Still waiting for financial transparency
On the one year anniversary of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC has yet to issue a final ruling to implement the landmark oil and mining financial transparency law, and the oil industry is fighting to weaken it.July 12th, 2011 | by Ian Gary
One year ago this week, Congress struck a huge blow against corporate and government secrecy by passing a law requiring oil, gas and mining companies to publicly report the payments they make to the US and foreign governments for the development and production of these resources. Too often, oil and mineral riches have led to corruption, violence, and wars affecting people on both sides of the pipeline–leaving communities close to production impoverished and consumers in the US relying on expensive energy from volatile regions of the world. Basic information about how much companies are paying host governments for these resources is often cloaked in secrecy.
The bipartisan Cardin-Lugar provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act, passed by Congress on July 15, 2010, represented a big step towards changing the situation. It requires all companies reporting to the U.S. Securities and Exchange Commission (SEC) to disclose annually taxes, royalties, and other payments on a project-level in every country of operation. From rural villagers in Africa to investors on Wall Street, the groundbreaking law casts the transparency net far and wide, arming the public with information it can use to track the amount of money governments receive from oil and mining companies.
Last year, as soon as news of the victory had spread, those of us who had worked for years on the law in the Publish What You Pay US coalition started receiving notes of congratulations from around the world and testimonies about how important this victory was to activists in countries rich in natural resources. A friend in Ghana said she heard the news on the radio in a taxi in Accra, with the driver giving a hearty assent. Oxfam partners in Cambodia sent clippings from local papers – the provision had made the front page in the Phnom Penh dailies. More messages poured in from Nigeria, Ghana, Indonesia, Peru, and elsewhere. Later that year, the coalition received the Commitment to Development Award from the Center for Global Development and Foreign Policy magazine in recognition of the achievement.
The congratulations are all fine and good, but one year later we – and communities around the world – are still waiting for the law to be implemented. The SEC must issue a final rule to implement the law and the time to act is now.
Congress gave the SEC until April 2011 to finish the regulation to implement this landmark provision. Faced with the burden of drafting over one hundred new “rules” or implementing regulations – from derivatives to executive pay –the SEC has fallen behind. The SEC now says it could be sometime between August and the end of the year before we see the final rule. Last December, Oxfam America largely welcomed the SEC’s draft rule. Oxfam, the Publish What You Pay coalition, faith groups, and investors representing over $1.2 trillion in assets commended the SEC for a draft that largely followed Congressional intent and provided specific comments in response to SEC questions to strengthen implementation.
Industry and other stakeholders have had plenty of time to comment on the draft – the SEC even extended the comment period at the request of the mining industry. The oil industry, led by the American Petroleum Institute (API), fought against the law and is now using the rule-making process to try to undermine implementation of this important victory. API and member companies have claimed that these disclosures could harm them competitively, even though several oil and mining companies, such as Norway’s Statoil, already disclose this information in every country of operation. (If it truly hurt their bottom line, they would not be doing it.) The law does not require the disclosure of sensitive information regarding commercial terms, proprietary technology, business models, or contracts.
API has also argued that companies should get exemptions if local laws prohibit disclosure of these types of payments – we haven’t found a case of this – and want their submissions to the SEC to be kept secret! I’ve unpacked and rebutted these arguments in previous posts.
This week, Oxfam America is launching an ad campaign in Politico and Bloomberg designed to encourage the SEC to complete its work and issue a final rule. We are also asking our supporters to contact API and tell the oil companies to stop supporting secrecy.
In the year since the law’s passage in the US, global momentum for financial transparency in the oil and mining sector has only been growing. Recently, in its annual meeting held in Deauville, France, the G8 endorsed mandatory disclosure laws to broaden the reach of the Dodd-Frank provision. Following suit, José Manuel Barroso, president of the European Commission, committed to advancing legislation in Europe, with a proposal tabled by October this year. The Hong Kong Stock Exchange now requires disclosure of tax, royalty and other payments when oil or mining companies list.
While recognizing the hard work of SEC staff, the Commission needs to move quickly to issue a final rule that follows the letter and spirit of the law. The world is waiting to follow the US lead. The longer the SEC waits to act, countries such as Ghana, Africa’s newest oil producer, are at risk of falling victim to the resource curse. We’ve seen it happen in Sierra Leone, Nigeria and Libya and in mining towns across Latin America, where corrupt government officials squander oil and mineral wealth instead of investing in health, education and agriculture. SEC – the time to act is now.
Contact API and tell oil companies to support transparency here.