Stung by controversy over its engagement more than a decade ago with a Sudanese government complicit in a genocide, Talisman Energy now voluntarily discloses the payments it makes to foreign governments. Thus we know—thanks to its filings with an industry transparency body—that Talisman paid out $1.4 billion abroad in 2011, about half to the U.K.
The rest of Canada’s resource extraction sector may soon have to do the same. Currently, most companies simply report aggregate taxes paid in financial statements. This makes it impossible to discern which governments received what amounts, or why. Critics argue this invites corruption; where tax and royalty payments remain concealed, kleptocrats cannot be held accountable for pocketing them. First proposed more than a decade ago, country-by-country reporting (also known as “publish-what-you-pay”) proposed to remedy that by requiring disclosure that breaks out significant payments by country and project.
What was once voluntary is now quickly becoming law. Last year the U.S. Securities and Exchange Commission adopted new rules requiring country-by-country reporting. Implementation was stalled by a July court decision, but the regulator will likely try again. In June, the European parliament approved similar rules for oil and gas, mining, and logging companies, including privately held ones. The SEC’s setback notwithstanding, “issuers are well advised to continue thoughtful preparations for the inevitable reporting,” lawyers at Paul Hastings LLP warned clients recently.
Canada has so far been on the sidelines. But last year the Mining Association of Canada and the Prospectors and Developers Association joined with two NGOs to form a working group on the issue. Just days before that group published its recommendations in June, the federal government announced plans to introduce mandatory standards within two years. Consultations are taking place this summer.
First Nations present a wild card. Their arrangements with resource companies are sometimes covered by non-disclosure agreements. And the oil and gas industry did not participate in the working group. The Canadian Association of Petroleum Producers says it supports country-by-country reporting, but has concerns about releasing granular project-level details.
Institutional investors managing more than $360 billion in assets have already voiced support for the working group’s proposals. Jamie Bonham, manager of extractives research at NEI Investments, says such disclosure would help NEI better assess the risks of companies it invests in. “I hope they don’t spend too much more time talking about it, because really, it’s not that hard.”