Following a recent investigation that found Exxon’s complicity in corruption in Liberia, Oxfam is calling on the US Securities and Exchange Commission (SEC) to issue a strong rule for a landmark law that fights corruption in the oil sector.
The sunshine law, known as Section 1504 of the Dodd-Frank Act, will allow Americans and citizens around the world to access information they can use to monitor how much money flows from oil, gas and mining companies listed on US stock exchanges to foreign governments. Without this information, citizens can't follow the fossil fuel and mining revenues to ensure they are invested in schools, roads and hospitals instead of being diverted into the bank accounts of corrupt officials. For years, Exxon has lobbied against the sunshine law and its implementing rule, which the SEC is responsible for adopting.
“The recent investigation highlighting Exxon’s complicity in oil corruption in Liberia makes it clear why the US needs to adopt strong anti-corruption rules,” said Isabel Munilla, policy lead for Extractive Industries Transparency at Oxfam America. “Once a leader, the US is now far behind other countries on oil sector transparency. Unfortunately, some members of Congress and industry laggards want to keep us at the back of the pack. The SEC has the power to reinstate US leadership by adopting a strong oil transparency rule.”
Congress passed Section 1504 in 2010 and charged the SEC with adopting a rule to implement it. The SEC adopted a strong rule in 2016. However, Republicans in Congress and the Trump administration, using the Congressional Review Act, repealed the rule and ordered the SEC to issue a new one. A draft rule is expected to be released soon.
Due to Liberia’s membership in the Extractive Industry Transparency Initiative (EITI), civil society groups were able to use project-level data to identify where corruption could be occurring. The EITI is the global standard for transparency of oil, gas and mineral resources and has proven to be effective at combating corruption. EITI member countries must disclose their revenue flows on a project-by-project basis.
Oxfam urges the SEC to adopt a strong project-level reporting rule, since it will provide crucial information that citizens in resource rich countries need to track revenue flows and detect corruption. Data from project-level reporting helps citizens hold their government accountable to ensure the money from oil projects is being invested in local communities. Project-level reporting will also have an impact on Americans. According to an op-ed authored by former Sen. Richard Lugar (R-Ind), oil, gas and mining revenues have supported dictators in Iraq, Libya and Syria and can impact global oil supplies, raising prices at the pump. Conflict generally arises around specific projects. The data will help close the gaps that currently allow oil, gas, and mining revenues to be funneled to groups such as ISIS.
“Despite the evidence that corruption around oil projects is rife, Exxon lobbied heavily against the project-level reporting that is now the global standard,” said Munilla. “It’s surprising since this is supported not only by their industry peers, but is also required by the EITI, where Exxon serves on the board.”
Oil majors such as Shell, BP, Total, Eni, and BHP Billiton – which also raise capital on US stock exchanges - support the global standard now in force in 30 countries including the European Union, Canada and Norway and have written to the SEC to adopt similar rules. This includes public disclosure by each company of project payments categorized by the contract which requires those payments, with no categorical exemptions. Investors worth $12 trillion support those requirements.
“The European Union and Canada have similar anti-corruption laws now in force and it's proven not to be a burden on companies despite claims made by industry laggards,” said Munilla. “This investigation makes it clear that US leadership is sorely needed. The SEC needs to issue strong rules that are consistent with reporting requirements in other countries.”