Prime Minister Stephen Harper announced in June his government’s plan to implement new transparency regulations that will require mining and oil and gas
companies to disclose payments they make to foreign governments. This includes all taxes, bonuses, licence fees, royalty payments, dividends and
infrastructure payments made on international projects, which is a sharp change from current voluntary reporting requirements. While Harper’s statement,
made prior to a G8 summit focused on transparency, was broad and vague about process, it marked a turning point in the government’s stance on the issue.
The mining sector and civil society organizations, working together as the Resource Revenue Transparency Working Group, released draft recommendations for
mandatory reporting requirements on the heels of Harper’s announcement. Launched in September 2012, the group had been working on the recommendations for
nine months, and had been in discussions with the federal government leading up to the announcement. The group’s hope is that the final set of transparency
regulations will reduce corruption and ensure local governments benefit from resource extraction, while showcasing the positive contributions mining
companies make to the countries in which they operate.
The regulations are geared toward keeping governments with mining projects and prospects in their nations honest, said Ross Gallinger, executive director
for the Prospectors and Developers Association of Canada, which, along with the Mining Association of Canada, is a member of the working group. “It’s about
host governments building an [argument] to show what they’re doing with those revenues and for communities to show what portion is flowing back into the
communities as well,” he added.
For a number of burgeoning mining nations, like Mongolia and Papua New Guinea, “mining is a big part of their transformational growth,” said Andrew Bauer
from Revenue Watch, a member organization in the working group. “In most cases, they haven’t reached their potential because these monies don’t go into
schools and hospitals and roads, they just end up disappearing and being mismanaged. It’s key that these rules are in place so citizens can hold their
governments to account for this money.”
The regulations need to be in place to improve transparency, but the reporting thresholds also need to be fair and scaled, said Gallinger. The working
group has recommended reporting requirements kick in once payments reach $100,000 for larger companies and $10,000 for smaller junior companies. “This
acknowledges that we have a lot of small junior exploration companies that aren’t making large payments but are making payments that can be material to
communities,” he said, pointing to a company that may build a road and improve local transportation networks.
Improved transparency also levels the playing field for countries, noted Jamie Kneen, spokesperson for Mining Watch Canada, and “could make players more
honest.” The rules would open up companies, so governments thinking about doing business with a mining company would be able to look at its track record on
how compliant it is with paying taxes and contributing to host nations through infrastructure improvements and benefit payments. Establishing a global
standard with the Europeans and the Americans could “eliminate the bad actors and really forces them to comply,” said Kneen.
It is also about project-by-project disclosure, added Kady Seguin, spokesperson for Publish What You Pay Canada. For companies with multiple projects in
one country, it will be crucial that “they show specifics to each project so they know what kinds of payments are being made.” Otherwise, it would be easy
for payments to get lumped together and the actual effect and use of the funds would be lost. However, Seguin said the regulations still would not uncover
“illegal payments some companies might make to get what they want.”
While Seguin is pleased with Harper’s announcement, she said it will take months – and perhaps as long as two years – for Canada to get ready to implement
any new rules. In the United States and the European Union, national governments manage securities. However, each of Canada’s 13 provinces and territories
manages its own securities commission, “and that’s where the challenge of implementation comes in,” she said. “In order to create a reporting standard that
is harmonized with all the jurisdictions, and without reinventing the wheel, there needs to be more discussions with the provinces to make it work.”
While a national securities disclosure standard is what the working group is pushing for, it is not necessarily the direction the regulations will take.
But with the group’s constant communication with the federal government in the months leading up to the announcement, Seguin said the
lawmakers are listening.