Mining companies forced to become more transparent

The amount of money that companies like Barrick Gold and ExxonMobil actually give to governments of countries that they extract resources from is now publicly available online thanks to a Canadian bill that was passed back in 2015.

This is significant because that information cannot be gleaned directly from the annual reports of publicly-listed companies, making it difficult to determine if resource companies were actually paying their fair share in taxes and royalties to governments.

The Extractive Sector Transparency Measures Act (ESTMA) was brought into force on June 1, 2015, and required that all oil, gas and mining companies listed on Canadian stock exchanges disclose payments to governments of $100,000 CAD and over on a project-by-project basis.

Two years later, we are starting to see the impact of ESTMA — over the past month, hundreds of financial reports detailing payments from extractive companies to governments around the world have trickled into the Natural Resources Canada (NRC) website.

More than 1200 extractive companies operating in over 100 countries are affected by the rule. The Toronto Stock Exchange alone hosted almost 60 percent of the world’s mining companies in 2013, and accounted for over 60 percent of the global mining equity raised in 2014. That effectively means that most major mining companies in the world will have to comply with ESTMA.

“This is is a game-changer,” says Claire Woodside, director of Publish What Your Pay Canada, the coalition of civil society groups that pushed for the regulation in Canada. “It’s going to increase the level of transparency globally across all types of extractive companies,” she says.

First Nations unhappy with ESTMA

But in an ironic twist, this transparency rule that is meant to empower local communities to demand their fair share of resource wealth from oil, gas and mining companies has some First Nations on alert.

They are worried that their federal transfers will be reduced once their resource revenue becomes public knowledge.

There are hundreds of Impact and Benefit Agreements (IBAs) between extractive companies and First Nations across Canada that ensure that local communities get a certain amount of profit from extractive projects, as well as jobs, training, environmental management, infrastructure, and social programs.

Some of these payments may be included in subsequent ESTMA reports, which are expected to appear on the NRC website in 2018.

Until early July, the Canadian government considered own-source revenue when deciding how much money to give the 25 self-governing Indigenous governments in Canada. The idea was that those First Nations should be able to pay for their own government activities and eventually become less reliant on federal transfers.

In early July, Carolyn Bennett, the minister of Indigenous and Northern Affairs (INAC), suspended that policy for three years, allowing self-governing First Nations to keep the money they earn from resource revenue, taxes, businesses or other sources of income.

“It’s the right thing to do,” said Bennett in a statement over email.

The decision was a long-time coming and the ESTMA reports “had nothing to do” with the change in policy, says James Fitz-Morris, Director of Communications for the Minister of Indigenous and Northern Affairs.

First Nations should not be worried about losing funding as a result of the ESTMA reports because INAC doesn’t count First Nations’ own-source revenue when allocating transfer payments, says Fitz-Morris.

“It’s not about how much [the First Nation] can afford, it’s about how badly they need it.”

That’s good news for Frog Lake First Nation in Alberta, which has made significant amounts of money from resource revenue in the past, but is now struggling with low oil prices. Band members have already stopped receiving dividends from natural resources, says Joe Dion, Chairman and CEO of Frog Lake Energy Resources Corporation, which manages natural resource revenue for the First Nation.

Still, some First Nations could be on the losing end of this transparency rule.

First Nations could lose their ability to negotiate for better deals with companies because everyone will be able to see what everyone else is paying and communities will know what everyone else is receiving, according to Dwight Newman, a senior fellow at the Macdonald-Laurier Institute who co-authored a report called “Stepping Into the Sunshine Without Getting Burned.”

Disclosing this information “has impact for First Nations, big time,” says Dion. This law is supposed to target companies that give money to corrupt governments and dictators, says Dion. “I don’t think that applies to us,” he says.

Why ESTMA is needed in Canada

For decades, communities in Canada have struggled to find out if they’re getting their fair share of compensation from extractive companies.

The CBC reported in 2015, the year that ESTMA came into effect, that towns in Northern Ontario appeared to be “in a perpetual fight to squeeze more money and basic information from mining companies and the provincial government.” The CBC filed a freedom of information request to find out how much money the province collected from different mining projects in the area, but the government said that information didn’t exist.

For example, residents of Red Lake, Ontario have complained for years that they don’t see enough of the revenue from the gold that sits beneath their town. Now they can go onto the NRC website to see that Goldcorp Inc. paid over $2 million USD in taxes last year for the mine in their community.

While it doesn’t show how much went to the provincial government, residents have a good starting point to ask politicians where that money went.

It will also help Canadians determine whether extractive companies operating on Canadian soil are avoiding taxes and royalties through various loopholes.

Many of these corporations avoid paying taxes to local governments by shifting their profits to offshore tax havens, says Dennis Howlett, executive director of Canadians for Tax Fairness. This is especially true in developing countries, but it happens in Canada too, he says.

The ESTMA reports won’t necessarily fix this problem overnight, but it’s the first step in getting people and governments to see “how skewed the taxes paid by resource companies are,” says Howlett.

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