Originally posted at www.earthrights.org/blog
After nearly two years of work and consistent opposition from big oil, substantive provisions of legislation initially introduced by Senators Lugar (R-IN) and Cardin (D-MD) as the Energy Security Through Transparency Act (ESTT), were signed into law by President Obama as Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act on Wednesday. Offered by Senator Leahy (D-VT), the provision will require both US and internationally-based companies registered with the U.S. Securities and Exchange Commission (SEC) to publish what they pay to governments for the commercial development of oil, gas, and minerals, while creating a new international standard for transparency in the extractive industry.
The provision, which will apply to 90 percent of the largest internationally operating oil and gas companies, made the cut during an all-night House-Senate conference committee meeting over the Wall Street reform bill.
The bill will have significant impacts in countries like Burma, where a lack of transparency has contributed to corruption, authoritarianism, and gross human rights violations, directly linked to the natural gas industry. According to EarthRights International’s new report, “Energy Insecurity: How Total, Chevron, and PTTEP Contribute to Human Rights Violations, Financial Secrecy, and Nuclear Proliferation in Burma (Myanmar), the lack of publicly available information on revenues received by the military junta in Burma has facilitated the misuse of these funds, including massive diversion of resource-related public monies.
In fact, data from a leaked IMF report indicates 70 percent of Burma’s foreign exchange reserves are from gas exports and that gas-related payments from corporations, amounting to billions of dollars, contributed only one percent of total budget revenue. That means that less than one percent of the largest source of income for the Burmese state actually enters the state budget. Had these revenues entered the state budget, they would have accounted for 57 percent of the total 2007/2008 budget. The majority of the gas revenues are believed to be held in offshore banks, with reports indicating that hundreds of millions are channeled into the personal bank accounts of individuals closely associated with the ruling military junta in two offshore banks in Singapore.
When this new transparency bill takes effect — likely in 2012 — companies including Chevron, Total, the Chinese National Petroleum Corporation, the Chinese National Offshore Oil Corporation, and others will be forced to disclose how much they pay the regime in Burma, something they have been resisting for years. For communities and civil society inside and outside of Burma, this information can be used in attempts to hold the authorities in Burma accountable for how these monies are spent.
The reach of this bill is truly global. Communities in Nigeria, Kazakhstan, Algeria, Brazil, Venezuela, Mexico, Russia, Columbia, Thailand, and around the world will know how much their governments receive from corporations including Shell, BP, Chevron, Exxon, Newmont Mining, and most of the other energy and mining majors operating in their countries.
EarthRights International was active throughout the legislative process, lobbying the U.S. Congress directly while providing public education, letter writing, advocacy, and training to other organizations in support of the transparency provision as a member of Publish What You Pay United States, a coalition of 32 nongovernmental organizations that advocated for the legislation.
This bill takes aim squarely at the “resource curse,” the documented pattern in countries rich in natural resources where this wealth leads to negative development outcomes. Senator Lugar (R-IN), one of the main supporters of the transparency provision summarized the importance of this measure quite well, saying: “History shows that oil, gas reserves, and minerals can frequently be a bane, not a blessing, for poor countries leading to corruption, wasteful spending, military adventurism, and instability, and too often oil money intended for a nation’s poor ends up lining the pockets of the rich, or is squandered on showcase projects instead of productive investments.”
While a major victory for communities in resource-rich countries, there are still several stages before the legislation is implemented and companies begin to report their payments. The Securities and Exchange Commission (SEC) must issue proposed rules that provide detailed guidance for companies covered by the bill. This process will take up to one year to complete. Groups like EarthRights International and our Publish What You Pay US colleagues will play an active role in this rule-making process, ensuring that critical information on payments is available in an effective, timely, and complete manner. Once the final rules are issued, companies will be required to disclose payments in their annual filings to the SEC going forward.
We expect that Big Oil will continue to resist these efforts as they did with the legislation. The American Petroleum Institute (API), a national trade association representing about 400 corporate members, including major oil and gas companies, made several misleading claims in a letter to members of the Senate in 2010, stating: “API feels that requiring only U.S-listed extractive companies to disclose revenues creates a competitive disadvantage for these companies in the global energy marketplace.” Members of the US Senate were not persuaded by this specious claim, with Senator Cardin calling API’s claims, “a red herring.”
This bill may be the beginning of the end for the cloud of secrecy and corruption associated with resource extraction around the globe. With other countries like the UK considering similar measures, there is a great hope that revenue transparency becomes a norm for the industry, and we can begin to see the responsible use of these critical revenues for the benefit of local and national communities.
For more information on the transparency bill, visit www.earthrights.org
Tags: algeria, american petroleum institute, api, brazil, Burma, columbia, earthrights international, energy security, extractive industry, kazakhstan, mexico, myanmar, Nigeria, oil, publish what you pay, resource curse, russia, thailand, transparency, venezuela
Posted on: July 26, 2010
Filed under: Featured