Transparency campaigners call on the U.S. Securities and Exchange Commission to follow Norway’s lead
The Norwegian energy giant Statoil today became the first major oil company to publish its payments to governments under a new, mandatory transparency standard being rolled out across the world. As the Securities and Exchange Commission works to create a similar transparency rule for US-listed oil and mining companies, campaigners in the Publish What You Pay coalition are calling on U.S. regulators to follow Norway’s lead. (1)
Norway is the first country to bring the standard into effect, which requires oil, gas and mining companies to disclose the revenues they pay into government coffers – such as taxes, royalties and licence fees – for all countries they operate in. (2) Greater transparency will enable citizens to monitor payments worth hundreds of billions of dollars each year, and hold their governments to account for how the money is used.
In line with the Norwegian standard, Statoil has published a highly detailed report of its payments, broken down by each of its oil extraction projects worldwide.
Statoil’s disclosures deal a major blow to efforts by a small number of backward looking oil firms, including ExxonMobil, Royal Dutch Shell and BP, to weaken the U.S. transparency rule. (3)
As members of the U.S. oil industry association the American Petroleum Institute (API), these companies are lobbying for a much looser model of reporting in the U.S. which would allow them to hide payments, and to anonymise reports by withholding the identity of the company making them. (4) These demands are based on speculative claims that a strong U.S. transparency rule will be too costly for industry to comply with, and that it will harm companies’ competitive position. Norway’s exemplary lead shows that these arguments are unfounded.
“Statoil’s disclosures skewer claims made by some companies that it is not practicable for them to publish reports which reveal their identities and show payments for each of their projects. Unless transparency rules include these elements, they will give companies a licence to continue making corrupt payments. Norway has shown the way by implementing a reporting standard that is fit for purpose, and rule-makers in other jurisdictions need to take note,” said Dominic Eagleton, senior campaigner with Global Witness.
Statoil’s report also undermines attempts being made by oil and mining industry groups to circumvent the UK’s extractives transparency law, which was passed in December 2014. (5) The industry bodies have drafted voluntary guidelines for implementing the UK law that encourage companies to continue hiding payments. Statoil’s report emphatically rejects the approach to reporting taken by the industry bodies on a key element of the guidelines. (6) “We commend the UK government for creating a strong transparency standard. Now it must take note of Statoil’s disclosure and face down industry attempts to cover up payments,” said Eagleton.
Statoil is a major operator in Angola, with substantial investments in offshore fields in the northern province of Zaire. Its report shows production entitlement payments from a single project of over US$1.1 billion in Zaire, and tax payments of US$240,000,000 from another project in the province. Manuel Pembele Mfulutoma, head of the civil society organisation Adjudeca which works with communities in Zaire province, said: “Zaire has natural wealth in abundance yet its citizens live in deep poverty. Project-level transparency will allow us to track these massive payments and ensure that they are used how they should be – to improve living conditions for the Angolan people.”
Statoil’s report also reveals large payments made by the company in other oil-rich but corruption-prone countries including Nigeria, Libya and Azerbaijan. In Nigeria, where Statoil has a 20% stake in the country’s largest deep water oil field, Statoil has reported tax payments of over US$354 million from a single project.
In contrast to some of its oil industry counterparts, Statoil is a strong supporter of mandatory project-level reporting, and has called on regulators in other jurisdictions to establish transparency rules that match those in Norway and the EU. (8) “As the European standard is hard law, the Securities and Exchange Commission needs to ensure its rules come into line with Europe. Otherwise it risks creating duplicative reporting burdens for companies listed in multiple jurisdictions and an uneven playing field for business, which is in no one’s interest,” Eagleton added.
Contact: Dominic Eagleton - +44 7738 713 016 / [email protected]
(1) Statoil’s report is available here: www.statoil.com/annualreport2014. The U.S. Securities and Exchange Commission is developing a similar reporting standard for US-listed extractive companies, which will implement Section 1504 of the Dodd-Frank Act: bit.ly/1GdYzBJ The Publish What You Pay collation promotes greater transparency in the global extractive industries, and is made up of over 800 civil society organisations from more than 60 countries: bit.ly/1wQQSRQ
(2) Norway is required to introduce the regulation by the EU Accounting and Transparency Directives, which were passed in 2013: bit.ly/1EVt426
(3) ExxonMobil, Royal Dutch Shell and BP are members of the American Petroleum Institute (API), an oil industry pressure group. The API filed a lawsuit in October 2012 to overturn the original SEC rule to implement the U.S.’s extractives transparency law (Section 1504 of the Dodd-Frank Act). ExxonMobil, Royal Dutch Shell and BP refused to dissociate from the API lawsuit when asked to by civil society organisations: bit.ly/1DsSEe9. After convincing a judge to suspend the original Section 1504 rule, the API is now calling for the SEC to re-issue a weaker rule for the U.S. law that would aggregate payment data above project level and keep the reporting companies’ identities hidden from public view: http://1.usa.gov/18Tc7qI. Representatives from ExxonMobil, Royal Dutch Shell and BP have taken part in several meetings with SEC officials to discuss the implementing rule for Section 1504 of the U.S. Dodd-Frank Act since October 2013: http://1.usa.gov/1lnVPbG
(4) See API submission to the SEC, November 2013: http://1.usa.gov/18Tc7qI
(5) The UK Reports on Payments to Governments Regulations 2014 are analogous to the Norwegian law, requiring UK-domiciled and UK-listed extractive companies to publish the payments they make to governments for all countries of operation on a project-by-project basis: bit.ly/12RGpb2.
(6) The voluntary guidelines are being produced by the International Association of Oil and Gas Producers and the International Council on Mining and Metals. A draft of the industry guidelines from November 2014 is available here: bit.ly/1uB1nRo. The document has been modified slightly since November. The guidelines state that if a company makes payments indirectly to a government via a partner company in the same joint venture project, these payments do not have to be disclosed. A legal opinion obtained by Global Witness states unequivocally that this goes against the letter and intent of the law. In marked contrast to the industry guidelines, Statoil has reported in line with the law and disclosed production entitlement payments made on its behalf by other companies. The industry guidelines also state that companies can group together distinct projects and report on them as a single project if the projects are “operationally and geographically integrated”, or if the legal agreements that establish the projects are on “substantially similar terms”. Global Witness’s legal opinion states that this element of the guidelines also goes against the letter and intent of the law.
(7) See page 19 of Statoil’s 2013 Sustainability Report: bit.ly/1mpU4Ky