I was thrilled to hear earlier this week that the European Parliament has proposed strong rules that would require extractive companies to publish what they pay to governments around the world – a measure that will increase revenue transparency and help affected community members to hold their governments responsible for the management of national resource wealth.
In Burma, a handful of companies remove billions of dollars in oil, gas, and minerals from the earth each year, providing a sustaining lifeline to a brutal military regime. In Angola, Gabon, and Equatorial Guinea, multinationals provide an oil revenue windfall to notoriously corrupt governments, allowing officials to live lavish lifestyles that bear little resemblance to their modest public servant salaries and contrast tragically with the living standards of most of their citizens. Every day, extractive companies pour millions of dollars into the coffers of dictators and generals, exposing themselves and their investors to serious political risks while devastating the lives of the members of the communities where the extraction takes place. Until now, apart from a scattering of voluntary and domestic disclosure measures, there’s been no way even to inquire into how much this revenue stream costs the affected populations or benefits the public purse.
This all began to change last year, when the U.S. enacted a law requiring oil, gas, and mining companies to publish a wide range of the payments they make to governments for all their extractive projects. That measure is currently caught up in a complicated rulemaking process, in which the oil companies are trying their best to roll back the law and weaken it by introducing loopholes and pushing the government to allow them to report at a high level of generality.
Meanwhile, the European Union appears set to take the lead in the fight to open companies’ books. Soon after the U.S. law was passed, it became clear that Europe was also interested in passing revenue transparency laws. (It was, of course, easier for Europe to move once the U.S. Congress had taken the first step, as companies would resist the disclosure requirements less vehemently if they already had to report the information in the U.S.) However, the exact content of the European proposal remained unclear.
This week, I’m happy to report, the European Parliament adopted a report directing the European Commission to draw up rules requiring oil, gas, and mining companies to publish what they pay to governments for every project, and for every country they invest in. It’s a significant win for the Publish What You Pay coalition, which has been leading the push for revenue transparency worldwide.
Particularly exciting is that Europe is looking to adopt a project-by-project disclosure requirement – which mirrors the U.S. legislation but has been the object of a slew of vitriolic attacks by the oil companies. The companies claim that disclosure at the project level is too expensive and would require them to reveal confidential information – complaints that do not withstand scrutiny. They pushed hard to be allowed to disclose all the payments they make to any given government as one aggregated number, rather than breaking the payments down to such a fine level of detail.
Project-level reporting is particularly important to ERI and the groups we work with because it will enable communities to hold governments to account for the resources that are extracted from their own land. It also matters to investors because company payments on various projects within a single country may be associated with different levels of political risk. (Think, for example, about how different it would be to make a large bonus payment to a government for a mining concession in a war-torn part of eastern Congo, as opposed to the peaceful, government-held western part of the country.) We’ve submitted comment letters to the SEC, which is charged with enacting the rules in the U.S., urging project-level disclosure, among other things.
I’m very excited that Europe has taken the lead on revenue transparency and is poised to enact such strong rules. If only this would nudge U.S. regulators to get the rules out here as well, we may be on the brink of a new global standard that will benefit communities, companies, and investors alike.