In a summer of record-breaking oil profits, U.S. Senator Charles Schumer introduced the Extractive Industries Transparency Disclosure Act (S. 3389), which mandates companies disclose payments to foreign governments for oil, gas and minerals. It is companion legislation to the bill of the same name in the House of Representatives.
The “publish what you pay” concept is this: a country has oil (or any resource) in the ground — potentially valuable, but only if it’s on the surface. So oil companies pay the government for the right to drill, lift the oil and sell it. This involves huge lump sum payments that have a habit of evaporating before they can benefit common citizens. If the books are open, this leakage can still happen — but it gets embarrassing quickly for governments and the companies both.
The EITD Act would require companies registered with the Securities and Exchange Commission (SEC) to report all payments of over $100,000 made to foreign governments for oil, gas and minerals. This is intended to reduce risks for investors, level the playing field for American companies and contribute to global efforts to fight corruption and reduce poverty and instability in oil-producing countries.
Sarah Pray, coordinator of Publish What You Pay United States, says “The advantage of this rule change is that nearly all internationally competitive oil, gas and mining companies are registered with the SEC, and as such, the EITD Act represents an important step forward in creating a truly global standard for transparency.”
This move in the Senate follows the introduction of the EITD in the House of Representatives, which took place on May 15th. The House held a legislative hearing in the Financial Services Committee on June 26th (Global Integrity’s Denise Ledgard reports on that hearing).
To emphasize the importance of transparency in extractive industries Ian Gary, Senior Policy Adviser from Oxfam America says, “With oil, gas and mining companies making record profits and host governments reaping giant windfalls, it is more important than ever that all financial flows are transparent”.
With gas prices as a hot election year issue, this bill could be pushed through by a Congress eager to do something — anything — that is tough on oil companies. Meanwhile, Exxon Mobile’s second quarter earnings make it the most profitable company in history, with the big six oil companies hitting US$51.5 billion in profits in the second quarter alone.
— Afroza Chowdhury