This week, civil society groups, companies, industry groups, investors, and local communities submitted public comments to the Securities and Exchange Commission (SEC) on the proposed rules to implement Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which mandates oil, gas, and mining companies disclose the payments they make to foreign governments.
EarthRights International (ERI) is a proud member of the Publish What You Pay (PWYP) coalition, which has long been a leader in the push for revenue transparency to combat the resource curse. PWYP’s submission this week provides extensive commentary, analysis and evidence that supports SEC’s rule, makes the case for how it can be strengthened, and further refutes the tired arguments industry has repeatedly put forth in an effort to keep oil payments secret. Once finalized, the rules will shine a light on the payments that extractive companies make to governments, will deter corrupt deals, give investors the tools they need to make better decisions, and will help citizens in resource-rich countries hold their leaders to account for the way that natural resource wealth is managed.
The proposed rule itself is hugely significant – and it has taken a long time and a lot of work to get here. In enacting Dodd-Frank in 2010, Congress instructed the SEC to finalize extractive payment transparency rules no later than April 2011. After missing that deadline by more than a year, and after a lawsuit filed by Oxfam America (represented by ERI), the SEC issued a final rule in 2012. Then came the industry lawsuit–the American Petroleum Institute (API) and the U.S. Chamber of Commerce sued the SEC, challenging the rule and claiming, among other things, that disclosing the payments it made to governments would violate extractive companies’ First Amendment rights. Oxfam intervened in the lawsuit on the side of the SEC to defend the rules. In July 2013, the court ruled that the SEC had to provide better justification for certain aspects of the rule and sent it back to the SEC (the court did not address the First Amendment argument). After yet another year of delay, ERI filed suit (again) against the SEC on behalf of Oxfam, and in September 2015, the judge sided with Oxfam and ordered SEC to expedite rulemaking.
While the SEC’s rulemaking process got hung up in agency delay and industry challenges, however, the rest of the world pushed ahead. Prompted by the SEC’s 2012 Rule, the European Union, Canada and Norway have all implemented similar transparency laws. Companies subject to Norway’s regime are already submitting public reports on their payments to governments, and reporting is set to begin in Canada and EU countries later this year. The SEC’s new proposed rule aligns with the rules in the EU, Canada and Norway by requiring public disclosure of project-level payments on a company-by-company basis, without any categorical exemptions.
The SEC has already received significant support for a robust rule that aligns with the global transparency standard from investors with more than $9.8 trillion in assets under management, civil society groups, citizens in resource-rich and corruption prone countries, economists, members of Congress, USAID, the State Department, and some extractive companies. Will industry groups like API and the U.S. Chamber of Commerce, and companies like Chevron and Exxon, who have fought the hardest and loudest against transparency, continue to lobby to hide information that is important to investors and citizens? Probably. But their numbers are dwindling as more companies embrace transparency as good for business and global momentum towards an international transparency standard has significantly weakened their arguments against disclosure.
The SEC is expected to vote on a final rule in June 2016.
Photo CC Securities Exchange Commission