Oil Industry Fights Global Progress on Revenue Transparency with Lawsuit Against U.S. Disclosure Regulations
In an attempt to turn back worldwide progress on mandatory transparency requirements, the oil industry took a swing this week at a U.S. law that requires extractive companies to publish the payments they make to governments. In a lawsuit filed in the federal courts in the District of Columbia on Wednesday, the American Petroleum Institute API and other trade associations are seeking to strike down the law and the rules that implement it, insisting that mandatory disclosure is unconstitutional, arbitrary and capricious.
API is trying to stem a tide of legal transparency requirements that began in the United States and has spread across the globe. At issue are the payments that oil, gas, and mining companies make to governments, which have traditionally been kept secret from regulators, investors, and the people of the resource-rich countries in which the companies operate. The secrecy surrounding these revenue flows – which can reach into the billions of dollars for a single project – fosters corruption, deprives citizens and investors of critical governance information, and can even catalyze political instability.
The Publish What You Pay PWYP coalition, a global network of NGOs, including ERI/(Education and Research Institute), faith-based organizations, trade unions, and investor groups, has been advocating for years for governments to adopt laws requiring disclosure of this information. The initiative received a major boost in June 2010, when the Congress included mandatory payment disclosure in the Dodd-Frank Wall Street Reform and Consumer Protection Act. Section 1504 of the Dodd-Frank directed the Securities and Exchange Commission (SEC) to write rules within 270 days requiring extractive companies that are publicly listed in the U.S. to disclose the payments they make to each government for each of their extractive projects .. //
… Given the broad progress on transparency around the world, it is unclear what API’s next move is. Even, if the oil industry wins its U.S. legal challenge – which seems unlikely, given the tremendous amount of work, careful analysis, and wide-ranging debate that informs and supports the SEC’s rule – it still faces regulation in Europe that will be, if anything, even stricter than the U.S. rules, and the possibility of truly global standards that parallel Section 1504. A large percentage of the companies covered by the U.S. rule will also be covered by European or Canadian rules, which may well take effect before the SEC’s legal challenge is resolved. Will Big Oil really try to roll back each of these developments, one by one? Or will it finally accept that increased payment transparency is to everyone’s benefit – good for investors, good for communities – and yes, good for business?
Big Oil Uses Fiction, Not Fact, to Oppose New Transparency Rules, on Earth Rights International, Feb. 14, 2012;
Corrected to Conform to Federal Register Version: SECURITIES AND EXCHANGE COMMISSION, 17 CFR Parts 240 and 249, [Release No. 34-67717; File No. S7-42-10], RIN 3235-AK85 – Disclosure of Payments by Resource Extraction Issuers;
EU politicians vote for tough oil, gas anti-corruption law, on Reuters, by Barbara Lewis, BRUSSELS, Sept 18, 2012;
MAC focuses on transparency, free trade, on Canadian Mining Journal, Sept. 19, 2012.