Fact sheet: The fight against oil and mining secrecy
The Fight Against Oil and Mining Secrecy: The 2010 U.S. Dodd-Frank Wall Street Reform Act and the Extractive Industries Transparency Provision
Two years ago, HumanONE members helped push Congress to pass the Cardin-Lugar Amendment, which requires oil, gas and mining companies to reveal their payments to foreign governments. Right now, the Securities and Exchange Commission (SEC) is finalizing these rules, but some of the world’s biggest oil companies are fighting to keep these deals hidden.
By knowing what a government is paid for its natural resources, citizens can help make sure their leaders don’t stash the cash. Let’s tell big oil we won’t be bullied.
What’s the problem?
- More than 1.5 billion people live in dire poverty – less than $2 a day – in countries that are considered “rich” in natural resources such as oil, natural gas, gold, diamonds and other minerals.
- While communities suffer from environmental damage, loss of land and human rights abuses in places such as Ghana, Peru, Cambodia and Nigeria, they see little in the way of benefits from the billions of dollars governments receive from oil and mining companies. Instead, these deals are often shrouded in secrecy and the money trail hidden from public view. This fuels corruption and conflict. This tragic irony – so much poverty amidst so much natural resource wealth – is sometimes called the “resource curse”.
- The “resource curse” harms local citizens and creates difficult operating environments for oil and mining companies. In addition, the volatility in resource-rich countries affects consumers in energy-hungry economies such as the U.S.
How does this law help?
- Transparency is an important part of the solution to the “resource curse”. This law creates a new global standard for company disclosure. It gives citizens in resource-rich countries information to combat oil and mineral sector corruption and to demand government accountability for responsible resource use.
- This law shines a light on billions in payments to governments from oil, gas and mining companies.
How did this law come about?
- The provision in the Wall Street Reform Act had bipartisan support and was based on bipartisan legislation introduced in the Senate in 2009 called the Energy Security through Transparency Act and sponsored by Senator Lugar, a Republican, and Senator Cardin, a Democrat.
What does the law require and achieve?
- Oil, gas and mining companies are required to disclose what they pay to the U.S. government and foreign governments as part of their annual filings to the U.S. Securities and Exchange Commission (SEC), which is the agency that regulates the U.S. financial sector. The law will cover a wide range of U.S. and foreign oil and mining companies. Companies such as Exxon, Chevron, BP and Shell will be covered as well as emerging market companies such as PetroChina and Petrobras.
The law was passed in 2010 – why haven’t we seen any information disclosed?
- The law required the SEC – as the relevant regulator – to develop the implementing regulation – or “rule” by April 2011. The SEC issued a proposed rule in December 2010 and asked for public comments. Dozens of comments were received from companies, investors, NGOs in the Publish What You Pay coalition, and groups in resource-rich countries themselves.
- Oil and mining companies have been urging the SEC to weaken the law in a number of ways that would go against the law and the intent of Congress.
- Oil companies such as Chevron, Exxon, Shell and others have been pressuring Commissioners at the SEC to issue a weak final rule. In January, their industry lobbyists – the American Petroleum Institute – threatened the SEC with a lawsuit unless the agency issued a new proposed rule – essentially starting from scratch and throwing away a year and a half of work.
- As of Feb. 1, 2012, the SEC has been in violation of the law for 290 days.
- This is a clear example of a powerful industry trying to pressure a regulator to try to weaken a law passed by Congress. Millions of people around the world are waiting for this information.
What can I do to help?
- Oil companies need to be told to stop fighting transparency. The SEC needs to be told to follow the law passed by Congress and not cave in to industry pressure.
- Stay tuned to www.one.org for ways to get involved. You can also go to www.oxfamamerica.org/transparency to learn about how to get engaged and www.pwypusa.org to learn more about the coalition and the issues.
What companies are covered?
- All oil, gas and mining companies listed on US stock exchanges who make payments to governments to development oil, gas and mineral deposits.
- This will cover a large number of the world’s largest internationally operating oil and gas companies, and eight of the world’s ten largest mining companies.
What are companies required to report?
- Covered companies will have to report : taxes, royalties, fees (including license fees), production entitlements, and bonuses for each project and for each government to which they make payments.
How will information be communicated to the public?
- The public will be able to access this information for free from the SEC website (www.sec.gov).
- Organizations such as Oxfam will work with their local partners in resource-rich countries to make sure that this information gets into the hands of the people who need it the most. The front-line communities and activist groups trying to hold their governments accountable for spending oil and mineral wealth.
Will the US be alone or is this law starting a transparency revolution?
- The US is taking leadership as President Obama said at the UN after the law passed, but it is not alone.
- The European Commission introduced legislation in October 2011 to require all EU-listed and large EU-based extractive and timber companies to publicly disclose their tax and revenue payments to governments worldwide. The proposed legislation mirrors the reporting requirements included in the Cardin-Lugar provision and may be finalized by the end of 2012.
- Publish What You Pay campaigns for disclosure laws are underway in the EU, Australia, Canada and a number of other important markets for the extractive industries.
Who are notable supporters of this type of disclosure?
- The G8 recently endorsed mandatory reporting in the extractive industries as a complement to the Extractive Industries Transparency Initiative (EITI) in its G8 Declaration released at the conclusion of the G8 Summit in Deauville, France on May 27, 2011.
- Newmont Mining, the second largest gold mining company in the world, based in the U.S., endorsed the primary legislation from which Cardin-Lugar originated.
- Investors with assets under management of over US$ 1.2 trillion have written to the SEC in support of the U.S. law. They know this information will help them make good investment decisions.
Is this a new trend?
- The Cardin-Lugar provision follows on a trend of voluntary disclosure and mandatory disclosure measures, promoting a global minimum standard that espouses best practice:
- Industry payment disclosure policies. Newmont Mining Company (US), Statoil (Norway), Talisman Energy (Canada), and Anglo Gold Ashanti (South Africa) publicly disclose payments on a country-by-country basis for all countries of operation, showing that this is possible and has not competitively harmed these companies.
- Policies of public international financial institutions. The International Monetary Fund (IMF) considers revenue payment and contract transparency in the extractive industries a best practice. The World Bank’s requires companies receiving financing for oil, gas and mining projects to disclose their payments to and contracts with governments.
- Extractive Industries Transparency Initiative (EITI). Since its founding in 2002, the EITI has grown to include 35 participating countries, and demonstrates both the demand for increased transparency, and the capacity and willingness of companies and governments to disclose payments and receipts.
This fact sheet was provided by Publish What You Pay.