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Interior Department says Dodd-Frank Provision – “Could be Very Useful”
Last year, when Oxfam and allies were celebrating the passage of the Dodd-Frank Wall Street Reform Act and the provision on oil and mining payment transparency, we were largely focused on the impact that these new disclosures would have on resource-rich developing countries. It turns out, though, that there could be a big financial benefit for the US Treasury and a country struggling with record deficits.
Few realize that the oil and mining payment disclosure provision – section 1504 or the “Cardin-Lugar” provision – requires reporting by companies in every country of operation, including reporting of payments in the US from production on Federal lands and offshore oil and gas production on the Outer Continental Shelf. The US Interior Department has just told the Securities and Exchange Commission (SEC) that implementation of this provision could be “very useful” in its work to collect oil and gas revenues inside the US. The Office of Natural Resource Revenue (ONRR) – charged with collecting and disbursing more than $10 billion in oil and gas revenues each year – has written to the SEC to say that how the agency implements the provision could help them “ensure that energy companies are reporting correctly and paying every dollar due to the American taxpayer.”
US government oversight and collection of oil and gas revenues from Federal lands has come under scrutiny over the last several years as a result of major corruption and conflict of interest scandals within the agency assigned to collect these revenues. The newly formed ONRR – replacing the scandal-ridden Minerals Management Service – is trying to turn a new page and has recently penalized Chevron, Anadarko and other companies for improper deductions and knowingly underpaying royalties. ONRR has told the SEC that in order to compare what companies pay to the Federal government and what they declare to the SEC, certain steps would be recommended in the final regulations. These include reporting to which agency(ies) the payments were made and separately identifying the types of payments – such as royalties, rents and bonus payments.
Most notably, the Interior Departments suggestions align with what Oxfam and the Publish What You Pay US Coalition have told the SEC related to how “project” level payments should be defined. The Dodd-Frank provision requires the SEC to issue a rule that would include project level payment reporting. Communities need to know how much governments are being paid related to specific oil and mining projects that have a direct impact on their lands and livelihoods. Civil society groups have told the SEC that project payments should be those made at the lease or license level.
For reasons not entirely clear, what seems to have oil companies most exercised is this project level reporting requirement. Now, Interior has told the SEC that, if feasible, payment data “should be reported at the lease level”, mirroring our project-level definition recommendation.
While oil companies are making a big push to weaken implementation, it’s heartening to see the Interior Department coming out in favor of strong implementation. ONRR concludes by saying if its suggestions are taken on board the new payment disclosures would “provide a valuable cross-check for the data we receive from resource companies, and help ensure that the Federal Government and American taxpayers are receiving the proper returns for extraction of these valuable public resources.” We couldn’t have said it better ourselves.