Publish What You Pay for Real

The Securities and Exchange Commission (SEC) on August 22, 2012, issued its long-awaited final rule on section 1504 of the Dodd-Frank legislation (Cardin-Lugar provision) which requires all companies regulated by the SEC to report all payments to governments for oil, gas, or mineral extraction on a project-by-project basis. The Open Society Foundations and our partners in the Publish What You Pay (PWYP) coalition had lobbied hard for release of the rule and for the content to follow the letter of the provision.

Despite vigorous lobbying by the oil industry and its many unsubstantiated claims, in the end the SEC rule follows the language of the provision and gives us most, if not all, of what we sought. There were three especially contentious issues: exemptions, definition of “de-minimus,” and definition of “project.” The SEC rule provides no exemptions and rejects the industry request to exempt contracts in countries where there are rules that might be read to make the required disclosures illegal. The rule defines “de-minimus” as requiring reporting of any payment or group of payments for $100,000 or more. The SEC explicitly rejected the industry call for de-minimus to be defined as “material” to the company. The coalition had urged the SEC to define “payment” and in the end it did not. However, it explicitly rejected the industry suggestions to define “project” to mean country or geographic basin, and it made it clear that a project could not be larger than a contract but that a contract might cover more than one project.

What happens next?

The U.S. PWYP coalition is examining the fine print of the rule to see what issues need to be tracked going forward. The oil industry is still threatening a lawsuit and that will need to be monitored and fought if the industry does sue. We also need to monitor the Congress to be sure there are no efforts to roll back the rule by legislation. This is likely to be a serious danger only if the Republicans take both houses and the presidency in the election. The coalition will be pressing the U.S. government to engage energetically with other governments where there are capital markets to encourage them to adopt a similar rule perhaps with an explicit definition of project.

The first and most immediate effort will be aimed at the EU which is already far along in developing legislation that in general terms tracks the Cardin-Lugar language. OSF has been an active participant in both a UK and an EU coalition. Both PWYP coalitions as well as the global network have mounted an all-out effort in Europe since Dodd-Frank was passed and we expect a final provision by the end of the year or early next year at the latest. The industry is pressing in Europe as well for country rather than project reporting, for a high minimum reporting level, and for exemptions for countries that prohibit disclosures. The momentum is with the coalition in light of the SEC rule, and it will be pressing for a provision at least as strong as the SEC rule.

The goal then will be to make the rule global and legally binding everywhere. One next step will be to press for such rules in the remaining capital markets including Norway, Canada, Australia, South Africa, China, and Japan. At the same time the global PWYP coalition will be seeking to persuade exporting countries to adopt these rules for all contracts that they sign even with companies that are not covered. Aid donors will be asked to restrict development assistance to countries that sign contracts without these disclosure provisions.

Then the real work begins to empower civil society in the exporting countries so that they access this data and use it effectively to be sure that the resources are used for the benefit of the people of the country. 

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