U.S. ditches mining, oil transparency rules
ENERGY
The United States has withdrawn from an anti- corruption initiative that aims to show how much money is exchanged between governments and companies for access to natural resources, setting it apart from Canada and other countries that have taken steps to improve trans- parency in the oil, gas and mining sectors.
It’s a move that could make the U.S. more attractive to large extractive companies that prefer to keep their finances away from the public eye — including Saudi Aramco, one of the most secretive oil companies in the world.
The U. S. began the long process of becoming a member of the Extractive Indus- tries Transparency Initiative (EITI), an international standard that requires governments to report key information about the extractive sector, in 2011. The government passed a related law in 2010 that required oil, gas and mining companies to report payments over $ 100,000 to governments in the U. S. and around the world.
But the American Petroleum Institute, along with other business groups, sued the U. S. Securities and Exchange Commission before it could implement the rule. President Donald Trump axed the regulation in February under the Congressional Review Act.
The U. S. EITI “has essentially been dead since then,” says Jana Morgan, Director of Publish What You Pay United States, a coalition of organizations pushing for transparency in the extractive sector.
Last week, the U. S. Department of Interior sent a letter to the EITI board stating that the U. S. is withdrawing from the initiative “effective immediately,” as the “domestic implementation of EITI does not full account for the U. S. legal framework.”
While the U. S. government will no longer implement the EITI, it will continue to promote transparency in the extractive sector as a supporting country, which can be done through financial, technical and political support, says the EITI website.
The government’s withdrawal from the process was simply the last nail in the coffin and represents a “huge loss” for Americans who deserve to know what oil, gas and mining companies are paying in taxes, says Morgan.
The announcement came a few days before President Trump began publicly courting Saudi Arabia to list its state-owned oil company on an American stock exchange, telling reporters on Sunday that he hoped the country would consider listing on the “New York stock exchange, Nasdaq or frankly anywhere else located in this country.”
The Natural Resources Governance Institute, a New York- based policy research group, listed the opaque oil giant 64th out of 74 in its ranking of state- owned extractive companies and has called on the company to become more transparent before it goes public.
When a large, state-owned company like Saudi Aramco considers listing on a stock exchange, they are “absolutely going to consider the transparency requirements,” says Ben Brunnen, Vice President of Oil Sands and Economic and Fiscal Policy for the Canadian Petroleum Producers Association.
The Toronto Stock Exchange is bidding for the Saudi Aramco listing, which is expected to raise as much as $ 100 billion. But with other major cities like London, Hong Kong and New York City in the running, analysts have called it a longshot.
“Fairness and transparency are key foundational tenets of Canada’s capital markets that serve to attract great companies to our markets rather than deter them,” said Ungad Chadda, President of Capital Formation, Equity Capital Markets at TMX Group in a written statement.
Brunnen says Canadian stock exchanges are not at risk of losing oil companies to the United States because smaller companies consider transparency rules to be the cost of doing business in Canada.
The real risk is misinterpreting the data that is provided through transparency laws in Canada, he says.
Natural Resources Canada started uploading reports onto its website under the Extractive Sector Transparency Measures Act (ESTMA) in January with the majority appearing this summer.
Since then, Brunnen says he has noticed more questions in the media about whether the Canadian government is receiving enough taxes and royalties from extractive projects.
An investigation by the Guardian last month shows that “Canada taxes its oil and gas companies at a fraction of the rate they are taxed abroad,” resulting in the loss of billions of dollars in potential revenue.
Brunnen says the ESTMA data was not designed to communicate the value of extractive projects in Canada. “The purposes of the ESTMA data is anti- corruption… it’s not very helpful for understanding whether we’re getting our fair share,” s ays Brunnen. Raising awareness about the proper way to interpret the ESTMA reports is “going to be an important priority” for the industry, he says.
Discussions about whether Canadians are getting their fair share of resource wealth “have been going on for a long time,” says Ben Chalmers, Vice President of Sustainable Development for the Mining Association of Canada. The information provided by ESTMA makes it possible to have those conversations “with much more factual data that we had before,” he says.
Chalmers says he hopes greater transparency will help to position Canadian mining companies as more desirable, especially in communities that may be skeptical about welcoming mining projects.
Glenn Mullan, President of Prospectors and Developers Association of Canada says increasing transparency in the extractive sector can attract investment by showing that Canada is a stable place to do business.
Responsible mineral exploration and mining is a “key component to being competitive in the industry,” says Mullan. Reporting payments to governments is one way to do that, he says.