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Canada Urged to Ensure Miners Publish What They Pay

May 15, 2013

by KRISTEN SHANE

Embassy Magazine

The Canadian government is feeling the heat from other countries, Canadian civil society groups, a former prime minister, and a famed American economist to ensure Canadian extractive companies open their books to show what money they pay to governments.

Last week, Nigeria’s finance minister added her voice to the list, imploring Prime Minister Stephen Harper to commit to mandatory disclosure rules for Canadian natural resources companies, something she said would “make a big difference in this area.”

About 75 per cent of the world’s mining companies are registered in Canada.

While other Western countries like the United States, European Union, Australia, and Norway are moving ahead with transparency reporting, Canada is lagging, say observers.

The federal government so far has shown some support: helping other countries boost transparency while insisting that Canada does a lot of that already on its own without signing on to new initiatives. Canada currently supports a global standard called the Extractive Industries Transparency Initiative, but isn’t an implementing country.

Canada is also promising to review a report to be released this year on the matter from a working group of industry and civil society representatives.

Those who are pressing for more say Canada should practice what it preaches and sign on as an implementing member, not just a supporter, of the Extractive Industries Transparency Initiative, put in place mandatory disclosure requirements for extractive companies, or both.

But the problem is how. Many players connected to the issue speculate that Canada is behind its peers because of jurisdictional barriers. 

A world of pressure

In a taped video presentation to a crowd including government officials and development workers attending a North-South Institute conference in Ottawa on May 9, Nigerian Finance Minister Ngozi Okonjo-Iweala spoke of how Nigeria has introduced new tools to boost audits of the government’s oil and gas revenues.

One tool is the Extractive Industries Transparency Initiative, a global standard meant to publicize what companies pay to governments, and the payments governments receive, through an independently verified report. There are 21 in-compliance countries implementing it now.

Ms. Okonjo-Iweala said she wanted to add her voice to a recent letter by six eminent individuals including former Progressive Conservative prime minister Joe Clark, a former president of the World Petroleum Council, and US economist Jeffrey Sachs “in entreating Canada to commit to mandatory disclosure rules for Canadian natural resource companies.”

She spoke directly to Prime Minister Stephen Harper: “this would be a great opportunity for you and your administration to make a big difference in this area.”

That open letter, sent to Mr. Harper in February, asked that the government implement the EITI alongside requirements for mandatory disclosure of extractive-company payments to governments.

After announcing its support for the EITI in 2007, the government started pumping money into helping other countries implement the program. As of last fall, it had funnelled $12.65 million to the World Bank. It is also helping the Tanzanian government meet the program’s standards.

While most of the EITI-implementing countries are developing and in Africa, the letter-writers noted that the British government had recently decided to review whether to implement the EITI, and the United States is moving in that direction too.

“These announcements arise both from domestic reasons and from a recognition that we cannot expect countries to do what we are not doing ourselves,” it read.

Australia is piloting the EITI, and Norway became compliant in 2011.

The letter-writers also noted moves toward mandatory disclosure requirements in the US and Europe.

While the EITI captures payments paid to a specific country, mandatory disclosure rules have typically included company payments to all governments.

The United States started a growing movement when in 2010 the Dodd-Frank Act passed including the Cardin-Lugar Amendment, which required that all publicly-traded extractive companies in the US publish their payments in all countries where they operate.

The European Union provisionally agreed last month to require all oil, gas, mining, and logging companies to publish what they pay in all countries where they operate. The G8 is also discussing mandatory disclosure.

 

Business on board

Now key players of the Canadian extractive industry are pushing for a rule similar to the trailblazing Dodd-Frank Act provision.

The letter-writers say that mandatory disclosure is “clearly in the interest of Canadian dual-listed companies that are already subject to the US Cardin-Lugar Amendment disclosure regulation and expect competitors to be subject to equivalent regulations.”

For mining companies, it’s also a way of showing their value to the communities where they work, said Ben Chalmers, vice-president of sustainable development with the Mining Association of Canada.

There’s value in having an overall dollar figure of how much the extractive sector is pouring into government coffers through taxes, royalties, and the like—money that then gets distributed to the society in the form of new hospitals, schools, and social programs.

He sits on the Resource Revenue Transparency Working Group, which also includes civil society groups Publish What You Pay Canada and the Revenue Watch Institute, and the industry group Prospectors and Developers Association of Canada.

They came together last fall to try to figure out a framework for the disclosure of payments to governments by Canadian oil and mining companies working in Canada and abroad.

While some of the interests represented in the working group also support Canada signing on to implement the EITI, they are focused now on a mandatory disclosure rule, riffing off of the momentum generated from the US model.

The group has spent the winter hashing out the best ways to implement a mandatory disclosure scheme in Canada, mulling over questions related to the vehicle to be used to put in place the rule, the scope of disclosure, and which companies should be covered.

The group has been talking to interested non-members to bounce ideas off of them, like the federal government and provincial securities regulators. This week, it met with civil society reps in Ottawa.

Kady Séguin, interim director of Publish What You Pay Canada, said the group is now planning to release a draft framework in mid June and a final version in November—a delay from its overly-ambitious original June completion date, she said.

The federal government is interested in what the working group proposes.

The government has committed to reviewing the working group’s findings.

Natural Resources Canada and the Department of Foreign Affairs recently had discussions with 30 mining, oil, and gas companies as well as six industry associations to gauge their views on extractive-sector transparency reporting, Natural Resources Canada spokesperson Jacinthe Perras wrote in an email to Embassy.

“There was support from both sectors for some form of transparency reporting, aligned with current regimes, that avoids undue costs and administrative burden,” she wrote.

The government will review the working group’s proposals with an eye to whether they align with Canadian laws, emerging international reporting processes, the vehicle for implementation, and the potential administrative and cost burden on the government and industry, she wrote.

The government appears warmer toward transparency reporting than implementing the EITI.

“The EITI is aimed at resource rich, developing countries that lack a clear regime for transparency and accountability. It is intended to provide accessible reports that citizens can use to hold their governments to account—something that already exists in Canada,” she wrote.

 

Barriers to action

Meanwhile, several working-group players agree that the government has lagged behind other jurisdictions in putting in place transparency reporting likely because of jurisdictional barriers.

In Canada, responsibility for laws and regulation of natural resources falls primarily under provincial and territorial jurisdiction.

There is also no national securities regulator—it too is provincially fragmented. That makes it harder to copy the US model, which involves publicly traded companies reporting through a national securities regulator.

Liberal MP John McKay tabled a private member’s bill in February, which he says is modelled after the US Cardin-Lugar amendment to the Dodd-Frank Act. He wrote in an op-ed in Embassy that he wanted to make it “as broad and as simple as possible” including “similar if not identical filing requirements to other jurisdictions.”

But not everyone is on board with his proposal to have companies report to federal departments. Ross Gallinger, executive director of PDAC, said his group doesn’t support it because it’s working on its own mandatory process through the working group.

“The venue that he’s picked is a bit complicated,” he said.

Ms. Séguin said the working-group members went into it with an open mind but have heard “quite a bit of feedback” that the best way to implement a mandatory disclosure rule would be through securities regulators. The problem is that each province has its own separate body.

Nevertheless, the members are committed to seeing the scheme rolled out.

“I wouldn’t be spending the amount of time on this that I am if I didn’t think that there was a strong likelihood of it being taking up,” said Mr. Chalmers, of the miners’ group.

“My hope is that when civil society and industry come together to build support for something like this, that that takes away a lot of the barriers to adopt it.”

kshane@embassynews.ca