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Moves in US, Mexico and Norway build momentum.
The Senate passed the US federal budget deal yesterday, and with it, Congress has reaffirmed its support for the oil payment disclosure requirements of the 2010 Dodd-Frank Act. Buried in the news of the US budget is the fact that the deal included approval of a long-delayed agreement between the US and Mexico to open up a vast area of the Gulf of Mexico for oil and gas exploration. Coincidentally, in the past week the Mexican Congress agreed to open up its petroleum sector to foreign investors and included important new transparency provisions with the move.
Approval of the 2012 US-Mexico Transboundary Hydrocarbon Agreement (THA) had been held up for months by the inclusion in the House version of an exemption to disclosing payments to governments as required by Dodd-Frank Section 1504, or the so-called Cardin-Lugar provision.
This irrelevant anti-transparency “poison pill” had stirred up considerable opposition in the House and Senate. A Senate bill approving the THA was clean; no exemption to the Dodd-Frank reporting requirement was included. The budget deal approved yesterday includes approval of the THA without the poison pill. Congress, then, has rejected disclosure exemptions and reaffirmed the importance of public disclosure of company-by-company payment information for investors and citizens around the world.
As pointed out back in May, the unnecessary exemption in the House bill only served to “forestall quick approval of this important agreement.” Oxfam America and allies in the Publish What You Pay coalition rallied to oppose what would be a backwards step on transparency.
In October, the Senate passed a version of the bill that did not include the exemption. Afterwards, pressure continued to mount to not include the waiver in a final House-Senate deal. The Ranking Members of the House Natural Resources, Financial Services and Foreign Affairs Committees sent a letter to Senate Majority Leader Harry Reid (D-NV) urging him not to include the waiver in a final House-Senate deal. The American Petroleum Institute (API) dropped its support for the exemption, saying in Senate testimony that it favored a clean version of the bill in order to pass the THA quickly.
By rejecting exemptions in the THA approval, Congress has again dismissed arguments put forward by industry that the reporting requirement might violate local laws in Mexico or other places where transboundary resources are located. Chair of the Senate Energy and Natural Resources Committee, Senator Ron Wyden (D-OR), hailed the passage of the THA as part of the budget deal and noted the important exclusion of the unnecessary Dodd-Frank exemption. (To note, Oxfam America’s stance has always been that it doesn’t oppose the THA – just the unrelated attack on transparency that threatened to hurt US leadership and global progress on holding oil and gas companies and resource-rich governments more accountable.)
With a clean bill finally passed and the threat of an anti-transparency addition gone, this is a big win in the fight against corruption. At the same time, there is good news out of Mexico on the oil transparency front. Historic constitutional revisions approved by the Mexican Congress that would allow foreign participation in the oil industry for the first time since the 1930s also make big strides on transparency. The changes include the full transparency of oil contracts as well as public disclosure of the Mexican government’s share of transboundary oil revenues, which will be paid into a newly established Petroleum Stabilization and Development Fund. In other words, far from having laws prohibiting disclosure, Mexico is taking proactive and concrete steps to increase transparency in the sector.
The passage of a clean THA in the US Congress and constitutional changes in Mexico are clear victories for oil transparency in both countries, but the fight is not over. In July the US District Court vacated the SEC 2012 rule to implement the Cardin-Lugar provision after API and the US Chamber of Commerce sued the SEC. The Cardin-Lugar provision, when fully implemented, will provide valuable information to investors, which is why a quick rewrite and promulgation of the rule by the SEC is supported by investors with more than $5.6 trillion in assets under management. Oxfam America, API, and investors agree on at least one thing – the SEC needs to prioritize finishing this important rule.
The SEC is still bound by the law to rewrite the Dodd-Frank disclosure rule, and can quickly reissue the rules with a stronger justification that satisfies the court’s ruling. With similar disclosure requirements in place in the European Union, Norway, and Switzerland, and with mining associations backing strong disclosure rules in Canada, the US is at risk of falling behind in providing valuable information about financial flows in the oil, gas and mining industries to investors and citizens. That’s why Oxfam America is a loud part of the chorus calling on the SEC to quickly reissue a strong rule.