France gives boost to oil and mining transparency, but US victory must be secured by SEC.As the US Securities and Exchange Commission (SEC) drafts a final rule to implement recently passed legislation requiring transparency of government payments by oil, gas, and mining companies reporting to the SEC, the European Union could soon follow suit at the urging of French President Nicholas Sarkozy.
According to a statement released by the French presidency on January 31, Sarkozy said, “I have decided to ask the EU to adopt, as speedily as possible, legislation to compel industries in the extractive sector to disclose their payments to all countries in which they operate.” The statement was in response to an open letter from Bono in Le Monde to follow the US lead. “This is big”, Bono said. “Could be even bigger than debt cancellation, in terms of the money it frees up for Africa’s fight against poverty. It doesn’t cost the US a single dollar, and it wouldn’t cost France or Europe a single Euro to enact the same law and make it binding.”
With France hosting the G8 and G20 this year, President Sarkozy’s statement gives a big boost to efforts to replicate the groundbreaking US transparency law in markets around the world. Three of France’s six priorities for the G20 presidency – strengthening financial regulation; fighting corruption; and promoting development – directly relate to promoting a European regulation on oil and mining transparency. Coincidentally, France will also be hosting the fifth global conference of the Extractive Industries Transparency Initiative (EITI) on March 2nd and 3rd – a global transparency jamboree for supporters of the voluntary program designed to increase disclosure of oil, gas, and mining payments.
But before Europe moves, the SEC needs to get the regulation in place to secure the historic victory of Oxfam America and other groups in the Publish What You Pay US coalition. According to the statutory language of the law and the draft rule published by the SEC on December 15, all companies filing reports with the SEC are required to disclose what they pay host governments for oil, gas, and minerals. The payments will be disclosed annually at the project level and will be broken out by payment type – taxes, royalties, etc. By requiring project-level disclosure – the kind of information communities are most interested in – and compelling disclosure in countries that haven’t voluntarily disclosed this information, the rule goes far beyond EITI and creates a new global standard.
The SEC has to decide important questions, such as the definition of a “project” and whether companies will be allowed any exceptions to the disclosure requirements. Having lost the first round in Congress, the American Petroleum Institute (API), Chevron, Exxon, Shell and other companies are fighting to gut the law in the shadowy world of regulatory action. These companies have provided the SEC with comments and proposals that would have the combined effect of greatly weakening implementation. For example, API would like to have the payment reporting kept confidential by the SEC, with only a public compilation of aggregate payments at the country level disclosed. Secrecy in the implementation of a transparency provision! Investors, Oxfam, Publish What You Pay, and others are preparing their responses before the public comment deadline of March 2 and anyone can add their two cents in support of transparency. Senator Carl Levin has already weighed in, with more congressional allies expected to reinforce the message. More on this battle next week…