Substitution determinations

In the Minister’s opinion, the reporting requirements in the European Union’s (EU) Accounting and Transparency Directives are found to meet the purposes of the Extractive Sector Transparency Measures Act (ESTMA) and are an acceptable substitute for the reporting requirements set out in section 9 of the ESTMA.

Section 10 of the ESTMA gives the Minister of Natural Resources the authority to impose additional conditions on reporting requirements on reports from another jurisdiction. EU reports submitted in substitution for the requirements of the ESTMA must meet the following additional conditions:

1. The report must be accompanied by the ESTMA reporting template cover page that includes a completed attestation statement.
2. Reports must satisfy the transparency and reporting requirements of the ESTMA and the EU Accounting and Transparency Directives (e.g., disclosure of payments at both the payee and project levels) to be accepted for the purposes of the ESTMA. Natural Resources Canada may request additional information be provided if reports do not meet ESTMA requirements.
3. Should the deadline for filing a report in the EU extend beyond 150 days after the end of a Reporting Entity’s financial year, the Reporting Entity must notify NRCan within 150 days by email of its intent to submit a substituted report at a later date. The Reporting Entity must submit its report to NRCan within the timeframe prescribed by the EU reporting requirements.

In the Minister’s opinion, the reporting requirements in Quebec’s Act respecting transparency measures in the mining, oil and gas industries and the Regulation respecting the application of the Act respecting transparency measures in the mining, oil and gas industries achieve the purposes of the Extractive Sector Transparency Measures Act (ESTMA) and are an acceptable substitute for the reporting requirements set out in section 9 of the ESTMA.

Section 10 of the ESTMA gives the Minister of Natural Resources the authority to impose additional conditions on reporting requirements on reports from another jurisdiction. Quebec reports submitted in substitution for the requirements of the ESTMA must meet the following additional conditions:

1. The report must be accompanied by the ESTMA reporting template cover page, excluding the completed attestation statement, which is already provided under Quebec’s An Act respecting transparency measures in the mining, oil and gas industries.
2. Reports must satisfy the transparency and reporting requirements of the ESTMA and the Quebec reporting requirements (e.g., disclosure of payments at both the payee and project levels) to be accepted for the purposes of the ESTMA. Natural Resources Canada may request additional information be provided if reports do not meet ESTMA requirements.

In the Minister’s opinion, the reporting requirements in Switzerland’s Transparency Requirements for Raw Materials Companies are found to meet the purposes of the Extractive Sector Transparency Measures Act (ESTMA) and are an acceptable substitute for the reporting requirements set out in section 9 of the ESTMA.

Section 10 of the ESTMA gives the Minister of Natural Resources the authority to impose additional conditions on reporting requirements on reports from another jurisdiction. Swiss reports submitted as substitution for the requirements of the ESTMA must meet the following additional conditions:

1. The report must be accompanied by the ESTMA reporting template cover page that includes a completed attestation statement.
2. Reports must satisfy the transparency and reporting requirements of the ESTMA and the Swiss Transparency Requirements for Raw Materials Companies (e.g., disclosure of payments at both the payee and project levels) to be accepted for the purposes of the ESTMA. Natural Resources Canada may request additional information be provided if reports do not meet ESTMA requirements.
3. Should the deadline for filing a report in Switzerland extend beyond 150 days after the end of a Reporting Entity’s financial year, the Reporting Entity must notify NRCan within 150 days by email of its intentto submit a substituted report at a later date. The Reporting Entity must submit its report to NRCan within the timeframe prescribed by the Swiss reporting requirements.

In the Minister’s opinion, the reporting requirements in the United Kingdom’s (UK) Reports on Payments to Governments Regulations 2014 are found to meet the purposes of the Extractive Sector Transparency Measures Act (ESTMA) and are an acceptable substitute for the reporting requirements set out in section 9 of the ESTMA.

Section 10 of the ESTMA gives the Minister of Natural Resources the authority to impose additional conditions on reporting requirements on reports from another jurisdiction. UK reports submitted in substitution for the requirements of the ESTMA must meet the following additional conditions:

1. The report must be accompanied by the ESTMA reporting template cover page that includes a completed attestation statement.
2. Reports must satisfy the transparency and reporting requirements of the ESTMA and the UK’s Reports on Payments to Governments Regulations 2014 (e.g., disclosure of payments at both the payee and project levels) to be accepted for the purposes of the ESTMA. Natural Resources Canada may request additional information be provided if reports do not meet ESTMA requirements.
3. Should the deadline for filing a report in the UK extend beyond 150 days after the end of a Reporting Entity’s financial year, the Reporting Entity must notify NRCan within 150 days by email of its intent to submit a substituted report at a later date. The Reporting Entity must submit its report to NRCan within the timeframe prescribed by the UK reporting requirements.

The Minister of Natural Resources is of the opinion, subject to additional conditions, that the payment reporting requirements found in the United States’ Disclosure of Payments by Resource Extraction Issuers rules achieve the purpose of the reporting requirements under the Extractive Sector Transparency Measures Act (ESTMA). Therefore, the Minister has determined that the reporting requirements of the U.S. Disclosure of Payments by Resource Extraction Issuers requirements are an acceptable substitute for those set out in section 9 of the ESTMA.

Section 10 of the ESTMA gives the Minister of Natural Resources the authority to impose additional conditions on reporting requirements on reports from another jurisdiction so that they achieve the purposes of the reporting requirements of the ESTMA. US reports submitted in substitution for the requirements of the ESTMA must meet the following additional conditions:

1. Disaggregation of Project Reporting

The US rules permit entities to treat all the activities within major subnational jurisdictions as a single project^{Footnote 1}. However, if activities in a subnational jurisdiction encompass multiple separate projects, reports substituted for the purposes of the ESTMA must report on each project carried out within that subnational jurisdiction individually and the related payments be disaggregated at the project level.

2. Reports Must Use ESTMA Project Definition

Under the US rules, projects are defined using three factors: (1) the type of resource extracted; (2) the type of operation; and (3) the major subnational jurisdiction. US reports substituted for the purposes of the ESTMA must organise their reporting of payments to conform with the ESTMA’s definition of ‘project’, which is: the operational activities that are governed by a single contract, licence, lease, concession, or similar legal agreement and form the basis for payment liabilities with a government. Multiple such agreements that are substantially interconnected will be considered a project.

“Substantially interconnected” means forming a set of operationally and geographically integrated contracts, licences, leases, or concessions or related agreements with substantially similar terms that are signed with a government and give rise to payment liabilities.

3. Reporting Payments to Subnational Jurisdictions in the United States

For payments made in the United States, the US rules only require disclosure of payments made to the Federal Government of the United States and not to state, local, or tribal governments^{Footnote 2}. However, reports substituted for the purposes of the ESTMA must also include any payments made to sub-national jurisdictions and payees in the United States to achieve the purposes of the reporting requirements under the ESTMA and its section 9.

4. Control and Payment Disclosure in Situations of Joint Ventures

Under US requirements, an issuer is not required to disclose payments made by entities that it only proportionately consolidates^{Footnote 3}. Under section 3(c) of the ESTMA, entities are required to disclose any reportable payments made by, or on behalf of, entities and operations under their control. This includes proportionately consolidated entities or operations if they are substantively under an entity’s control.

In situations of joint ventures or operations where no one party has control, the US rules stipulate that an operator that makes payments to governments for the entire venture or operation on behalf of its non-operator members must report all payments^{Footnote 4}. However, section 3(d) of the ESTMA requires that non-operating members also ascertain if any payments were made on their behalf by operators, as payments made on behalf of an entity are deemed to have been made by the entity. If these payments were not disclosed by the operator, non-operating members would be obligated to report them separately.

Please consult the ESTMA Guidance (PDF, 332 KB) and Frequently Asked Questions webpage for more information on reporting in situations of joint ventures and joint control.

5. Inapplicability of Reporting Delays and Exemptions

The ESTMA does not provide for the one-year reporting delays included under the US rules^{Footnote 5}. This means that entities eligible to claim a reporting delay for a given financial year under US requirements might still have a reporting obligation under the ESTMA for that period.

The ineligible reporting delays include:

1. Reporting delay for exploration activities;
2. Reporting delay for initial public offerings (IPOs); and
3. Reporting delay for recently acquired companies.

Additionally, the US rules provide reporting exemptions for smaller reporting companies and emerging growth companies, as well as for situations where disclosures are prohibited by foreign law, and where the required disclosures would violate one or more pre-existing contract terms. The ESTMA does not provide for similar exemptions, so entities are required to inform Natural Resources Canada (at estma-lmtse@nrcan-rncan.gc.ca) if they encounter challenges in meeting ESTMA reporting requirements. Smaller reporting issuers and emerging growth companies are obligated to report under the ESTMA if they qualify as “Reporting Entities” (see subsection 8(1) of the ESTMA) and have made reportable payments (payments made to a single payee that aggregate to CAD $100,000 or more in a single ESTMA payment category).

6. Form and Manner of Reporting Additional Information

To meet these additional requirements, reporting businesses must submit and publish an ESTMA reporting template (XLSX, 59KB) containing the additional information required by the substitution determination as an addendum to their substituted report. The substituted report must also be accompanied by the ESTMA reporting template cover page, including a completed attestation statement. Additionally, data availability and recordkeeping requirements provided under the ESTMA must be observed for the prescribed periods (sections 12 and 13 of the ESTMA).

Reports must satisfy the transparency and reporting requirements of the ESTMA and the US Disclosure of Payments by Resource Extraction Issuers requirements (e.g., disclosure of payments at both the payee and project levels) to be accepted for the purposes of the ESTMA. Natural Resources Canada may request additional information be provided if reports do not meet ESTMA requirements.

As the deadline for filing a report in the US extends beyond 150 days after the end of a Reporting Entity’s financial year, Reporting Entities must notify NRCan within 150 days by email of their intent to submit a substituted report at a later date. The Reporting Entity must submit its report to NRCan within the timeframe prescribed by the US reporting requirements.