For 15 years, ConocoPhillips, an American oil giant operating in 14 countries, participated in the Extractive Industries Transparency Initiative (EITI–the global standard for transparency in oil, gas, and mining). Not anymore.

Recently, the company walked away from the EITI, just after the organization announced changes to its Company Expectations (which establish the standards of behavior for EITI-supporting companies), and new guidance on how to meet them.

The updates to the EITI Company Expectations notably include a more explicit requirement that companies must disclose their project-level payments to governments in all countries of operation, including those that aren’t yet EITI implementers, and consequences for those that do not do so. ConocoPhillips fails to do this.

But the expectation that companies engage in this critical transparency measure is not new. Project-level payments-to-governments disclosures are integral to the values upon which the EITI was founded.

These disclosures help citizens hold their governments accountable for the use of natural resource revenues, so that the funds are used for their country’s development, rather than siphoned off to corruption or lost to poor governance. However, until a few months ago, the EITI had no formal mechanism for ensuring that companies were making the necessary disclosures. For too long, companies were able to skirt their disclosure responsibilities while still gaining the reputational benefits that EITI membership provides.

Now that the EITI has strengthened its Company Expectations, ConocoPhillips is out.

AMERICAN OIL COMPANIES ARE SOME OF THE WORST OFFENDERS

Last spring, under pressure from civil society, the EITI evaluated how well its corporate members–known as Supporting Companies–have been implementing the Company Expectations. While several oil majors (including BP, Equinor, and Total Energies) easily met the requirements for project-level payment disclosure, 33 percent of EITI-supporting companies flout this rule. Unsurprisingly, the worst offenders include major American oil and gas companies–namely ConocoPhillips, ExxonMobil, and Chevron.

Other American oil and gas companies–including Marathon Oil, Valero Energy, Occidental Petroleum, and EOG Resources–also do not disclose, and disappointingly have never signaled a commitment to transparency by joining the EITI. They can and should do better.

In 2010, the US became the first country to pass a law requiring project-level payment disclosure by mining, oil and gas companies, but more than a decade of lobbying by Big Oil has prevented the Securities and Exchange Commission (SEC) from ever implementing this landmark law. (Some US-listed oil, gas, and mining companies, like Newmont and Kosmos, report on their payments voluntarily, and are in line with their EITI Supporting Company commitment, nonetheless.)

Although the US is now a laggard on payment disclosure, the law spurred new regulations in Canada, the European Union, the United Kingdom, Ukraine, Switzerland, and Norway, resulting in the disclosure of some $1.2 trillion in payments to governments.

Meanwhile, other extractive-sector companies (like Shell, Tullow Oil, BHP, and Rio Tinto) are embracing even greater transparency by voluntarily providing country-by-country reporting of their total and related-party revenues, profits, taxes, and employment. Predictably, US oil majors ConocoPhillips, ExxonMobil, and Chevron are not doing so.

Following the EITI’s evaluation, the organization realized that without meaningful consequences for non-compliance, some companies were likely to continue to ignore the Expectations they’d agreed to meet. After months of negotiations, the organization ultimately decided that companies that failed to comply with the Expectations would not be allowed to serve on the EITI Board. Companies not serving on the Board would simply be “encouraged” to meet their obligations. These are weak consequences, for sure, but seem to be consequences enough to scare ConocoPhillips.

Companies will be reevaluated against the new Company Expectations in the first half of 2023, and should subsequently face removal from or ineligibility for the Board and increased encouragement to comply if not meeting the Expectations.

WHAT WITHDRAWAL WILL MEAN FOR CONOCOPHILLIPS

ConocoPhillips is active in 14 countries. However, only two of those countries–Indonesia and Norway–are EITI-implementing countries themselves. The company’s departure from the EITI means that ConocoPhillips will continue having to provide project-level payments-to-governments data for its operations in Indonesia and Norway–as well as for any projects held by subsidiaries in countries like Canada that have their own project-level payments-to-governments laws–but will avoid providing this critical data in its remaining eleven countries of operation.

The countries it will avoid reporting on includes the United States, the source of more than half of ConocoPhillips production for 2019, and where its lack of transparency has been the subject of criticism by Oxfam and its allies. This means that American citizens are without critical information about how much the company is paying in exchange for our natural resources.

ConocoPhillips' operations in the US are a particularly good example of how payments-to-governments data would be useful to citizens. Under an aggregated reporting model–the watered-down requirements that the American Petroleum Institute has lobbied the US government to adopt–ConocoPhillips would be allowed to consolidate the payments it makes from multiple projects within the same state, including in the large states of Alaska and Texas where the company has multiple projects.

However, under the best practice model used by the EITI, Canada, the EU, the UK, Norway, and others, ConocoPhillips would have to disaggregate the payments it makes to federal, tribal, state, and local governments for each one of its projects. In these states, communities impacted by oil and gas projects are currently unable to see the fiscal contributions of an individual ConocoPhillips project to government revenues. This data would be extremely useful to citizens and watchdog groups in making sure that payments from the projects they care about are able to be scrutinized, and that governments are receiving what they are owed and using those revenues responsibly, including to the benefit of those communities.

Conversely, because Canada has a project-level payments-to-governments law–the Extractive Sector Transparency Measures Act (ESTMA)–Canadian citizens are given information about what ConocoPhillips pays different levels of government for different projects in their country.

However, in those countries that do not have such a law and are not members of EITI, ConocoPhillips’ departure from EITI means they will not have to report. In addition to the United States, those countries include Libya, Colombia, Qatar, China, Cambodia, and Malaysia–many with significant corruption risks.

In response to our enquiry about its departure from EITI, ConocoPhillips explained that it is refocusing the countries in which it works and that, “This decision does not in any way reflect a retreat from our support of transparency. ConocoPhillips remains committed to following all applicable disclosure rules in the countries in which we operate and will continue to follow applicable EITI reporting standards at a country level in the participating countries where we engage in exploration and/or are the operator of production activities.”

This is, of course, a very carefully-worded way of saying that it will report only in the countries where it is compelled to do so, either by that country’s legal framework or by that country’s membership in EITI. By not being an EITI-implementing company itself, it will continue to avoid reporting for the majority of its operations, notably those in the United States.

WILL OTHER OIL AND GAS COMPANIES RISE TO THE OCCASION? OR FLEE THE EITI?

ConocoPhillips is the first to jump ship from EITI, and hopefully the last. Non-compliant EITI companies have a choice to make: Will they join their peers in being transparent about their dealings in foreign countries, or will they continue to run the risks of fueling corruption and misuse of precious, finite funds that could be used for development?

Alongside ConocoPhillips' departure, the EITI announced the retirement of Chevron’s representative who had served on the Board since its first meeting in 2006, and noted that Chevron has declined to appoint a new Chevron representative to the Board. It’s unclear whether this decision is coincidental or because it doesn’t want to be held accountable for meeting transparency standards and then face the embarrassment of later being kicked off the Board.

In response to our inquiry, Chevron said, “After 19 years of continuous service, Chevron is stepping down as a Board member, which will allow the opportunity for another company to join the Board, sustaining a healthy balance between continuity and new input.”

While Chevron states that it plans to remain “an active member of EITI’s company constituency” and that it is “compliant with all EITI requirements in the implementing countries,” this suggests that it plans to report only in the countries where it is compelled to do so, much like ConocoPhillips. The EITI will reevaluate the company in 2023; whether or not Chevron reports its project-level payments to governments in all jurisdictions around the world will be illuminating.

In sharp contrast to Chevron’s departure from the Board, Colorado-based mining company Newmont has recently stepped up to the Board and is already disclosing details on payments to governments at a project level in every jurisdiction in which it operates.

The biggest question mark currently hovers over ExxonMobil, which also holds a seat on the EITI Board. Last year, ExxonMobil’s representative was caught lobbying the SEC against a strong EITI-aligned implementing rule for Section 1504 of the Dodd-Frank Act–a provision that requires companies to be transparent about their payments to foreign governments for oil, gas, and minerals.

All eyes are on ExxonMobil as it decides whether or not it will begin to publish project-level payments-to-governments disclosures in line with its EITI obligations. Will it take a stand for transparency and social responsibility, or will it, like ConocoPhillips, opt for a shroud of secrecy?