Finance Committee on Nov. 26th, 2014

[The Chair, Conservative, James Rajotte]

All those in favour of Liberal-4 to Liberal-7?

(Amendments negatived)

We'll do amendment PV-16, and I'll just mention again that the vote on this applies to amendments Liberal-8 and NDP-8.

We'll go to Ms. May, please.

[Elizabeth May, Green, Saanich—Gulf Islands, BC]

Thank you, Mr. Chair.

I am not surprised that the wording of the amendment put forward as Green Party-16 has been repeated by other opposition parties, because I took the language for the amendment directly from testimony to the committee, from Publish What You Pay and the Natural Resource Governance Institute. They are recommending, as you know, that we provide greater specificity and disaggregated project-level reporting in this act.

There is no question that I second the comments made by my colleagues. It is truly encouraging to see this legislation within.... We'd rather that it were not in an omnibus bill so it could get the kind of attention it deserves. However, this particular section of division 28, the extractive sector transparency measures act, is really welcome and would be much improved by accepting amendment Green Party-16, which requires the minister to specify in writing the way in which payments are to be broken down or organized, with the pay in each case, the jurisdiction, the amount of the payments, the total amount per category of payment and, if those payments can be attributed to a specific project, the total amount per category of payment.

I look forward to hearing from my colleagues. Perhaps, since this is an amendment supported by the expert witnesses who were before the committee, who also supported the intent of the legislation, this can be seen as an amendment that strengthens the overall effort of the bill.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you for that, Ms. May.

As I mentioned, if you want to have discussion on this or on amendments Liberal-8 or NDP-8, I think now is the best time.

We'll go to Mr. Cullen, and then I have Mr. Saxton.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Chair, through you to our officials, thank you for pulling the midnight shift with us.

My understanding, and I am not an expert in this field, is that there is legislation in the U.S. and the EU that allows for disaggregated level of reporting, of separating out. Is that correct?

[Mark Pearson, Director General, External Relations, Science and Policy Integration Sector, Department of Natural Resources]

Yes, that is correct.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

The notion of this putting Canadian companies at some sort of a disadvantage, particularly toward the EU competitors or American competitors.... Can we put that to the side, just in terms of any company that would come forward and say, “Well, we can't have disaggregated reporting, because that will put us at some unfair disadvantage towards competitors from those countries”?

[Mark Pearson]

The intention of the legislation is to work with our international partners to achieve a common global standard, so we are working to align with those other jurisdictions.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Would not that effort then lead us towards disaggregated reporting, which is not, to my understanding, present within the legislation right now?

[Mark Pearson]

Actually it is present, and I'll refer to Ekaterina to speak to that.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

So is there—

[Ekaterina Ohandjanian, Legal Counsel, Department of Natural Resources]

Thank you for your question.

The act speaks to the authority of the minister to just set up a framework and then be aligned with international G-7 partners and their approach. The fact that you don't see it expressly in the act does not mean that this is not how it's going to flow, even if you look for coherence, because we are always talking about commercial development of oil, natural gas, or minerals. We're always talking about the reporting of payments to a specific payee; we do talk of projects.

So in order to make our report aligned and have the flexibility that is inherent in the EU approach, which we don't have because we have a legislative approach, and they have a regulatory approach.... In order to find the best possible instrument for addressing this and reserving the flexibility that they already have in their scheme, we've taken the approach that you see in proposed subsection 9(5).

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

So outlining broad principles but then using the regulations in order to have this pay breakdown payment by payment, is that correct?

[Ekaterina Ohandjanian]

It becomes a requirement that is legally enforceable the moment that the minister will specify these requirements. That's why we're working...because the international standard is also emerging. They have general references in the regulations but it doesn't go beyond that. In any event, we've organized it in a way so that the moment that it is specified by the minister, again recognizing that we need alignment, then it becomes legally binding.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

So there is my question as to whether we're in a lead or follow position? The question that has been raised is whether the moment it is required the minister by this act has the power to require this level of reporting. Is that correct?

[Ekaterina Ohandjanian]

Correct.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

I understand you're always seeking flexibility in terms of application but why not, if it's a goal and a principle of ethical business practice, institute it as this amendment seeks to? As we heard from witnesses both on the industry side and on the human rights, environment, and first nations side, why not just allow a principle to be put into the law itself?

[Ekaterina Ohandjanian]

Because the moment you have it in legislative form, if you need to add to it, you can't. There is no more authority. You lose a certain flexibility if you do it that way. This is about an implementation. The core reporting obligation is clear; it is about the threshold you see. The types of payments, the types of payees, and the breakdown is what you see addressed administratively.

If we were to legislate this, again, we'd lose that flexibility. We would need a legislative amendment to add additional information fields or break down requirements.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

I understand the tension there and as a legislator I'm falling on the other side of it and saying greater commitments in law give me greater assurance, but I understand in terms of the application.

I have a last question through you, Chair, to the witnesses. There has been some concern raised by some first nations development corporations with respect to the disclosure and by the proponents of various mining, oil, and gas projects in Canada. Have you heard those concerns through this process? Or is this a separate topic that doesn't get addressed here?

[Mark Pearson]

I would say that's a separate topic.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

So in saying it's a separate topic, the provisions provided in these changes to the act wouldn't have an impact on Canadian resource companies working here in Canada and the benefit impact agreements and whatnot that they do with first nations governance?

[Mark Pearson]

Just to clarify, there is no reporting obligation on the part of aboriginal governments. The reporting obligations are on the part of the commercial entities.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

I understand.

[Mark Pearson]

So the concern has been that all the stakeholders have asked if we could have a deferral so we could better inform aboriginal governments, work with them, to bring them into the implementation, hence the two-year deferral that's in the legislation.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

The concern coming from some of those resource development companies, mining, oil and gas, and whatnot, is that the reporting obligations under some of these changes will put them at a competitive disadvantage, because oftentimes, particularly with, say, energy transportation companies, they are making many agreements, not with just one first nations group. Have you heard those concerns and can they be addressed through this legislation?

[Ekaterina Ohandjanian]

Is the competitive disadvantage concern related to them having to report in Canada but not elsewhere? That would not be a proper reading of the EU rules or the U.S. rules as we had them, because they take a neutral approach to what a payment to a government is. They make no exclusions. Having a background in legislative work, you can recognize, and we can recognize, that if you make no exclusion, everyone is included. That's the approach the EU has taken. This is the approach the U.S. has taken. We've confirmed that with the U.K. in particular, and this is the approach we're taking as well.

So it's a neutral approach to what a government is. If a payment is made pursuant to an IBA or whatever else, it would have to be reported after the two-year deferral period ends.