EITI board raises bar on global standards to report natural resource revenues

Source: Thomson Reuters Foundation - Fri, 1 Mar 2013 17:34 GMT
Author: Stella Dawson
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WASHINGTON (TrustLaw) – The board of the Extractive Industry Transparency Initiative has raised the global standard for countries to disclose in greater detail the revenues they receive from natural resource wealth.

The decision by the EITI, a voluntary group that sets global standards on transparency for extractive industries, taken at a board meeting in Oslo this week, is designed to improve community access to information about oil, gas and mining projects, as a way to funnel more of that money into economic and social development.

About 3.5 billion people live in resource-rich countries and yet many of them remain in poverty. Greater accountability over how governments use natural resource revenues is seen as one way to change that.  

Under the new guidelines, governments that want the EITI’s global seal of approval will be required to reveal project-by-project how much companies pay for the right to prospect for and extract oil, gas and minerals, said Jonas Moberg, head of the EITI secretariat.

Civil society groups campaigning for natural resource wealth to benefit citizens applauded the move.

“EITI board members have agreed important steps to strengthen the standard,” said Joseph Powell, senior policy manager at ONE, the anti-poverty group.

The board decision would bring the EITI's standards into line with new rules in the United States and those pending in the European Union. It would take effect under the same timetable as the U.S. and EU legislation, starting in 2014. 

Some business groups, however, are contesting detailed project-by-project breakdown. The American Petroleum Institute and the U.S. Chamber of Commerce are among those who have filed a lawsuit in the United States to block it.

Powell said he hoped the latest EITI action would encourage oil companies to drop their efforts to overturn transparency laws and withdraw from the lawsuit, as Statoil of Norway has done. It is also a reminder for the EU as it finalises its legislation “that they must not include dangerous loopholes and exemptions that could weaken the information that ends up in the hands of citizens,” he added.

BENEFICIAL OWNERS

The EITI board also decided to strongly encourage countries to pull back the veil on who ultimately holds a license or contract, known as revealing the beneficial owner. Complex corporate structures and partnerships can disguise who bids for the right to explore and extract natural resources, leaving a huge loophole where corruption and abuse can thrive.

While this fell short of a push by civil society organisations to make beneficial ownership a requirement, Moberg said there was widespread support on the EITI board for the principle of disclosing the underlying owner. However, board members wanted to give countries more time to adapt to the tougher standards, which they see as an incremental process.

“It is a pretty significant step to say, ‘Yes, this is something we have to work towards and this is a good thing’,” Moberg said in a telephone interview from Oslo.

So far 37 countries have signed up to the multi-stakeholder initiative, which brings together government officials, companies and non-governmental organisations to agree on disclosure standards in the extractive industries. Countries issue reports on how well they meet those standards, which are evaluated by the EITI for compliance.

To take effect, the stricter standards must be adopted when the EITI holds its conference in May in Sydney.

Moberg said the board also discussed ways to ensure that communities take full advantage of the data on oil, gas and mining revenues.

Getting companies and governments to release data on revenues from extractive industries will do nothing to improve the livelihoods of people living in poverty in resource-rich countries unless civil society activists can use it effectively to campaign for money to support development projects in their communities.

Without effective usage of the information, Daniel Kaufmann, president of Revenue Watch, said it would be “zombie” data and financial transparency would not lead to government accountabilty over natural resource wealth.