Life carries on outside of a major gold mine in Ghana. Photo credit: Olivier Blaise/ PWYP
On Wednesday, the Securities and Exchange Commission (SEC) finally voted to adopt the final rules implementing the Cardin-Lugar extractives transparency provision or Section 1504 of the Dodd-Frank Act. The law passed in July 2010 and these long-awaited rules were due on April 17, 2011. Starting on September 30, 2013, the 1,100 oil, gas and mining companies registered with the SEC must disclose their payments to US and foreign governments, country-by-country and at the project-level every year.
As we mull on the complexities of this rule, it’s important to remind ourselves why ONE members got involved in extractives transparency. Effectively fighting poverty in this period of global economic crisis includes unleashing domestic resources in developing countries to fund some of their own development priorities. It also means good governance and good stewardship of revenues, which in turn requires transparency and accountability.
To achieve this, we have to help civil society and reformers in developing countries to take on the “resource curse.” The resource curse refers to the paradoxical condition of scores of countries which are blessed with abundant natural resources such as oil, timber, precious stones and metals, and are simultaneously heavily indebted, as most of their citizens live on less than $1.25 a day.
This is largely connected to the siphoning of money to private foreign bank accounts and the legitimate exploitation of financial proceeds from petroleum, gas, precious metals and minerals by corrupt government leaders, bureaucrats and companies.
In an effort to address this resource curse; promote transparency, accountability, global human rights and justice; protect investors; and strengthen US national security; Senators Pat Leahy, D-Vt., Dick Lugar, R-Ind., and Ben Cardin, D-Md., introduced the Extractives Transparency Amendment or Section 1504 of the Dodd-Frank Act. They also had the support of Representatives Barney Frank, D-Mass., and Maxine Waters, D-Calif. Cardin-Lugar is an important tool to help improve the lives of people in developing countries by making sure that payments received by their governments for their natural resources are publicly known so that they go toward meeting Millennium Development Goals like health care, schools and clean water, and not into the pockets of kleptocrats.
Thank Sens. Lugar, Leahy and Cardin for their work on this rule by tweeting this message to them now (click on this link to tweet):
Thanks @SenatorCardin @SenatorLeahy & @senatorlugar for leading the way on transparency in the oil & gas industry. Let’s go global!
Even though the law passed in 2010, the SEC had to write the regulations and rules implementing the law. Since then, ONE, our partners in the Publish What You Pay coalition and congressional champions have been fighting oil company lobbyists at the SEC to ensure that they didn’t succeed in weakening the law in the rule-making process.
In January of this year, when it seemed like the oil lobbyists would prevail, we asked ONE members to once again rally and fight to ensure that the SEC would not give in to industry pressure but instead, uphold the intent of Congress in implementing Cardin-Lugar and 143,000 responded.
On key issues within the rule, ONE and PWYP drew a line in the sand and specifically demanded that the SEC uphold the law on:
Exemptions: Consistent with the intent of Congress, the SEC rejected all oil industry arguments. No exemptions were provided for foreign companies, small companies, countries or contracts that prohibit reporting (the tyrant’s veto). This was a crucial win, because exempting some companies would have provided very uneven data for countries and a poor picture of government revenues.
“Project” Definition: We had asked for projects to be defined according to the financial agreements between companies and governments to drill or mine a specific area. The industry wanted projects to be defined as a geologic basin, which could have encompassed a whole country or several countries, rendering the disclosure meaning. This was a big loophole that needed to be closed. The SEC provided clear guidelines on how companies should interpret “project” in relation to the fiscal terms in their contracts with governments, and we believe these guidelines closely track with our definition.
De Minimis Threshold: This is a number that is considered to be the significant payment that must be reported, and the SEC set it at $100,000. ONE members advocated for $15,000, but the loophole is much smaller than industry lobbyists wanted, and is a vast improvement over the status quo.
The release of the Cardin-Lugar rules and the specifics within regulation represent a significant victory in our extractives transparency efforts, and has created a significant boost for the prospects of the campaign to get the 27 countries of the European Union to adopt similar laws. We’ve laid the foundation, now we must go global.
Join us in THANKING Sens. Cardin, Lugar and Leahy for their hard work on this SEC rule. Click here to send a thank you message now.