The Securities and Exchange Commission (SEC) issued a landmark transparency rule yesterday requiring oil, gas and mining companies listed on U.S. stock exchanges to disclose the payments they make to the U.S. and foreign governments. In 2010, Congress mandated the rule in Section 1504 of the Dodd-Frank Act, in order to provide critical information to investors and help communities in resource-rich countries hold their governments accountable for the responsible management of billions of dollars in extractive resource revenues.
Members of Congress, investors worth nearly $10 trillion in assets under management, civil society groups, and citizens of resource-rich countries voiced support for a strong rule, emphasizing the need for detailed payment information. While some oil companies have sought to keep the payments they make to governments secret, other companies are already disclosing payment information voluntarily, or under similar regulations in other jurisdictions.
“The baseless arguments and doomsday predictions made by certain oil companies and industry groups to try to maintain payment secrecy have been thoroughly undermined by the rulemaking record and transparency developments in the rest of the world,” said Michelle Harrison, Staff Attorney at EarthRights International (ERI). “The SEC weighed the evidence and rightfully rejected calls for certain sweeping rule-based exemptions and anonymous, highly-aggregated disclosures that would deprive investors and communities of precisely the information they need. While we are still reviewing the details, we are pleased to see the SEC finally take action on this critical transparency rule.”
The final rule has been delayed for years, prompting ERI, on behalf of Oxfam America, to sue the SEC twice for dragging its feet. Last year, a federal judge ordered the SEC to issue the rule promptly, finding that the SEC had “unlawfully withheld” the final rule. “Our successful lawsuit made sure the SEC could no longer delay action that Congress required it to take years ago,” said Harrison.
“Extractive industry payments have been secret for too long. This rule is a huge victory for investors and citizens who have long called for such information,” said Ian Gary, Associate Policy Director at Oxfam America. “The final rule aligns with the rules in other markets by requiring public disclosure of project-level payments to governments and enables the U.S. to reassert itself as a leader in transparency.”
Section 1504 inspired similar disclosure laws around the world, setting a new global standard for transparency. While the U.S. rule faced delay, the European Union, Canada and Norway plowed ahead, adopting similar mandatory disclosure laws. Many U.S.-listed extractive companies are also covered by the regulations in other markets. Some companies, like Shell, Total and Statoil, are already reporting on their project-level payments in all countries of operation under those regulations without consequence, while others have voluntarily disclosed their payment information. The SEC’s rule intentionally aligns with those rules to ensure consistent reporting obligations.
ERI has submitted numerous comments to the SEC during the 6 year rulemaking process on its own, on behalf of Oxfam, and as part of the U.S. Publish What You Pay Coalition (PWYP-US).
EarthRights International (ERI) is a nongovernmental, nonprofit organization that combines the power of law and the power of people in defense of human rights and the environment, which we define as “earth rights.” We specialize in fact-finding, legal actions against perpetrators of earth rights abuses, training grassroots and community leaders, and advocacy campaigns, and have offices in Southeast Asia, the United States and Peru. More information on ERI is available at https://www.earthrights.org.