The public’s right to know what companies are paying their governments

For too long, oil, gas and mining companies have made payments to governments in secret. This has made it easy for officials to misuse or outright steal their people’s money, and exceedingly difficult for NGOs, journalists and civil society to track government revenues and root out fraud, waste, and corruption. In short, secrecy is a major contributor to the “resource curse,” which is the paradox that many resource-rich countries that should be well-off actually experience lower growth and far greater poverty than resource-poor countries.

Since 2009, EarthRights International has been working with Oxfam America and the Publish What You Pay US (PWYP-US) coalition to shine a light on these payments and promote transparency in the extractive industry. In 2010, Congress passed landmark bipartisan legislation, Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (also known as the “Cardin-Lugar provision”), to require oil, gas and mining companies registered with the U.S. Securities and Exchange Commission (SEC) to publicly disclose the project-level payments they make to foreign governments and the federal government for the extraction of natural resources. The law directs the SEC to promulgate regulations to implement the disclosure regime.

Oil companies like Chevron and Exxon have fought for years to keep their dealings with governments like Russia, China and Saudi Arabia secret and industry groups like the American Petroleum Institute (API) have fiercely fought against Section 1504 and the SEC’s regulations. ERI has been there every step of the way to fight back against industry’s attacks and ensure the SEC meets its obligation to finalize strong disclosure rules.

While industry efforts to weaken transparency have slowed implementation in the U.S., we’ve had a number of major successes globally. Section 1504 set a new global transparency standard in motion and catalyzed the development of similar rules in other countries. As a result, 30 countries – including European Union countries and Canada – have adopted and started implementing strong mandatory disclosures that give host communities, investors, and anti-corruption officials critical tools to hold governments accountable, evaluate risk and detect and deter corrupt conduct.

ERI has served as counsel to Oxfam in legal actions and advocacy around implementation of Section 1504. We filed two lawsuits against the SEC over its failure to meet the deadline set by Congress, intervened in an industry lawsuit against the SEC to defend the 2012 rule, and have provided numerous submissions to the SEC to provide legal arguments and evidence to refute industry claims and push for a strong rule.

The SEC issued a strong final rule in June 2016, under which U.S.-listed companies finally would have started reporting in 2018. But with the start of the Trump Administration, both the President and Congress made clear they were there to do big oil’s bidding. Using the Congressional Review Act, Congress passed, and Trump signed, H.J. Res. 41, a one-line “resolution of disapproval” gutting the SEC’s rule on February 14, 2017. The SEC is currently required to re-issue regulations by February 14, 2018, and ERI continues to work for strong revenue transparency regulations.

Advocating for strong U.S. extractive transparency rules

In order to implement the landmark extractive industry transparency provisions of the Dodd-Frank Act, the U.S. Securities and Exchange Commission (SEC) needs to issue and enforce strong regulations. ERI has been supporting this regulatory process along with the Publish What You Pay (PWYP) US coalition.

Throughout the SEC’s rulemaking process, there has been widespread support for a strong disclosure rule implementing Section 1504. Investors with more than $10 trillion in assets under management have repeatedly said that the rule was important to them, providing critical information for evaluating risk that they wouldn’t otherwise have. National security experts have deemed it vital to combat the corruption, secrecy and government abuse the fuel violent extremism and threaten U.S. security. Government agencies, including the State Department, USAID, and the Interior Department have voiced strong support for the rule, highlighting the important U.S. transparency and anti-corruption interests the disclosures would serve. Faith-based groups have deemed it a critical way of protecting the world’s poorest, including religious minorities, and citizens and community-based groups emphasized the importance of finally having the information they need to hold their governments accountable and fight the rampant corruption that plagues countries rich in natural resources.

ERI has been actively involved in commenting on the proposed regulations throughout the various stages of the SEC’s 6-year rulemaking process. We’ve made a number of submissions to the SEC as part of the PWYP-US coalition, on our own behalf, and in our capacity as counsel to Oxfam America. Our submissions generally focus on legal questions, refuting industry’s false claims, and providing evidence for the SEC to use in crafting and justifying a rule fully public, project level disclosures on a company-by-company basis, without categorical exemptions.

The final rule issued by the SEC in June 2016 was a major victory and the SEC relied heavily on submissions by ERI, Oxfam, PWYP-US and other coalition members in rejecting industry’s baseless claims to try to maintain secrecy in their foreign dealings.

But things changed dramatically in 2017 with the Trump Administration and the 115th Congress who made their top priority taking down the rule using the Congressional Review Act (CRA). As the first significant piece of legislation of the new administration, Congress passed and Trump signed a one-line “resolution of disapproval” under the CRA gutting the SEC’s rule. While the rule is now void, the law – Section 1504 – still stands. Under the CRA, the SEC is required to issue a new rule by February 2018, but it can’t be “substantially the same” as the old rule. What this will mean remains to be seen, but payment transparency has become an international expectation, and that isn’t going away. We’ve been in this fight for a long time, and we aren’t going away either.

Past Cases:

Documents:

PDF icon PWYP-US Submission to SEC (February 16, 2016)
PDF icon ERI Submission to SEC (February 3, 2012)
PDF icon ERI Submission to SEC (September 20, 2011)
PDF icon ERI Submission to SEC (January 26, 2011)
PDF icon ERI Submission to SEC (December 2, 2010)
PDF icon PWYP-US Comment (November 22, 2010)
PDF icon PWYP-US Submission to SEC (February 25, 2010)