Known as Section 1504 or the “Cardin-Lugar” provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the law requires oil, gas and mining companies to disclose payments they make at the country and project level to the United States and foreign governments. Passed nearly two years ago, the law covers more than 1,100 companies, according to the SEC, including around 90 percent of internationally operating oil companies and many of the top international mining companies. This includes American companies such as ExxonMobil and Chevron, foreign companies, such as BP and Shell, and some companies from emerging markets such as China, India, Brazil and Russia.
“By approving final regulations yesterday, the SEC lifts the veil of secrecy on billions of dollars that flow every year from oil and mining companies to governments around the world and will arm citizens of resource-rich countries with information they need to track the amount of money their governments receive from oil and mining companies,” said Raymond C. Offenheiser, president of Oxfam America. “We commend the United States for taking a leadership position on increasing transparency in the oil, gas and mining industry and the SEC for implementing Congress’ intent and not caving under intense industry pressure.”
Implementation of the law will put the United States in a position to influence a draft European Union law designed to complement Section 1504. The EU proposal requires both publicly and privately-held companies to disclose their payments to governments in countries where they do business.
“The SEC provision covers the vast majority of internationally operating oil companies and the world’s largest mining companies, and with expected European rules covering even more companies, the transparency net will be cast far and wide,” said Offenheiser.
Oxfam has urged the SEC to release final rules that conform to the statutory requirement as well as Congressional intent. While Oxfam is still reviewing the 231 pages of final rule text, the SEC largely appears to have done so. For example, the SEC rejected appeals from industry by not allowing any exemptions to the disclosure requirements for covered companies. Industry commentators had argued that a few countries prohibit disclosure but they did not provide convincing evidence. Oxfam America has made it clear to the SEC that such prohibitions are not known to exist and that creating such an exemption would invite foreign regimes to create new secrecy prohibitions.
While the new rules list all of the payments, such as taxes, royalties, dividends and bonuses companies need to disclose, they do not define the term “project”. There is already a common understanding within the industry of what a project means and it’s usually at the lease, license and concession levels. A company that doesn’t use the definitions widely used by industry is most-likely poorly-managed and investors should be cautious. The SEC provided detailed guidance in the rule release to minimize company abuse of the flexibility provided. For example, the SEC said that a project can’t be defined as a country, geologic basin or reporting unit.
Tight reporting requirements by the SEC will help to reverse the “resource curse” and the misuse of billions in oil and mining revenues. More than 1.5 billion people live on less than $2 a day in resource-rich countries.
"The communities in resource-rich countries like Ghana rarely share the wealth from oil and mineral extraction and the new requirements will certainly help close the gaps in the current system,” said Hannah Owusu-Koranteng of WACAM, an Oxfam partner working and an Extractive Industries Transparency Initiative global board member. “The SEC has finally implemented the law and the project-level disclosure required must provide communities and local officials in Ghana with detailed information on the revenue flowing to government from gold extracted from their lands.”
Owusu-Koranteng added, “We encourage developing countries to enshrine similar requirements."
“Congress spoke two years ago through this bi-partisan measure and now the SEC has done its job by issuing these final rules,” said Offenheiser. “Yesterday’s vote would not have been possible without the tireless efforts of Senators Cardin, Lugar, Leahy and Levin, Rep. Frank and many other Congressional leaders who have pushed the SEC since 2010 to finish the job.“
The information will not only benefit communities in Africa and in mining towns across Latin America and Asia, it will also benefit investors on Wall Street who will now have better information to assess high-risk investments. Companies will also benefit from better relations with local communities next door to their multi-billion dollar investments, creating better operating environments and more secure jobs for Americans. Companies will be required to comply with the new rules for fiscal years ending after September 30, 2013.
“The SEC has examined the facts and given its final word. It’s time for companies to embrace this global wave of transparency which is, in the end, in their own interest,” Offenheiser added. “American companies are not competitive because they make secret payments, but because they bring better technology, competitive fiscal terms, access to capital and efficient business practices. US companies will continue to win deals. No proprietary information will be revealed through payment disclosure and there is much to be gained for companies through transparent practices.”
]]>The landmark law, known as Section 1504 or the Cardin-Lugar provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act, requires companies filing reports with the SEC to disclose taxes, royalties and other payments related to the exploration and extraction of oil, gas and minerals in every country of operation. The required information, which includes project-level payment information, will arm watchdog groups, citizens and journalists in resource-rich countries with crucial information they can use to help hold governments accountable. The reports will also help investors assess the risks companies face.
“In too many countries around the world, oil and mineral wealth is squandered through government mismanagement and corruption instead of being invested in health, education and agriculture,” said Ian Gary, senior policy manager of Oxfam America’s oil, gas and mining program. “There’s no time left to waste. The SEC should not give in to industry pressure to water down the rules.”
Transparency advocates won the battle two years ago to get the law on the books, but the fight continues with the SEC, which has missed the statutory deadline to issue final rules needed to bring Section 1504 into effect by more than a year. To compel the agency to follow the law, Oxfam America filed a lawsuit against the SEC in May. The SEC responded to the lawsuit in a court filing on July 26.
“The SEC has told the public the meeting for the vote is scheduled for August 22 and is now using this scheduled vote as its principal excuse to the court. The August 22 date must not slip,” said Gary. “It’s time for the SEC to bring this fight to an end and follow the letter of the law.”
Yesterday, Senator Benjamin Cardin (D-MD) joined Arlene McCarthy, a leading Member of the European Parliament, on Capitol Hill to call for strong and swift action by the SEC. The European Parliament is working with the European Commission and European Council to complete a similar mandatory requirement for listed and large privately-held extractive companies in Europe.
“We’ve acted and the SEC is our implementing arm and they are required to follow the law passed by Congress,” Senator Cardin said. “Read the law. It’s simple. There is no ambiguity and I don’t think the SEC has a lot of discretion.”
Many Members of Congress, Oxfam and campaigners with Publish What You Pay USA have urged that the final rule should allow no exemptions and should define the project-level reporting requirement included in the law as payments made at the lease, license or contract level in host countries. MEP McCarthy emphasized in meetings with SEC Commissioners Walter and Aguilar that a majority in the relevant committee supports project level reporting and that they will not accept proposals from industry to create exemptions for alleged laws in host countries prohibiting disclosures.
“We are not prepared to create exemptions when we have no evidence that the problem exists… I told the SEC that we want a strong rule from the SEC and that this will help us in Europe. We won’t accept industry to play off two jurisdictions to weaken rules,” McCarthy said.
“Transparency is essential to good governance wherever you live on the globe. The US shares a commitment with our EU partners to support local citizens and level the playing field for all companies by harmonizing requirements to decrease corruption through greater transparency in resource-rich countries,” said Senator Cardin “Two years after passage of the US law that includes project-by-project reporting, with no exemptions, we look forward to completion of the SEC rule on August 22. This final information will be critical to ensuring that the EU has the information it needs to write its own rules.”
]]>The letter follows the alarming surge in repression of free speech, police brutality and human rights violations in Cajamarca, Peru, where protests against Newmont’s $4.8 billion Minas Conga gold mining project intensified last week, leaving five people dead due to the government’s violent response. Community members in Cajamarca are concerned that the project will harm the environment by draining mountain lakes and replacing them with man-made reservoirs, and generating massive amounts of toxic waste.
"We are deeply concerned about the latest mining-related violence in Peru,” said Keith Slack, global program manager of Oxfam America’s oil, gas and mining program. “Urgent action is needed now to prevent the situation in Cajamarca from deteriorating further."
The groups, which include Oxfam America, Amazon Watch, Earthworks, Earthjustice, Friends of the Earth, MiningWatch Canada, Rainforest Action Network and the United Steelworkers, raise concerns about the Peruvian government's violently suppressing community opposition to extractive projects. They also call on Newmont, whose gold mine project has been the principal catalyst for the conflict, to make a public declaration against the Peruvian Government’s violent repression of civil liberties and harassment of mining protestors. The letter continues by calling on Newmont to not proceed with the project without obtaining the free, prior and informed consent of affected communities.
“We are dismayed that the Peruvian Government is providing cover for extractive projects by suppressing community opposition through violent means,” stated the letter. “Our organizations support communities’ rights to peaceful and non-violent protest.”
In the last year, conflicts relating to mining have risen sharply in Peru, now numbering over 240. Many of these conflicts can be prevented by companies first engaging in dialogue with affected communities and receiving community consent for projects.
]]>Under Section 1504, companies are required to disclose in their annual SEC reports all payments made to either the United States or a foreign government, at the project-level, for the extraction of oil and minerals. The SEC has delayed the rule-making process for more than a year, missing the statutory deadline of April 16, 2011 set by Congress.
“The financial transparency and regulation promised by the Dodd-Frank Act are more important than ever, and Congress is rightly demanding that the promise of the Cardin-Lugar provision be fulfilled by the SEC,” said Ian Gary, senior policy manager of Oxfam America’s oil, gas and mining program. “New discoveries of oil and minerals, such as in East Africa, are being announced almost every week and quick implementation of this provision will help ensure that these countries build on a foundation of transparency.”
The letter demands the SEC issue final rules on the Cardin-Lugar provision, as well as the conflict minerals provision, Section 1502 of the Dodd-Frank Act.
“These two proposed rules take the issues of secret payments and the use of conflict minerals out of the shadows and into the open, making it possible to fight corruption, increase government accountability and help end the resource curse in developing countries,” highlighted the letter. “The SEC has a history of unmet promises regarding the completion of these rules” and “the issue is too serious to allow further delay.”
“We have been patient but for those living on less than $2 dollars in resource-rich countries, there’s no time left to wait,” continued Gary. “We join these members of Congress to urge Chairman Schapiro to schedule a vote on the final rule now.”
The Congressional letter comes as Senators Ben Cardin (D-Maryland) and Richard Lugar (R-Indiana) weigh in on the battle being fought on the other side of the Atlantic, where oil and mining companies are fighting a draft European Union law similar to Section 1504. To express their appreciation for adopting similar requirements in Europe, the Senators sent a letter to European Commissioners that emphasized the SEC’s mandate to follow the letter of the law.
“As Senators, we assure you that the SEC does not have the authority to remove or change the basic requirements of the law,” said the letter, which also enclosed a copy of the law.
Both letters follow letters from prominent Senators and House members from February and March urging the SEC to “resist” pressure from oil companies, which have been lobbying the Commission to water down the rule.
On May 16, Oxfam America filed a lawsuit against the SEC for unlawfully delaying the issuance of a final rule for Section 1504. The lawsuit was filed in the US District Court for the District of Massachusetts and asks the court to order the SEC to issue a final rule as required by law. “Oxfam America is simply asking the SEC to follow the law,” Gary said.
Notes to Editor:
The letter was signed by Edward J. Markey, Barney Frank, Howard L. Berman, Jim McDermott, Maxine Waters, Henry A. Waxman, Frank R Wolf, Louise M Slaughter, Dennis J Kucinich, James P Moran, Charles B Rangel, Steve Cohen, Andrew Carson, Michael M Honda, William Lacy Clay, Melvin Watt, John A Yarmuth, Fortney Pete Stark, Barbara Lee, George Miller, Gregory W. Meeks, Raul M. Grijalva, Brad Miller, Brad Sherman, John Olver, Eleanor Holmes Norton, John Conyers, Jr., Carolyn B. Maloney, Gwen Moore, Theodore Deutch, Keith Ellison, Jesse Jackson, Jr., Earl Blumenauer, James P. McGovern, John Lewis, Janice D. Schakowsky, Betty McCollum, Bob Filner, Jose E. Serrano, Anna G. Eshoo, Peter Welch, Michael E. Cupuano, Corrine Brown, Jerrold Nadler, Jackie Speier, Edolphus Towns, Frederica S. Wilson, Maurice D. Hinchey, John B. Larson, Carolyn McCarthy, Louis Capps, John Garamendi, Charles A. Gonzalex, Sam Farr, Karen Bass, Henry C. "Hank" Johnson Jr., Mazie K Hirono, Suzanne Bonamici.
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“We are very disappointed by (ICSID’s) decision to rule against El Salvador. It goes against the views the Salvadoran people who are overwhelmingly against mining,” said Keith Slack, manager of Oxfam America’s oil, gas and mining program. “We are concerned that the continued presence of Pacific Rim in El Salvador will contribute to further human rights abuses. We urge Pacific Rim not to pursue this case and to listen to the voice of the Salvadoran people.”
The jurisdictional ruling means that the case will now move forward into the merits phase, which may take several years to decide. Pacific Rim also filed a parallel lawsuit, claiming that El Salvador violated the Central American Free Trade Agreement (CAFTA), however the World Bank agency rejected their claim.
This David versus Goliath story began in the rural area of Cabañas, El Salvador in 2002, when Pacific Rim began exploring for gold. In 2004, the company applied for a required “exploitation permit” to start mining. However, the government refused to issue a permit since the application lacked three out of the five elements required under Salvadoran law.
A year later, CAFTA went into effect and by December 2007, the company reincorporated in Nevada and shortly after launched their suit under CAFTA, using an extremely controversial procedure under which corporations can sue governments for allegedly violating their rights as foreign investors. At the same time, the company filed another claim under El Salvador’s investment law. On Friday, the World Bank’s ICSID rejected Pacific Rim’s claim under CAFTA but accepted the company’s parallel claim under El Salvador’s foreign investment law.
“The Salvadoran government has recognized that not all foreign investment is good for the country,” said Slack. “The ruling undermines the government’s ability to protect its citizens and the environment.”
A number of mining activists have suffered human rights violations since Pacific Rim began exploration activities in 2002. The most recent occurred last June when Francisco Durán Ayala, a student who disappeared after posting flyers as part of a campaign against the mining company, was found in a soccer field a day later with two gunshots in the head. His killing is believed to be linked to his mining activism. Many of the community members such as Ayala along with local groups believe the mine will contaminate local water supplies and ruin their ability to grow crops; independent studies have confirmed their concerns.
]]>Congress set a deadline of April 17, 2011, for the SEC’s promulgation of the final rule that is needed to bring Section 1504 into effect. The SEC has now missed this statutory deadline by one year and one month. Oxfam America notified the SEC on April 16, 2012 that it would file suit if the regulatory agency did not issue a final rule within 30 days. As Oxfam America’s lawsuit states, “the extractive payment disclosures that Congress mandated nearly two years ago will not take place unless and until the SEC issues a Final Rule. Unfortunately, the SEC’s pattern of delay gives no assurance that it will ever promulgate a Final rule without the involvement of this Court.” The SEC issued a proposed rule on December 15, 2010.
This legal action follows engagement by Oxfam America and allies in the Publish What You Pay coalition with the SEC since the Dodd-Frank Act was signed into law. Oxfam America has made numerous substantive submissions to the SEC and has had multiple meetings with SEC staff about the proposed rule and the need for a strong final rule.
“We have been patient, but the Commission’s continued failure to issue a Final Rule implementing Cardin-Lugar frustrates Congress’s intent to increase transparency in resource-rich countries,” said Ian Gary, senior policy manager of Oxfam America’s oil, gas and mining program. “For those living in poverty in resource-rich countries, there’s no time left to wait.”
Gary added, “Oxfam America is simply asking for the SEC to follow the law.”
Investors representing more than $1.2 trillion worth of assets under management have made submissions to the SEC in support of the provision. Secretary of State Clinton has called on the SEC to “go as far as possible” in the final rule and many prominent members of the Senate and House of Representatives have called on the SEC to respect the statutory deadline and Congressional intent. The oil and mining industries have been fighting implementation, with the American Petroleum Institute calling on the SEC to “repropose” the rule.
“One of the reasons for the financial crisis was a lack of public information about the real risks of investments,” said Gary. “In the case of the oil and mining industries, investors have a right to know how and whether companies are exposed to political and expropriation risks in volatile resource-rich countries.”
The lawsuit, filed in the US District Court for the District of Massachusetts, asks the court to order the SEC to issue a Final Rule as required by Section 1504. Oxfam America is represented in this matter by Baker Hostetler LLP, one of the largest law firms in the US, and EarthRights International, an organization dedicated to defending human rights and the environment through legal actions and other strategies.
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Even though Congress passed the law in 2010 and set a statutory deadline of April 17th 2011 to issue a final rule, the SEC continues to delay the rule-making process, despite prominent members of Congress, investors and advocacy groups with the Publish What You Pay coalition urging the regulatory agency to resist industry pressure and follow the letter of the law.
“As Americans rush to the post office to mail their tax returns, oil companies are actively lobbying the Securities and Exchange Commission (SEC) to keep their tax payments secret,” said Ian Gary, senior policy manager of Oxfam America’s oil, gas and mining program. “The hypocrisy of big oil, which loves to trumpet their tax contributions to the US government, has never been more apparent until now.”
Gary added, “The SEC has now been in violation of the law for 364 days. The time for excuses is over.”
To bring attention to SEC’s violation of the law, activists dressed in suits and wearing monkey masks gathered inside an oil barrel in front of the SEC today. They acted out scenes to convey the message that transparency in the oil, gas and mining industry is not monkey business. The action is part of a campaign launched in February that included a demonstration in front of the SEC as well as Chevron building in Houston, Texas, a six-figure ad campaign, and a grass-roots petition targeting oil companies.
“The SEC should not let oil companies push them around,” said Gary. “It’s time for the SEC to bring this saga to an end and follow the clear Congressional mandate.”
While the heavy rule-making workload of the SEC under Dodd-Frank is appreciated, all parties have made their views known to the SEC and it is the responsibility of Chairman Schapiro to bring the final rule to a vote. The deadline is well past and the public is waiting for this vital information. Through SEC action, the United States will be well-positioned to influence the European Commission’s proposal, which would require both private and public companies to disclose the payments they make to foreign governments. The oil industry is actively lobbying in Europe to try to water down the EC proposals.
“The oil industry needs to recognize this transparency wave is inevitable and should stop fighting disclosure rules that benefit companies, investors, energy consumers in industrialized countries and citizens in resource-rich states,” said Gary. “The SEC should stand up to big oil and quickly issue a final rule.”
The final rule must contain no exemptions and should define the project-level reporting obligation included in the law as payments made at the lease or license level in host countries.
]]>The call comes as the Peruvian government is debating whether to grant Doe Run Peru another extension for environmental remediation commitments it made when it purchased the smelter from the Peruvian government in 1997. If it’s granted, the smelter could reopen and put La Oroya’s children at risk again. According to government studies in 2011, blood lead levels in children have decreased since a 2005 study conducted by St. Louis University, in collaboration with the Centers for Disease Control, which concluded that 97 percent of the children in the town under age six had elevated blood lead levels. In recent statements, Peru’s government has sharply questioned Doe Run’s willingness to address the environmental issues at La Oroya.
“We hope the Peruvian government will maintain its firm position vs. Doe Run in the current negotiations and stand up for the health of workers and innocent children of La Oroya,” said Keith Slack, global manager of Oxfam America’s oil, gas and mining program. “The smelting operation should remain closed until the company takes adequate steps to control toxic pollution.”
However, US-based Renco Group, Doe Run’s parent company, has shifted blame for La Oroya’s environmental problems onto the Peruvian government by filing an $800 million lawsuit against Peru under the US-Peru Free Trade Agreement. Oxfam America believes the claim is one of several tactics the company is using to pressure the Peruvian government to grant Doe Run Peru reprieve from meeting its environmental commitments.
To add to the debate, 18 members of the US House of Representatives sent a letter to Secretary of State Hillary Clinton and Secretary of the Treasury Timothy Geithner expressing their concerns regarding the behavior of Renco Group and its subsidiary. It urges the US government to refrain from supporting the company in its trade dispute with Peru.
“We believe that the poor environmental record of this company reflects negatively on the image of the United States in Peru and Latin America and jeopardizes the credibility of American efforts to promote responsible foreign investment,” said the letter.
In a separate letter to Peru’s Congress, Russ Carnahan, another member of Congress, expresses his concerns over the lead smelter in La Oroya. Congressman Carnahan represents the 3rd district of Missouri, which is home to a lead smelter operation owned by the same US-based Doe Run Corporation and its parent, Renco Group. Similar to the smelting operation in Peru, children and families living near the facilities in Herculaneum, MO have been exposed to dangerously high levels of lead. However, in 2010, Doe Run reached an agreement with the US Environmental Protection Agency to pay $65 million for violating environmental laws, as well as a $7 million civil penalty to pay for environmental remediation.
“We are heartened that prominent members of the US Congress are taking a stand against environmental polluters like Renco Group’s Doe Run lead smelter,” said Rocio Avila, program officer for Oxfam America’s oil, gas and mining program. “The US government should not support companies like Renco Group who abuse investor-state provisions in trade and investment agreements.”
So far, more than 35,000 people have signed a petition calling on the US government to hold the company accountable, which has presented the Peruvian government with a number of onerous demands. These include, assuming responsibility for a 2007 personal injury lawsuit filed against Doe Run in Missouri courts on behalf of 137 sickened Oroyan children; covering the cost of Doe Run complying with the environmental remediation plan; and insisting the government cancel $21.7 million in fines and other penalties it has accumulated over the years.
Peru’s government will make a decision on Doe Run’s demands tomorrow.
]]>While the law would help stem corruption in resource rich countries, the American Petroleum Institute (API) and its oil company members, such as Chevron, ExxonMobil and ConocoPhillips, are fighting implementation of the provision by the SEC, even threatening to sue the regulatory agency, unless it withdraws its proposal and starts from scratch.
“The SEC has a strong mandate from Congress to follow the letter of the law and should not cave into those who don’t want to.” said Ian Gary, senior policy manager of Oxfam America’s oil, gas and mining program. “We are heartened to see so many people standing up to big oil, demanding companies open their books and stop hiding secret payments to local governments.”
Powerful political figures are also weighing in. Secretary of State Hilary Clinton expressed her strong support last week for the provision during a Senate hearing, saying the SEC should “go as far as possible” to implement the law. “I hope the regulations expected from the SEC reflect the clear intent of the law,” she said. “I think our own government…should be as forward-leaning as possible in giving full weight to what the intent was behind the legislation.”
Many prominent legislators and appropriators, including Senators John Kerry, Charles Schumer, Ben Cardin, Leahy and Rep. Barney Frank are also ramping up pressure. The Senators submitted a letter to the SEC on January 31st followed by a similar letter by fourteen senior members of the House of Representatives on Feb. 14, urging the SEC to “resist” pressure from oil companies and “promptly” release a strong effective final rule.
“We urge the SEC and oil industry to pay close attention to the House and Senate letters and issue a strong final rule quickly,” said Gary. “We’re watching and ready to fight back if the SEC issues weak final rules.”
Though transparency supporters will deliver the online petitions to the American Petroleum Institute, ExxonMobil, Chevron and ConocoPhilips today, citizens will still be able to join Oxfam America’s e-action campaign.
“It’s great to see this issue resonating so well with the public. This was our most popular action in the last year,” said Gary. ”The SEC and oil industry should pay close attention to the growing momentum for strong final rules and the ‘votes for transparency’ our petition received.”
Major voices in the financial press have also weighed in the last two weeks. London’s Financial Times said in an editorial on Feb. 27 that “oil companies are wrong to resist publication of payments” and that “lobbying efforts aimed at overturning this progress should not be allowed to succeed.” The Economist in its Feb. 25 edition said that if oil companies go to court to block the SEC final rule it could “become a public relations disaster.”
Oxfam America kicked off its campaign a month ago in Washington, DC in front of the SEC, where activists depicted the oil and gas industry and the SEC in bed together. The activists then headed to Houston, Texas where they gathered in front of the Chevron Building downtown to demonstrate the yawning gap between the transparency rhetoric of the industry and the reality of their actions, which has never been more apparent until now.
To coincide with these activities, Oxfam America and a number of organizations supported a six-figure advertising campaign calling on the oil industry to stop fighting transparency. The ads ran online in the Washington Post, Politico, Huffington Post and The Hill and in print in the Wall Street Journal.
]]>Fourteen Members of Congress, including Rep. Barney Frank (D-MA), ranking member of the House Financial Services Committee, Rep. Norm Dicks (D-WA), ranking member of the House Appropriations Committee, and Rep. José Serrano, ranking member of the Financial Services Subcommittee of House Appropriations, signed the letter to SEC Chairman Mary Schapiro and the other SEC Commissioners.
Known as Section 1504 or the “Cardin-Lugar” provision of Dodd-Frank, the law requires oil, gas and mining companies to disclose the payments they make to host governments around the world for the exploration and extraction of oil and minerals. However, the American Petroleum Institute (API) and its oil company members such as Chevron, Exxon and Shell are fighting implementation of the law, threatening to sue the SEC, the regulatory agency responsible for issuing final rules, unless it withdraws its proposal and starts from scratch.
The letter comes the same week as international humanitarian organization Oxfam America and allies in the Publish What You Pay coalition launched a new campaign urging oil companies to stop lobbying to water down implementation the law that will help stem corruption in resource-rich countries. Oxfam America and other anti-poverty and financial transparency groups are supporting a six-figure advertising campaign calling on the oil industry to stop fighting transparency. The ads are running online in the Washington Post, Politico, Huffington Post and The Hill and in print in the Wall Street Journal.
The House letter follows a similar letter sent two weeks ago by senior Senators, including Senators Kerry, Leahy, Schumer, Cardin and Levin. The rulemaking for the Cardin-Lugar provision is long-delayed and the House letter says “we are also concerned that the Commission is far behind in meeting the statutory deadline of April 17, 2011” and that they are aware of oil industry efforts to press the SEC to “release a watered down rule that does not reflect the statutory language as well as the legislative intent of Section 1504.”
“We are pleased to see prominent Members of Congress stand up to big oil and tell the SEC that it has a strict mandate from the Dodd-Frank Act to follow the letter of the law and that it should not cave in to pressure from industry,” said Ian Gary, senior policy manager of Oxfam America’s oil, gas and mining program. “We urge the SEC to pay close attention to the House and Senate letters and issue a strong final rule quickly. The SEC must be accountable to Congress, investors and citizens who, now more than ever, expect strong financial transparency.”
The House letter highlights three areas where supporters are concerned the SEC might try to water down the tightly-drafted provision. First, the House letter, which includes Rep. Henry Waxman, ranking member of the House Energy and Commerce Committee, says that Section 1504 reporting requirements must be applicable to “all companies that raise capital in U.S. markets and report to the SEC, with no exemptions.” Some companies have complained that local secrecy laws would make it difficult to disclose payment information. While companies have not been able to show an example of such a law, the House letter emphasizes that such obstacles, if they exist, should not “be allowed to pre-empt US law.”
Second, the House members also emphasize that the project-level reporting required by Section 1504 should not be defined by the SEC in a way that would violate the statute. For example, an industry suggestion that “project” could be defined as all activities in a country would go against the statute and “therefore, payments should not be allowed to be reported only at an aggregate level.” Finally, the House letter, which includes eight members of the powerful House Appropriations Committee, says that “any inclusion of ‘materiality’ to limit payments or projects to be disclosed would be in violation of the statute.”
“It’s time for supporters of financial transparency, investor rights and good governance in resource-rich countries to make a stand and we are heartened by the House and Senate letters. The oil and gas industry loves to trumpet their support of international transparency initiatives and their tax contributions to the US government, but when a new law requires them to tell investors and the public exactly how much gets paid to whom around the world, they bring out the lobbyists and lawyers,” said Gary.
Investors representing more than $1.2 trillion in assets under management welcomed the law and draft rules the SEC issued in December 2010. The House notes the importance of strong implementation for investors. “We believe extractive industry revenue transparency will be of great value to investors as they assess the commercial, political and reputational risk faced by companies in often volatile locations… transparency of payments made to a government can help mitigate political and reputational risks and also allow shareholders to make better-informed assessments of opportunity costs, threats to corporate reputation, and a company’s dependence on such ventures.”
While the oil industry continues fighting transparency, some companies, such as Talisman Energy, Statoil, AngloGold Ashanti and Newmont Mining, are embracing it. They already disclose payments in every country of operation and in some cases they volunteer this information at a project level.
]]>Known as Section 1504 or the “Cardin-Lugar” provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the law requires oil, gas and mining companies to disclose the payments they make to host governments for the exploration and extraction of oil and minerals. However, the American Petroleum Institute (API) and its oil company members are fighting back, threatening to sue the SEC, the regulatory agency responsible for issuing final rules, unless it withdraws its proposal and starts from scratch.
“The SEC has a strict mandate from Congress to follow the letter of the law and should not cave in to those who don’t want to,” said Ian Gary, senior policy manager of Oxfam America’s oil, gas and mining program. ”Our campaign aims to send a strong message that we’re watching, and ready to fight back if the regulatory agency issues weak final rules.”
The campaign, which includes a number of activities, will kick off on Friday in Washington, DC in front of the SEC, where activists will depict the oil and gas industry’s wooing of the regulatory agency. Representing SEC commissioners and oil company executives, the activists will act out a number of scenes, including pillow fights, champagne toasts and snuggling to convey the message that they may be getting in bed together to undermine the law.
The activists will then head to Houston, Texas on February 16th to gather in front of the Chevron Building downtown. Dressed as the three wise monkeys embodying the principle “see no evil, hear no evil, speak no evil,” the action will shine a light on the yawning gap between the transparency rhetoric of the industry and the reality of their actions, which has never been more apparent until now.
“The oil and gas industry loves to trumpet their support of international transparency initiatives and their tax contributions to the US government, but when a new law requires them to tell the public exactly how much gets paid to whom around the world, they bring out the lobbyists and lawyers,” said Gary.
To coincide with these activities, Oxfam America, Global Witness and a number of organizations are supporting a six-figure advertising campaign calling on the oil industry to stop fighting transparency. The ads will begin running February 13th online in the Washington Post, Politico, Huffington Post and The Hill and in print in the Wall Street Journal.
While the oil industry continues fighting transparency, some companies, such as Talisman Energy, Statoil, AngloGold Ashanti and Newmont Mining, are embracing it. They already disclose payments in every country of operation and in some cases they volunteer this information at a project level. Some companies have complained that local laws might prevent them from disclosing this information, but companies have been unable to show the SEC a single example proving their argument.
In fact, investors representing more than $1.2 trillion in assets under management welcomed the law and draft rules the SEC issued in December 2010. Furthermore, outside the United States, the transparency movement continues to grow rapidly with the European Commission introducing a legislative proposal in October 2011. The legislative directive requires similar disclosures by oil, gas and mining companies. The European Parliament and Commission are likely to issue a final law later this year. Oil companies are also actively lobbying in Brussels to weaken the proposed legislation.
“It’s time to blow the whistle on the industry’s transparent hypocrisy,” said Gary. “For more than 1.5 billion people living on less than two dollars a day in resource-rich countries, there’s no time left to wait.”
]]>Similar to the recently passed US “Cardin-Lugar” provision of the Dodd-Frank Act, the EC proposal goes further by requiring both public and private companies to disclose their payments.
“The revolution for transparency in the oil, gas and mining industry is continuing across the Atlantic, where there is strong political momentum, particularly in the United Kingdom and France, to build upon the ‘Cardin-Lugar’ provision of the Dodd-Frank Act passed last year by the United States,” said Ian Gary, policy manager of Oxfam America’s oil, gas and mining program. “The United States has an important opportunity to help shape the European proposal by issuing final rules for the Cardin-Lugar provision as soon as possible.”
With the US law covering the vast majority of internationally operating oil companies and world’s largest mining companies along with these European rules covering even more companies, the transparency net will be cast far and wide. Citizens of resource-rich countries will now be able to arm themselves with information they can use to track the amount of money governments receive from oil and mining companies.
“Too often, oil and mineral riches have led to corruption, violence and wars, affecting communities and consumers on both sides of the pipeline,” said Gary. “We applaud the leadership of EC President Jose Manuel Barroso and Commissioner Michel Barnier on this issue, but Europe and the United States need to act quickly, especially at a time when the world’s appetite for finite resources is at an all-time high.”
Despite the urgency, the US Securities and Exchange Commission (SEC) has delayed issuing a final rule for the “Cardin Lugar” provision. The regulatory agency was required by Congress to finish this rule by April 15, 2011, but now says the final regulation will be released by December of this year.
“While the heavy rule making workload of the SEC is appreciated, all parties have made their views known to the SEC. The deadline is well past and the public is waiting for this vital information,” said Gary. “Through SEC action, the United States will be in a good position to influence the EC legislative proposal.”
The oil industry has been seeking to weaken implementation of the US law and to water down the EC proposals. The strong proposals from the EC show that industry needs to recognize that this transparency wave is inevitable and should stop fighting disclosure rules that benefit companies, investors, energy consumers in industrialized countries and citizens in resource-rich states.
“Oil companies are hugely profitable and compliance costs will be minimal. This is information that any well-run company will already be collecting and accounting for,” said Gary. “If systems aren’t in place for tracking payments to governments for resource-rights, investors need to ask why.”
The EC proposals can be improved by ensuring that there are no exemptions for covered companies – as proposed by the SEC – and that reporting for each project is defined to cover payments made at the lease or license level in host countries.
Notes to the Editor:
- The EC proposal and the US law will complement the Extractive Industries Transparency Initiative (EITI), a set of voluntary principles under which governments publicly disclose their revenues from oil, gas and mining projects, and companies make parallel disclosures regarding payments they make to host governments for accessing publicly owned resources. So far, eleven countries have implemented EITI and the United States is the first G8 country to commit to implementation. EITI implementation in the United States will require private companies to also disclose their payments to the federal government.
- Clare Short, chair of the EITI, said in a statement that “These EU transparency requirements will strengthen the local accountability that the EITI provides.”
]]>- Webcast of the event launching the report can be viewed here.