whether payments made to a particular organization or institution meet the criteria set out in the Act for any of the following Payees:
    • any government in Canada or in a foreign state, including any Indigenous group or organization that exercises or performs the power, duty or function of government.
    • a body that is established by two or more governments.
    • any trust, board, commission, corporation or body or other authority that is established to exercise or perform, or that exercises or performs, a power, duty or function of government for a government.
  • [Entity Name] will use the same analyses and considerations when determining when and how to report payments to Indigenous governments as they would with any other government in Canada or abroad.
  • [Entity Name] will document its analysis and decision-making processes when determining which payments are in and out of scope as part of demonstrating their efforts made in complying with the Act.

4.2 Joint operating agreements, joint ventures and situations of joint control

If entities are involved in joint ventures or other situations of joint control, they should implement clear procedures around reporting payments made in these situations. Although specific provisions would depend on entities’ circumstances, example provisions are included below for entities that engage – or that expect to engage – in these types of complex partnerships.

Example provisions

  • As [Entity Name] is the Operator in a joint operating agreement, it will report all of the reportable payments it makes on behalf of Non-Operator members.
  • As [Entity Name] is a Non-Operator in a joint operating agreement, it will report any payments made directly to a Payee, as well as any payments made as part of the joint operating agreement that are not reported by another Operator.
  • [Entity Name] will make best efforts to determine whether the Operator is reporting reportable payments made by a joint venture or under a joint operating agreement.

5. Report submissions

The following provisions describe requirements of the ESTMA reporting process. Entities should also consult the TRS for instructions on the form and matter of submitting a report under the ESTMA. The TRS also provides links to the tools and forms necessary for report submissions.

5.1 Reporting deadline

It is also advisable that entities formally establish their ESTMA reporting deadline, i.e., the date upon which a report of payments made by the entity to governments during that financial year must be submitted to NRCan. This date must not be any later than 150 days after the end of the entity’s financial yearFootnote 4. Entities should also consider the procedure that must be followed if no payments reportable under the ESTMA are made in a financial year.

Example provisions

  • [Entity Name] must submit a report by the Reporting Deadline, that being not later than 150 days after the end of its financial year, i.e. [Insert end of financial year + 150 days] (the “Reporting Deadline”).
  • If [Entity Name] does not make any Reportable Payments within a financial year, it will notify Natural Resources Canada by email within 150 days following the end of the financial year that no report will be submitted for that year.

5.2 Attestation

Each ESTMA report must include an attestation statement – either an independent attestation made by the entity or an independent opinion from an auditor. Please note that if an entity uses one form of attestation over the other, it would not be required to include both provisions in its ESTMA policy.

Example provisions

Upon submitting an annual report, [Entity Name] shall include an attestation statement by a director or an officer of the entity. 
In the event that the attestation is being made by [Entity Name] itself,

  • The name of the director or office that is making the attestation, their position and the date of attestation shall be provided in the Data Entry sheet. No physical signature is required.

OR

If the attestation is being made through an independent audit,

  • A director or officer from [Entity Name] shall attest that they obtained an independent audit opinion that follows the Canadian Auditing Standards and the audit will be submitted with the report.

5.3 Publication of reports online and continued accessibility

Entities might consider implementing procedures to formalize the online publication of their ESTMA reports . Given the requirement that ESTMA reports remain accessible to the public for a period of five (5) years, entities should also consider implementing procedures for informing NRCan if reports are moved to different websites or become unavailable.

When implementing these policies, entities should consult the TRS and Extractive Sector Transparency Measures Act (ESTMA) FAQs for more detailed information related to the format, location and maintenance of reports published online.

Example provisions

  • [Entity Name] shall publish the accepted version of its ESTMA report online to a publicly accessible website in a machine-readable format.
  • At the time of submission, [Entity Name] will provide Natural Resources Canada with a functional link to their ESTMA report, as well as an electronic copy of their report in XLSX format, via the eServices Portal.
  • [Entity Name] shall make its annual report links accessible to the public for the prescribed five (5) year period.
  • [Entity Name] will notify Natural Resources Canada should any reports become unavailable and provide a functional link at its earliest convenience.

5.4 Report validation and reporting errors

If entities are contacted by NRCan concerning report validation errors following the submission of their annual reports, they should resolve the issue(s) as quickly as possible and document the errors to avoid repeating them in subsequent years.

Example provisions

  • [Entity Name] shall respond promptly to Natural Resources Canada in the event of report validation errors being identified.
  • [Entity Name] shall implement a robust tracking system of any reporting errors to prevent their recurrence.

6. Record keeping

The ESTMA requires that entities retain records of their payments to governments for a period of seven (7) yearsFootnote 5 from the date a payment was published in a report and provided to NRCan. Entities should implement procedures to ensure this requirement is met and include additional details around the types and locations of records that should be stored.

Example provisions

  • [Entity Name] must retain records of payments to governments for seven (7) years from the date the information on a payment was published in a report and provided to Natural Resources Canada.

7. Internal measures respecting violations

Entities should also implement internal measures to allow for violations of their ESTMA reporting policies and/or ESTMA requirements to be reported and addressed internally. As such, ESTMA reporting policies might also describe how any violations should be reported to senior management, as well as how violations of ESTMA reporting requirements should be reported to NRCan. If the entity has an internal whistleblower policy in place, relevant information should be provided to enable employees to report violations there as well.

These mechanisms would contribute to good corporate responsibility as NRCan may recommend prosecution to the Director of Public Prosecutions under section 24 of the Act, which allows for fines of up to $250,000 per day per offence, if a person or entity is found to be willfully not compliant with reporting requirements or corrective measures, obstructs an audit, knowingly provides false or misleading information, or fails to comply with the requirements described under sections 9, 12 or 13 of the Act.

Example provisions

Any employee that suspects or has reasonable grounds to suspect a violation of this policy or of the requirements of the ESTMA is encouraged to submit a report setting forth their suspicions to [insert designated employee] as soon as possible.

Where submissions are made on an anonymous basis, they must contain enough information to be actionable.

Employees are encouraged to report violations of the ESTMA to Natural Resources Canada by submitting a third-party complaint by email to estma_reports-rapports_lmtse@nrcan-rncan.gc.ca or regular mail to:
 

Extractive Sector Transparency and Taxation Division
Lands and Minerals Sector
Natural Resources Canada
580 Booth Street, 9th floor
Ottawa, ON K1A 0E4
 

Employees are encouraged to report any suspected bribes or related offences directly to the RCMP (see the Report Corruption section of the RCMP’s Corruption website).

8. Review period

Entities should keep informed of developments concerning the ESTMA for potential future amendments to the ESTMA guidance documents and reporting requirements. 
It is also recommended that entities periodically reassess their ESTMA reporting policies to ensure they are current and accurately reflect their current circumstances. Entities should also take note of any feedback received from NRCan on their reports (e.g., notes of errors, requests for clarification or amendments) for ways to improve their ESTMA reporting policies over time, or as operational circumstances change.

Example provisions

[Entity Name] will review this ESTMA reporting policy on an annual basis and consider opportunities to improve upon its content and implementation. This policy will also be updated if [Entity Name’s] operational circumstances change such that its reporting under the ESTMA will be affected.

9. Responsibilities

As a best practice, entities should identify individuals responsible for key aspects of the ESTMA reporting process, as depicted in the following example provisions.

Example provisions

Preparation of report

  • [Insert employee/section] shall draft and review the ESTMA Report to ensure that all information is accurate and complete in all material respects.
  • [Insert employee/section] is responsible for validating all the operational, accounting and tax information that is obtained during the preparation of the ESTMA Report.

Report submissions

  • [Insert employee/section] shall be the primary contact person for communications with Natural Resources Canada and is the individual responsible for the submitting of ESTMA by the Reporting Deadline defined at Policy 5.1.1, above, in the form and manner prescribed by the Technical Reporting Specifications.

Publication of reports online and continued accessibility

  • [Insert employee/section] is responsible for ensuring that annual reports are published online in the form and manner prescribed by the Technical Reporting Specifications prior to the report being submitted to Natural Resources Canada.
  • [Insert employee/section] shall implement oversight procedures for ensuring that links to an annual report remain valid at all times and will promptly take corrective actions to immediately fix any broken link and will notify Natural Resources Canada of the actions taken.

Report validation and reporting errors

  • Upon submitting an annual report to Natural Resources Canada, [Insert employee/section] is responsible for responding promptly to Natural Resources Canada in the event of report validation errors being identified.
  • [Insert employee/section] shall maintain a tracking system of any reporting errors while ensuring that responsible parties are notified to prevent the recurrence of errors. Where necessary, recommendations will be made for the current policy to be updated or revised with procedures to improve upon reporting practices.

Record keeping

  • [Insert employee/section] is responsible for the collection and retention of records of payments to governments for seven (7) years from the date the information on a payment was published in a report and provided to Natural Resources Canada.

Review of policy

  • [Insert employee/section] is responsible for monitoring the implementation of this policy and will provide, on an annual basis, a report to [senior management] on the policy’s effectiveness and will recommend procedures to ensure its adequate functioning.
 
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