An overview regarding transparency measures in the mining, oil and gas industries

On June 11, 2015, the Government of Québec tabled Bill 55: An Act respecting transparency measures in the mining, oil and gas industries (the Bill) before the National Assembly. The purpose of Bill 55 is to impose transparency measures by making it mandatory for mining, oil and gas enterprises to declare the monetary payments or payments in kind they make in relation to natural resources exploration and development projects. The measures introduced by the Bill are aimed at discouraging and detecting corruption as well as fostering the social acceptability of such activities or projects.

Background

The objectives of Bill 55, as well as the provisions contained therein, are largely inspired by the federalExtractive Sector Transparency Act included in omnibus Bill C-43. As mentioned in our bulletin on Bill C-43 of October 30, 2014, the Government of Canada initially hoped that the Provincial Securities Regulators would assume responsibility for implementing reporting rules on payments made to foreign and domestic governments. In this regard, the timing of Bill 55 is not surprising in light of the federalExtractive Sector Transparency Act having come into force on June 1, 2015 (see our bulletin on Bill C-53 of July 13, 2015).

To whom the Act will apply

Section 4 of Bill 55 provides that every legal person, corporation or other organization that engages in exploration for or development of mineral substances or hydrocarbons (or that holds a permit, right, licence, lease, etc. for such activities), or an entity that controls such a legal person, corporation or organization, and that meets one of the following requirements, is an entity that will be subject to the transparency measures and be required to declare payments if:

  1. it is listed on a stock exchange in Canada and has its head office in Québec; or
  2. it has an establishment in Québec, exercises activities or has assets in Québec and, based on its consolidated financial statements, meets at least two of the following conditions for at least one of its two most recent fiscal years:
    1. has at least CA$20 million in assets;
    2. has generated at least CA$40 million in revenue;
    3. employs an average of at least 250 employees.

It is worth noting that the above thresholds are similar to the ones prescribed in the federal Extractive Sector Transparency Act. Furthermore, the Government of Québec may determine by regulation other requirements or other activities relating to mineral substances or hydrocarbons that would cause the Act to apply.

What must be declared

Entities subject to the Act (as per one or more of the requirements described above), will be required to file an annual statement with the Autorité des marchés financiers (AMF) declaring all payments made to the same payee in a fiscal year, if the value of those payments totals CA$100,000 or more.

  • Definition of “payment”

The Bill defines “payment” as a monetary payment or a payment in kind that is made to a payee in relation to exploration for or development of mineral substances or hydrocarbons and that falls within one of the categories set out in the Bill, which include taxes, royalties, fees, production entitlements, dividends and bonuses.

  • Definition of “payee”

The definition of “payee” provided in Bill 55 includes (1) a government; (2) a body established by two or more governments; (3) a municipality or the Kativik Regional Government; and (4) an aboriginal nation, Makivik Corporation, the Cree Nation Government, an aboriginal community represented by its band council, etc., the whole as further defined in the Bill. Other payees may also be eventually added to the list by future regulation.

The Bill has introduced transitional provisions in order to defer its application for payments made for the benefit of aboriginal payees. More specifically, Bill 55 provides that entities subject to the Act will not be required to report a payment made to such payees before June 1, 2017.

How and when to declare

The entities subject to the Act must send the AMF an annual statement by no later than 150 days after their fiscal year-end. The statement must be accompanied by a certificate made by one of the entity’s directors or officers, or by an outside independent auditor attesting that the information in the statement is true, accurate and complete. The form of the statement as well as the manner in which the payments must be presented or broken down (for instance on a project-by-project basis), will be established by regulation.

The entities subject to the Act must make available to the public for five years all statements sent to the AMF, and maintain records of payments for seven years. ”As a substitute for annual statements, the Government of Québec may accept statements filed with another competent authority provided they achieve the same purposes as those of Bill 55 and that the Government of Québec adopts a regulation to this effect. Considering the purposes of the federal Extractive Sector Transparency Act, a statement made under that Act would likely be an acceptable substitute for the Québec statement.

Bill 55 also contains several provisions granting the AMF the powers necessary to administer the Bill and sets out the requirements for reporting on its application.

Consequences of non-compliance

Bill 55 sets out monetary administrative sanctions and penal provisions. More specifically, the Bill provides that designated persons within the AMF may impose monetary administrative penalties on any entity subject to the Act that fails to comply with the Act or its regulations, in the cases and under the conditions set out in same. The Minister responsible for the application of the new Act will develop a general framework for applying such administrative penalties in connection with penal proceedings.

Directors and officers of an entity subject to the Act that has defaulted on payment of an amount owed under the Monetary Administrative Penalties Chapter of Bill 55 will be liable, with the entity, for the payment of the amount, unless they establish that they exercised due care and diligence to prevent the failure which led to the claim.

Bill 55 also provides for penal provisions for failure to comply with the main provisions of the Act (failure to file the annual statement, failure to make the statement public, failure to provide document or information requested by the AMF, etc.) which are offences punishable by a maximum fine of CA$250,000. The AMF will have the power to institute penal proceedings regarding offences under the Act.

Next steps

Special consultations and public hearings on Bill 55 are scheduled on August 18 and 19, 2015. The following organizations, invited by the Committee on Agriculture, Fisheries, Energy and Natural Resources, will participate in these consultations and public hearings:

  • On August 18, 2015: Association minière du Québec (Québec Mining Association), Vérificateur général du Québec (Auditor General of Québec), Québec Peat Moss Producers Assocation, Fédération québécoise des municipalités (Québec Fédération of Municipalities), Coalition pour que le Québec ait meilleure mine, Fédération des chambres de commerce du Québec (Québec Federation of Chambers of Commerce) and Québec Oil and Gas Association.
  • On August 19, 2015: Assembly of First Nations of Québec and Labrador, Grand Council of the Cree (Eeyou Istchee), Makivik Corporation, Innu Nation (Québec), Algonquin Anishinabeg Nation Tribal Council and Québec Association for Mining Exploration.

Bill 55 will be further studied during the fall session of the Québec National Assembly which is scheduled to begin on September 15, 2015. We will follow with interest the upcoming works of the Parliamentary Committee and the debates before the National Assembly on Bill 55.