NEW YORK, 27 June 2016—Transparency advocates hailed the adoption today of a rule by the United States Securities and Exchange Commission requiring oil, gas and mining companies listed on U.S. stock exchanges to publicly disclose the billions of dollars in payments that they make to governments around the world in exchange for natural resources.

The rule means that major industry players like ExxonMobil, Chevron and Vale will have to disclose detailed project-level information for all payments of $100,000 or more. Companies will have to begin reporting payments for all fiscal years ending after 30 September 2018.

The long overdue rule implements a provision of the 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act. A previous version of the rule was struck down following a legal challenge led by the American Petroleum Institute.

“This rule marks the end of an era of secrecy,” said Suneeta Kaimal, chief operating officer of the Natural Resource Governance Institute (NRGI). “We’re still reviewing the details, but at long last, citizens will be armed with the information they need to combat corruption and hold governments to account for natural resources managed on their behalf. This rule will also provide investors with an important source of information in order to manage risk in the volatile commodities sector.”

Similar rules requiring public, project-level payment disclosure have been passed in the European Union (including the U.K., home to many extractive companies), Norway and Canada since the Dodd-Frank Act was made law, but the U.S. had lagged behind due to legal challenges and a failure to implement the pioneering law. Many U.S.-listed companies such as Royal Dutch Shell, BP, Statoil and Total have already reported under European laws, but the SEC’s new rule will extend these requirements to a further 425 companies such as ExxonMobil and Chevron which have vigorously opposed disclosure, as well as some major state-owned companies such as Brazil’s corruption-plagued Petrobras and China’s CNOOC.

Unlike the European and Canadian rules, the SEC rule includes a targeted exemption from disclosure which allows companies to delay for one year reporting payments related to exploratory activities. “Exploratory activities are subject to just as much corruption risk as other activities and should be subject to the same levels of disclosure,” said Joseph Williams, NRGI’s senior advocacy officer. “We view this exemption as unnecessary.”

Royal Dutch Shell’s disclosures in April this year under U.K. law revealed that the company received large tax refunds in the U.S. and U.K. in 2015 and allowed citizens groups in the Philippines to question their government about how revenues from a major oil project were used. NRGI and others are building innovative tools to ensure this important new financial data is accessible to all stakeholders to deter corruption, engender accountability and improve investment decisions.

“Similar disclosure requirements in Australia, Brazil, China, India, Russia and South Africa would complement those in north America and Europe and increase global coverage,” Williams said. “However, failure to implement the U.S. law has given these countries an excuse not to pursue greater transparency. With the world’s largest capital market now demanding disclosure, those countries will be hard-pressed to stand against this global trend.”

Trading missing from disclosure requirement

While the rule requires public, project-level disclosure of payments including taxes, royalties and fees, payments related to commodity trading where a company buys hydrocarbons or minerals from a government entity, such as a national oil company, have been left out almost entirely from the final rule. The final rule does acknowledge the scale of these payments and will require disclosure of the repurchase value of production entitlements paid in kind, but many commodity trading payments will go undisclosed. “The exclusion from the final rule of most trading payments, which carry many corruption risks, leaves a major gap,” Kaimal said. “In countries like Iraq, Libya and Nigeria, the sale of oil to traders constitutes the government’s largest source of revenue. The omission of most trading payments from the rule means these transactions will remain opaque.”

At the May 2016 London anti-corruption summit, eleven countries including major trading hubs like Switzerland, the U.K. and the Netherlands committed to “enhance company disclosure” of payments to governments for the purchase of oil, gas and minerals. “NRGI calls on the U.S. government to make a similar commitment and ensure all these massive, corruption-prone payments are included within the SEC’s disclosure regime as soon as possible,” Williams said.

“The SEC appears to have adopted a solid rule largely in line with similar laws internationally,” Williams added. “This rule is a victory for the Publish What You Pay coalition which has campaigned for years on the issue, as well as congressional champions including Senator Ben Cardin, former Senator Richard Lugar and Senator Patrick Leahy.”

For more information contact: 

Joseph Williams

Senior Advocacy Officer

Natural Resource Governance Institute

London

+44 20 7332 6113 (office)

+44 77 7575 1170 (mobile)

jwilliams@resourcegovernance.org

Lee Bailey

Director of Communications

Natural Resource Governance Institute

London

+44 (0)20 7332 6114 (office)

+44 (0)7823 442 954 (mobile)

lbailey@resourcegovernance.org

Max Brett

Communications Officer

Natural Resource Governance Institute

New York

+1 718 395 5179 (office)

+1 917 545 0009 (mobile)

mbrett@resourcegovernance.org