RWI Responds to Oil Lobby

Issue: Dodd-Frank
Country: United States
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Revenue Watch and other transparency organizations have called on the oil industry to stop obstructing regulations mandating disclosure of oil and mining company payments to governments. In February, the Business & Human Rights Resource Centre invited eight companies and the American Petroleum Institute to respond to criticism over their lobbying efforts against section 1504 of the Dodd-Frank Act. Four companies and the API have responded so far. In this letter, cross-posted from the Business & Human Rights Resource Centre, RWI replies.

Companies that oppose the disclosure requirements of Dodd-Frank's Section 1504 often preface their objections by touting their commitments to transparency, in particular by reference to their support for the Extractive Industries Transparency Initiative (EITI). This is a tired refrain. And often it's a smokescreen for companies actively opposing greater transparency.

EITI, which puts companies, governments and citizens at the table together to develop systems for reporting resource revenues, is an important forum. But the data it produces doesn't capture all of the information investors and citizens need, and the quality and scope of EITI reporting varies wildly (pdf). And the initiative isn't yet a truly global standard: Only 30 countries have published at least one EITI report; in contrast, Shell operates in 90 countries, Total in over 130.

And while companies claim to support EITI, they often lobby to limit the amount of data to be disclosed. In particular, they push for data from all companies to be "aggregated" or lumped together so that citizens cannot see the activities of individual companies. Accountability is for governments, they seem to argue, not for companies.

The gaps left by EITI reporting and other voluntary disclosure from companies are precisely why it's important that Dodd-Frank's requirements go further. Existing gaps also explain why Section 1504 and a similar standard recently proposed in the EU enjoy strong, broad-based support from civil society, government officials, investors, industry unions and development experts around the world. And the existing gaps explain why new, tighter disclosure standards face such heated opposition from companies.

The American Petroleum Institute (API) and oil companies such as BP, ExxonMobil, Chevron and Shell may loudly voice their support for transparency. But when it comes to mandatory reporting, their support seems to extend only to the very largest industry payments made to governments, in just some countries and on an aggregate basis—which is not good enough.

Section 1504 requires company reporting of individual payment streams, on a country-by-country and per project basis, in each country of operation. If you were a citizen in an oil-producing or mining area, you would want to know about the payments relating to the particular projects affecting you. If you were an NGO tracking whether your government collects what is owed and where it goes, data that shows payments from separate companies and projects is what you would need.

API says its stance against Section 1504 is motivated by the "unintended consequences" increased reporting might bring. However the handful of extremely profitable oil companies most vigorously opposing the law have provided no concrete evidence supporting the notion that the benefits of enhanced disclosure will be trumped by its costs.

Indeed an editorial published in the February 27th edition of the Financial Times characterized API's lobbying to undermine Dodd-Frank's reporting requirements as little more than "rearguard action to engage regulators in a battle it lost against legislators in 2010." The point being, of course, that Section 1504 is U.S. law, and the time to debate its basic tenets has long since passed.

API has noted that its members want to work "in a constructive manner to find a sensible path forward" as Section 1504 is implemented. We suggest this path is one that leads to compliance, rather than special pleading, to demonstrate that oil and gas companies truly support meaningful transparency in their industries.

Rebecca Morse is RWI advocacy officer.

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