This piece is part of our blog series on extractive transparency counting down to the SEC vote on the Cardin-Lugar Amendment. See past coverage here.
The Cardin-Lugar Amendment, also known as Section 1504, of the Dodd-Frank Act requires ALL companies to report the payments they make to governments for extracting oil, metals and other minerals. The law requires them to disclose these payments at both the country-level and the project-level. Next Wednesday, when the Securities and Exchange Commission (SEC) releases its rule implementing Cardin-Lugar, a major point of focus will be on how the SEC defines a “project.” Along with exemptions and setting de minimis (the minimal payment threshold that has to be reported), project definition is one of the three areas where the SEC must carry out the intent of Congress in order to produce a gold-standard for global extractives transparency.
Project-definition refers to the unit of operations at which extractives companies will be required, by the SEC, to report their payments to governments. In order to fulfill with congressional intent and create a strong rule that local civil society activists can use to hold their governments accountable, it is essential that the SEC defines a “project” in relation to the lease/license or concession agreement between an extractive company and government that triggers a payment. This way, local communities can get a clearer sense of how much wealth is being generated from their lands and demand accountability for spending on public services, based on their share of the proceeds. For the benefit of the US taxpayer, this is how the US Department of the Interior defines a “project” domestically.
It is critical that the SEC make the US definition the international standard. If the SEC gives into industry demands to define a project as all activities in a country, it would be violate the statute. Cardin-Lugar requires both country-level and project-level reporting, so the two cannot be defined as equivalent to each other. The SEC has also received proposals to define a project as “geologic basin.” This is equally unacceptable in meeting the object of equipping civil society to fight corruption. This is because a geologic basin could encompass an entire country’s reserves (amounting to country-level reporting). For example, in the oil sector, there are over 65,000 oil sites and fields in the world, so for the usability of civil society at the local level, more detail is needed. A geological basin could also cover multiple countries. For example, Nigeria and Cameroon form a basin, as do Angola and the Republic of Congo, and Ghana and Cote d’Ivoire, so such a definition would serve only to continue to obscure company payments to governments.
Some companies have argued that this would put them at a competitive disadvantage by revealing sensitive financial information to international companies that aren’t listed on the US Stock Exchange and thus don’t have to report. However, Cardin-Lugar does not require reporting of bids. The disclosures would occur one year after the payment has been made. So the bidding, contract negotiations, extraction and payments would have happened well over a year earlier.
The SEC must look past these excuses and fulfill the intent of Congress by voting on a strong rule which gives the people in resource-rich countries the ability to fight corruption by holding their governments accountable for the revenues they generate from their country’s natural wealth. Now that’s gold!
Photo credit: US Geological Service