Extractive Sector Transparency Measures Act (ESTMA) FAQs

About the Act

  1. What is the Extractive Sector Transparency Measures Act?
  2. How were Canadians involved in the development of the ESTMA?
  3. Who must report under the ESTMA?
  4. Are private equity companies required to report under the ESTMA?
  5. Which financial years should an Entity consider when applying the size criteria?
  6. Who receives reportable payments under the ESTMA?
  7. What is “commercial development of oil, gas or minerals”?
  8. Where will ESTMA reports be published?
  9. How long must an ESTMA report be published online?
  10. How do businesses that do not have a website publish their report online?

Enrolment and Submission of Reports

  1. Who must complete a Contact Form and what information must be included?
  2. How do I provide updates for the Contact Form?
  3. Are businesses that do not make any reportable payments under the Act required to submit a report?
  4. How do businesses prepare and publish an ESTMA report?
  5. How do businesses correct a mistake in their published ESTMA report?
  6. How do businesses report if they change their financial year?
  7. How do businesses submit a consolidated report when the parent/subsidiary(ies) have different financial years?
  8. If I use the Excel reporting template to complete my ESTMA report, can I publish it in PDF on my website?

Reporting Requirements

  1. What payments must be reported under the ESTMA?
  2. Are “social payments” reportable under the ESTMA?
  3. What is “project-level” reporting?
  4. How is the value of an in-kind payment determined?
  5. Must non-operating members of a joint operation also report the payments that have already been reported under the ESTMA by the operator?
  6. Must non-operating members of a joint operation report the payments that have been made for them by the operator, when the operator is not reporting the payments as an ESTMA Reporting Entity?
  7. How do businesses report on joint operating agreements in situations of joint control (e.g., the partnership is 50-50, or there is no clear operator)?

Substitution

  1. What is “substitution”?
  2. How does the ESTMA compare with other emerging international reporting requirements ?

Compliance

  1. What criteria must my ESTMA report meet before NRCan publishes the link on the ESTMA website?
  2. What do I do if I note an omission or error in my published ESTMA report?
  3. Will NRCan be conducting compliance verification or audits on the ESTMA reports?
  4. What happens if a Reporting Entity fails to comply with the reporting requirements (sections 9, 12, or 13) of the Act?
  5. Can a third party submit a complaint about a report?
  6. Will NRCan investigate suspected criminal activity?

About the Act

1. What is the Extractive Sector Transparency Measures Act?

The Extractive Sector Transparency Measures Act (ESTMA) was enacted by the Parliament of Canada in December 2014 and came into force on June 1, 2015.

The Act requires businesses to publicly report certain payments they make to all levels of government in Canada and abroad in relation to the commercial development of oil, gas and minerals. The purpose of the ESTMA is to deter corruption in the global extractive sector by making government revenues from natural resources transparent to the public. The reports will be made available on publicly accessible websites by reporting businesses, and a link to every report submitted will be available on the ESTMA website. 

The Act responds to a commitment that Canada made at the 2013 G8 Leaders’ Summit; where leaders agreed to raise global standards of transparency in the extractive sector, reduce the potential for corruption and ensure that citizens benefit fully from the extraction of natural resources.

2. How were Canadians involved in the development of the ESTMA?

Natural Resources Canada (NRCan) engaged provinces and territories, civil society, industry and Indigenous representatives during the development of the ESTMA and after the legislation was in force. You can read about the engagement on the ESTMA on the Open Government website.

NRCan engaged Indigenous peoples from the earliest stages of developing the ESTMA in 2013. This included meeting with Indigenous governments and organizations in bilateral discussions and regional roundtables across the country.

NRCan also engaged with industry in the development of the Act, and after it came into force. Early engagement with industry is focused on compliance promotion and clarification of reporting requirements.

3. Who must report under the ESTMA?

“Entity” is the term used in the Act to describe businesses that are subject to the ESTMA.

An Entity under the Act is a corporation or a trust, partnership or other unincorporated organization that is engaged in the commercial development of oil, gas or minerals. This definition includes businesses that control, directly or indirectly, other Entities that engage in such activities.

An “Entity” under the Act is required to report if:

  • If the Entity or the Entity’s securities are listed on a stock exchange in Canada.

Or

  • If the Entity has a place of business in Canada, does business in Canada or has assets in Canada:

And

  • Meets two of the three following minimum thresholds (“size-related criteria”) in one of its two most recent financial years:
    • Has at least C$20 million in assets.
    • Generated at least C$40 million in revenue.
    • Employs an average of at least 250 employees.

These two tests above are exclusive of one another. For example, an Entity with common shares listed on the TSX Venture Exchange will be a Reporting Entity, even if it does not have a place of business in Canada or does not meet any of the size-related criteria.

It should be noted that the Act deems payments made by a non-reporting Entity on behalf of a Reporting Entity to have been made by the Reporting Entity.

There are no reporting requirements for governments receiving payments (‘payees’) under the ESTMA.

4. Are private equity companies required to report under the ESTMA?

Yes, private equity companies may be required to report under the ESTMA. To determine whether a company has reporting obligations, the following should be considered:

  • To qualify as an “Entity” under the ESTMA, a business must be engaged in the commercial development of oil, gas or minerals in Canada or elsewhere, or control a business engaged in the commercial development of oil, gas or minerals in Canada or elsewhere.
  • Control for the purposes of the Act is not limited to direct control. It also extends to indirectly controlled businesses down an organizational chain. Whether an entity has control over a business will depend on the specific facts and circumstances of the situation.
  • An “Entity” may be required to submit an annual report (i.e., be considered a “Reporting Entity”) if it:
    • is listed on a stock exchange in Canada or
    • is a private company that meets the size criteria as stated in section 8(1)(b) of the Act.  

Given these considerations, a private equity company that is a “Reporting Entity” for the purposes of the ESTMA must take into account any reportable payments made by all non-Reporting Entity businesses it controls when determining if it has to submit an ESTMA report for its financial year.

5. Which financial years should an Entity consider when applying the size criteria?

To determine if they meet the size criteria, Entities must consider the "two most recent financial years" or in other words, the two most recently concluded financial years. 

For example, a private entity has a January 1st to December 31st financial year.  To determine if they have to submit a report for 2016, following December 31, 2016, the entity must determine if they met the size criteria in either the year ending December 31, 2016 or December 31, 2015. 

If they met the size criteria in either of those years, they would be required to submit a report for their 2016 financial year within 150 days following its completion.

6. Who receives reportable payments under the ESTMA?

“Payee” is the term used in the Act to describe governments and related organizations that receive reportable payments under the ESTMA. 

For purposes of the Act, a Payee is:

  • Any government in Canada or in a foreign state.
  • 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 a government for a government referred to in paragraph (a) above or a body referred to in paragraph (b) above.

Businesses will need to consider the facts and circumstances to determine whether a particular organization or institution meets the criteria of a Payee. The Act includes a broad definition of payee in recognition that there are many forms of government.

It should be noted that the Act deems payments received by a third party on behalf of a Payee to have been made to the Payee.

As of June 1, 2017, reportable payments made to Indigenous Payees in Canada must be reported 150 days following the end of the Reporting Entity’s fiscal year.

Links to ESTMA reports are published on the NRCan website.

7. What is “commercial development of oil, gas or minerals”?

For the purposes of the Act, “commercial development of oil, gas or minerals” comprises exploration and extraction, as well as obtaining or holding a permit, lease or license or other authorization for these activities. This includes the production of crude oil, bitumen and shale oil; natural gas and its by-products; and all naturally occurring metals and non-metallic minerals.

The definition does not include support services like construction or equipment manufacturing, or post-extraction activities like refining, smelting, marketing, distribution or export.

8. Where will ESTMA reports be published?

Links to all ESTMA reports must be published by businesses (“Entities”) on a publicly accessible website. A list of links to all reports is available on the ESTMA website.

9. How long must an ESTMA report be published online?

Submitted ESTMA reports must be publicly available for a period of no less than five years from the date they were published and initially provided to Natural Resources Canada. All ESTMA reports published within the last five years should be made available at the same link.

10. How do businesses that do not have a website publish their report online?

It is the responsibility of the businesses that are subject to the Act to ensure that their completed ESTMA report is published on the Internet in a publicly accessible manner for no less than five years in order to be compliant with the Act. The reports do not necessarily have to be published on a corporate website.

Enrolment and Submission of Reports

1. Who must complete a Contact Form and what information must be included?

All businesses (“Entities”), including all subsidiaries, reporting under the Act must complete a Contact Form in order to receive an ESTMA Identification Number to be used for tracking all future interaction between Natural Resources Canada and Entities for the purposes of the ESTMA. Once completed, the form must be sent to NRCan’s ESTMA reports mailbox.

Natural Resources Canada requests that Entities complete every field in the form, including both the Legal and Operating Name for each Entity. It is also strongly encouraged that Entities provide their Canada Revenue Agency-assigned Business Number (if they have been assigned one) in the Contact Form to ensure a consistent record in the event of changes to its name or other information over multiple years of reporting. 

The Contact Form is for Natural Resources Canada’s internal administrative use only and will not be published on the ESTMA website.

2. How do I provide updates for the Contact Form?

Businesses (“Entities”) must ensure that the information provided to Natural Resources Canada via the Contact Form is accurate and up to date.  Should updates be required, Entities must submit a new Contact Form with the correct information as soon as possible to NRCan’s ESTMA reports mailbox.

If a business changes its legal name, it must notify NRCan by email without delay and include a copy of the certificate of name change in the notification email.

3. Are businesses that do not make any reportable payments under the Act required to submit a report?

Natural Resources Canada does not require businesses (“Entities”) that do not make any reportable payments to government within a financial year to submit a report; however, Reporting Entities are encouraged to notify NRCan by email within 150 days following the end of their financial year that no report will be submitted for that year.

Sample email:

Please be advised that [insert Legal Business Name] ([insert ESTMA ID #]) has made no reportable payments under the ESTMA for the year ended [insert fiscal year end date].

In the situation where a parent entity has no reportable payments, the company may still be required to submit an ESTMA report on behalf of its subsidiaries.

A company must ensure that all reportable payments it makes and all reportable payments made by companies it controls, directly or indirectly, are included in an ESTMA Report. 

A parent company may elect to not publish a report if all of the following conditions are met:

  1. if all the reportable payments were made by subsidiary companies;
  2. those subsidiaries are also Reporting Entities under the ESTMA; and
  3. the reportable payments in question are included in ESTMA reports filed by those subsidiaries.

Parent and subsidiary Reporting Entities must always follow the requirements set out in section 11 of the Act, and the Technical Reporting Specifications.

4. How do businesses prepare and publish an ESTMA report?

The key steps to preparing and publishing a payment are:

  1. Obtain the reporting tools from the ESTMA website, including the Contact Form, Technical Reporting Specifications, Guidance and reporting templates from the “Tools for Extractive Businesses” section of the ESTMA website.
  2. Enrol with Natural Resources Canada and obtain an ESTMA identification number by submitting a completed Contact Form to NRCan’s ESTMA reports mailbox.
  3. Create your report using either of two reporting templates.
  4. Publish the completed report online within 150 days following the end of your financial year and provide Natural Resources Canada with a link to the report, as well as an electronic copy of the report to NRCan’s ESTMA reports mailbox.

The reports must remain publicly available for at least 5 years. Natural Resources Canada will publish the web links on the ESTMA website. Watch and listen to the recorded webinar to obtain additional information on the Act and how to report. Detailed instructions on how to prepare and submit reports are outlined in the Technical Reporting Specifications.

5. How do businesses correct a mistake in their published ESTMA report?

Businesses (“Entities”) must ensure that the information provided within their ESTMA report is accurate and up to date. 

In the event that a published report requires amendments, Entities must inform Natural Resources Canada in detail of any changes to the report, provide an electronic copy of the latest version of the report to NRCan’s ESTMA reports mailbox and ensure that the most up-to-date report is available on a publicly accessible website.

In addition, the amended report must include a note that identifies the amendment(s).

6. How do businesses report if they change their financial year?

Businesses subject to the Act (“Entities”) that change their financial year must submit a report for the period between the end of the previous financial year and the beginning of the new financial year, before beginning to report based on the new financial year going forward.

For example, if an Entity changes its financial year from June-May to January-December, it would have to submit a report for the months of June-December in the year that the change occurs. Subsequently, the Entity would report from January-December in the following years.

Entities submitting shortened reports as a result of a change to their financial year must inform Natural Resources Canada of the change as part of their report submission, and may include a note within the report or as an addendum to provide context for the shortened reporting period.

7. How do businesses submit a consolidated report when the parent/subsidiary(ies) have different financial years?

Subsidiaries that are “Reporting Entities” in their own right (i.e. they are either listed on a Canadian stock exchange or meet the size threshold detailed in section 8(1)(b) of the ESTMA) have two options for reporting if they have a different financial year than their parent:

  1. Opt against consolidated reporting and submit a separate ESTMA report: In this scenario, a subsidiary that is a Reporting Entity in its own right submits an ESTMA report covering all of its reportable payments made within its financial year. The parent must no longer report that subsidiary’s payments in their report as to avoid duplicate reporting.
  2. Submit a “top-up” report in addition to the consolidated report: In this scenario, the parent includes part of the Reporting Entity subsidiary’s financial year in its consolidated report, and the subsidiary then provides a separate “top-up” report containing payments it made during any part of its financial year that is not covered by the consolidated report (as per section 11(c) of the Act).

Please note that for the purposes of determining reportable payments under the ESTMA, the parent entity must aggregate the payments of its subsidiaries by payee and category to determine whether they meet the $100,000 CAD threshold.

Subsidiaries that are not “Reporting Entities” in their own right (i.e. they are not listed on a Canadian stock exchange and do not meet the size threshold detailed in section 8(1)(b) of the Act) cannot submit an ESTMA report to satisfy the reporting requirements of their parent. In this scenario, the parent must include the payments of all such subsidiaries that it controls directly or indirectly in its report based on its own financial year.

options available for submitting an ESTMA report

 

Printable version (PDF, 186 kb)

Text version

The figures show the options available for submitting an ESTMA report for parent and subsidiary entities having different financial years:

Option 1

Filing separate ESTMA reports for parent and subsidiary Reporting Entities is the recommended option.

Option 2

  • Filing a consolidated report for parent and subsidiary Reporting Entities with different financial years (for example, a parent having a January 1 to December 31 financial year and its subsidiary having a July 1 to June 30 financial year) would require the first report (Year 1) from the parent Reporting Entities to include all payments made by the parent and subsidiary during the parent Reporting Entity’s financial year.
  • The subsidiary would be required to provide a top up report for the period of January 1 to June 30 to cover the period of its financial year not already disclosed in its parent company’s report. A similar top-up report would be required for each year thereafter.
  • On year 2 and subsequent years, the parent Reporting Entity’s report would include all reportable payments made by their organization and the subsidiary during the parent’s financial year; however, it must exclude the payments reported in the subsidiary’s top up report to avoid double counting of payments.

8. If I use the Excel reporting template to complete my ESTMA report, can I publish it in PDF on my website?

Yes, but the Excel template must be converted to machine readable PDF format.  The following are the instructions on how to properly convert the file:

For MS Excel 2013 and earlier versions:

  1. Select the “File” tab at the top left corner of the screen
  2. Click on “Save As”
  3. Click on the down arrow of the “Save as Type” field and select PDF (*.pdf)
  4. Click on the “Options” button
  5. Under “Publish what”, select “Entire workbook”
  6. Click “OK”, then “Save”

For MS Excel 2016:

  1. Select the “File” tab at the top left corner of the screen
  2. Click on “Export”
  3. Click on “Publish as PDF or XPS”
  4. Click on the “Options” button
  5. Under “Publish what”, select “Entire workbook”
  6. Click “OK”

Reporting Requirements

1. What payments must be reported under the ESTMA?

Businesses (“Entities”) subject to the Act are required to publicly report certain types of payments of $100,000 or more made to all levels of government in Canada and abroad (“Payees”), including:

  1. taxes, other than consumption taxes and personal income taxes;
  2. royalties;
  3. fees, including rental fees, entry fees and regulatory charges as well as fees or other consideration for licences, permits or concessions;
  4. production entitlements;
  5. bonuses, including signature, discovery and production bonuses;
  6. dividends, other than dividends paid as ordinary shareholders; and
  7. infrastructure improvement payments.

In some cases, it may be unclear whether a payment should be reported under one category or another.  Entities should look to the substance, rather than the form, of payments in determining which category is applicable.  It is the responsibility of the Entity to determine in which categories their payments fall based on the facts and circumstances of each payment.

Payments captured by these categories which are part of a private commercial agreement, including Impact Benefit Agreements (IBAs), are reportable at the time of payment regardless of non-disclosure agreements. The ESTMA does not require that the agreements themselves be disclosed.

2. Are “social payments” reportable under the ESTMA?

Social payments may be reportable under the Act if they are directly related to, or a condition of, the commercial development of oil, gas or minerals. It is the responsibility of the reporting business to determine in which categories their payments fall based on the facts and circumstances of each payment. Social payments can include capacity-building payments, accommodation payments, infrastructure improvement payments, and other payments or in-kind support.

3. What is “project-level” reporting?

Payments must be reported at the project level, when possible. This means that, where possible, businesses (“Entities”) must specify in the reporting template the name of the project to which a particular payment relates. Some payments, such as corporate income taxes, may not be attributable to a specific project. Entities can report these payments at the Payee level only.

A “project” means the operational activities that are governed by a single contract, license, lease, concession, or similar legal agreement and form the basis for payment liabilities with a government. If multiple such agreements are substantially interconnected, they would be considered a single project.

“Substantially interconnected” means forming a set of operationally and geographically integrated agreements (e.g. contracts, licenses, etc.) with substantially similar terms that are signed with a government, resulting in payment liabilities.

4. How is the value of an in-kind payment determined?

If a business subject to the Act (“Entity”) can determine the cost of an in-kind payment; that is the value that should be reported. If the cost is not determinable, the in-kind payment should be reported at fair market value. This includes agreed reallocation of funds for internal changes to internal processes as a condition of the commercial development of oil, gas or minerals.

5. Must non-operating members in a joint operation also report the payments that have already been reported under the ESTMA by the operator?

If the operator of a joint agreement is a Reporting Entity and it reports all of the payments it has made on behalf of the non-operating members, the non-operators may not be required to report those payments made “for” them (as per section 3(d) of the Act) based on two factors:

  1. If the operator reports all of the payments, the purpose of the Act, which is to make the payments transparent to the public, is met.
  2. Requiring the non-operators to also report those same payments would create duplication in reported payments.

Non-operator members must ensure that they report any payments they make directly to a Payee, as well as any payments made for them that are not reported by the operator.

Reporting Entities are encouraged to document their due diligence in determining their reporting obligations under the Act, including their analysis of the facts and circumstances of specific situations.

6. Must non-operating members of a joint operation report the payments that have been made for them by the operator, when the operator is not reporting the payments as an ESTMA Reporting Entity?

If the operator of a joint agreement is not a Reporting Entity (i.e., it is not required to submit an ESTMA report), the non-operator Reporting Entities must report all of the payments that they make directly to the Payee, as well as all payments that have been made for them (as per section 3(d) of the Act) by the operator.

There may be cases where payments are made for a Reporting Entity, but the Reporting Entity is not aware if those payments are being reported by the operator, what the payments are, or who they are being made to. Compliance with the Act requires that Reporting Entities make efforts to obtain this information.

Reporting Entities are encouraged to document their due diligence in determining their reporting obligations under the Act, including their analysis of the facts and circumstances of specific situations.

7. How do businesses report on joint operating agreements in situations of joint control (e.g., the partnership is 50-50, or there is no clear operator)?

In situations where two or more Reporting Entities exercise joint control and no single operator is in a position to report the payments made for all non-operating members, Reporting Entities have flexibility in determining how to report these payments in a manner that achieves the purpose of the Act, which is to make the reportable payments transparent to the public.

Depending on the nature of the operations and the relationships between each member of the joint operation, Reporting Entities may choose to have a single member report all of the payments on behalf of the rest of the members, with the other members only reporting any payments they make directly to a Payee. Another option may be for each member to report their proportion of the reportable payments that have been made to a Payee. Context on how they choose to report the payments can be included in the “notes” section of the reporting template.

Reporting Entities are encouraged to document their due diligence in determining their reporting obligations under the Act, including their analysis of the facts and circumstances of specific situations.

Substitution

1. What is “substitution”?

The Act allows the Minister of Natural Resources to determine that the Reporting Requirements of another jurisdiction are an acceptable substitute for the Reporting Requirements under the ESTMA.

Substitution can help to reduce the reporting burden for businesses that are subject to the Act (“Entities”) that have similar reporting obligations in other jurisdictions. 

Currently, the requirements under the European Union’s (EU) Accounting Directive and Transparency Directives have been determined to be substitutable under the ESTMA. Therefore, a compliant report submitted to the appropriate authority in an EU and/or European Economic Area member state that has implemented these EU Directives may also be submitted to the Minister of Natural Resources Canada to comply with the ESTMA. 

2. How does the ESTMA compare with other emerging international reporting requirements ?

Extractive transparency measures in Canada, and the European Union use a similar broad definition that recognizes governments around the world come in many forms; including Indigenous governments.  They also require the reporting of similar payment categories of $100,000 or more.

In Canada businesses that are subject to the Act (“Entities”) will begin publishing their ESTMA reports as early as June 2016. Entities will publish transparency reports for the European Union beginning in 2015 or 2016, depending on the implementation schedule in each country.

Compliance

1. What criteria must my ESTMA report meet before NRCan publishes the link on the ESTMA website?

All incoming reports will be reviewed based on a validation checklist that aligns with sections 9 and 12 of the Act, as well as with the Technical Reporting Specifications. If a report does not meet the requirements of the checklist, NRCan will request corrections prior to linking it to the ESTMA website.

For reports published under a substitution determination made by the Minister of Natural Resources, NRCan will also ensure that the substitution process has been followed and that the conditions set out in the relevant substitution determination have been met prior to publishing a link to the report on the ESTMA website.

It should be noted that, while NRCan may proceed with publishing links to reports, the reports have not been verified for full compliance with the Act. All reports may be subject to further ESTMA compliance verification and corrective measures may be ordered at any time following the report being published on the ESTMA website.

2. What do I do if I note an omission or error in my published ESTMA report?

If a Reporting Entity itself identifies an error or omission in its published ESTMA report, it must notify NRCan of the error immediately, publish an amended report online, and re-submit it in accordance with the process outlined in the Technical Reporting Specifications. The new report must include context/details on the changes that were made to the previous version(s) of the report.

NRCan may exercise enforcement discretion for self-reporting of omissions and errors, including those submitted after the 150 day deadline. Key considerations may include whether the Reporting Entity identified and corrected its non-compliance in an acceptable and timely manner; was the first party to report its non-compliance to NRCan; reported its non-compliance to NRCan before NRCan started an investigation; and whether it gained any competitive advantage or any other benefit from late disclosure or non-disclosure.

3. Will NRCan be conducting compliance verification or audits on the ESTMA reports?

NRCan will be taking a risk-based approach to compliance verification, and will assess ESTMA reports based on an internal risk assessment framework to ensure ESTMA compliance and data integrity. Companies found to be at a higher risk of non-compliance may be flagged for further compliance verification, including requests for information/documents or audits. Examples of risk criteria that may be considered when determining companies that are at higher risk of non-compliance include:

  • Companies that submit a report with multiple errors
  • Companies that do not rectify errors in their reports in an acceptable and timely manner
  • Companies that did not report on, or provide context on why they did not have to report on joint ventures
  • Companies that are flagged for data anomalies

4. What happens if a Reporting Entity fails to comply with the reporting requirements (sections 9, 12, or 13) of the Act?

NRCan is committed to undertaking outreach and working with industry to ensure that reporting obligations are well understood. If an 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 any other provisions in section 9, 12 or 13 of the Act, 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 the entity is found guilty.

5. Can a third party submit a complaint about a report

NRCan will consider requests by third parties to further examine a report submitted under the Act, provided that there are reasonable grounds to believe that the report merits further scrutiny.

6. Will NRCan investigate suspected criminal activity?

The ESTMA was developed to deter and detect corruption, including any forms of corruption under any of sections 119 to 121 and 341 of the Criminal Code and sections 3 and 4 of the Corruption of Foreign Public Officials Act. The responsibility for investigations of any possible criminal activity will rest with the relevant law enforcement agency.

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