Activist says of oil industry proposal: Anything other than project-level disclosure supports corruption
WASHINGTON (Thomson Reuters Foundation) – The American oil industry is using its fight to rewrite U.S. regulations requiring companies to publicly disclose their payments to governments for oil, gas and mining projects as a lever to try and shape how rules are written in Europe, an industry official said on Monday.
The strategy is to “have some influence on European Union activities,” Stephen Comstock, director of tax policy at the American Petroleum Institute (API), said during a panel discussion on transparency in natural resource wealth at the Brookings Institution.
European countries with Britain in the forefront are in the process of writing into national laws an EU requirement for require oil, gas, mining and lumber companies to publish - broken down by project and company - what they pay governments for natural resource wealth. The rules will start taking effect in 2016 and are part of a global trend toward company disclosure of extractives payments. Australia and Canada also are working on legislation.
The United States had been in the lead on extractives disclosure, but its efforts stalled in face of vigorous opposition from the oil industry.
The API, the U.S. Chamber of Commerce and major oil companies including Royal Dutch Shell Plc, Exxon Mobile Corp and Chevron Inc successfully sued to stop the U.S. law, known as Section 1504 of the 2010 Dodd-Frank bank reform act, from taking effect this year.
A judge sent the rule back to the Securities and Exchange Commission (SEC) for a rewrite, saying it had failed to explain adequately why individual company payments should be made public rather than aggregated, and why no provisions were made to exempt some payments that could be anti-competitive.
But Senator Ben Cardin, author of the U.S. law, defended the SEC and urged it not to water down the legislation.
“The SEC did exactly what Congress wanted: full mandatory disclosure that Congress required,” he told the Brookings Institution.
“Our message is clear. Read the language that was passed and its intent,” he said, adding that transparency over natural resource wealth benefits companies because it aids in fighting the corruption that destabilizes countries and leads to conflict and threatens national security.
SUPPORTING CORRUPTION?
Comstock said that the API supports transparency but wants a U.S. regulation that is practicable. It has proposed that the SEC compile reports in a searchable database that would allow campaigners to view aggregated payments in their localities, listed by who received the money but not broken down by company.
This however would differ from the EU, which requires public disclosure broken down by project and by company. Under EU law, countries have very little flexibility in how they write their national regulations, said Michelle Kosmidis, a senior EU official.
Asked why the industry is pressing for a different regulation in the United States from the one in Europe - effectively blocking the emergence of global uniform rules - Comstock said: “We hope that the (U.S.) definition of project and standardization will have some influence on the European Union activities. It will have some value in bringing the information together and making it usable to folks.”
But Dotun Oloko, a Nigerian anti-corruption campaigner, rejected Comstock’s suggestion that data tagged and organized this way would be more useful. Under this proposal, the illicit payment by Shell and the Italian oil company Eni of more than $1 billion to a former Nigerian energy minister for oil block OPL 245 would never have come to light, he said. That payment, equal to about 60 percent of Nigeria’s health budget, only was revealed through a lawsuit in the United Kingdom.
“Anything other than project-level disclosure is supporting corruption. I don’t understand why there are some in the extractives industry who are still fighting disclosure,” Oloko said.
The SEC has said it plans to have a new U.S. rule in place by next March. The United Kingdom last week received industry and civil society input for its regulation.
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