Canada’s federal government tabled a bill last week that would require mining, oil and gas companies to disclose how much they pay foreign and domestic governments for access to their resources.
The proposed Canadian legislation applies to oil, gas and mining companies with at least $20 million in assets and $40 million in revenue or employ an average of least 250 employees. It targets companies that are listed on Canadian stock exchanges or had assets in Canada during one of their two most recent financial years.
The mining industry is supportive of the law, even going so far as to submit their own set of recommendations last January. They hope that if people can see how much money they give to governments, they can increase their social capital and redirect public grievances at political leaders rather than mining companies.
Oxfam Canada is also praising the federal government for championing a global transparency standard that, it says, could help millions of people living in poverty demand their fair share of wealth from resource extraction.
But, amid all of this applause, let’s keep in mind that the United States was the first country to pass a payment disclosure law in 2010 and it still hasn’t implemented a rule. This should serve as a warning that there is lots of room for the oil and gas industry to undermine a law in the time it takes to write a rule.
The American example
President Obama signed Section 1504 of the Dodd Frank Wall Street Reform and Consumer Protection Act into public law in 2010 and sent it to the U.S. Securities and Exchange Commission (SEC) to implement a rule. The SEC wrote a strong rule in August 2012 that required companies to disclose payments to all levels of government for each of their projects. But the American Petroleum Institute challenged the rule in court only two months later, saying it placed an undue burden on the industry and would negatively affect competition.
In July 2013, the U.S. District Court for the District of Columbia sent the rule back to the SEC to either a write a new rule or provide a better justification for the first one. The SEC will discuss the rule again in March 2015, and until then, one can only speculate whether lobbying by the oil and gas industry has been successful, or not.
Canadians should take note of this because, as Oxfam Canada rightly pointed out, the tabling of legislation “is only the first step in developing Canada’s disclosure requirements.” Even if it passes a law supporting payment transparency, it will still need to settle important details, such as what the definition of a “project” will be and what the reporting standards will look like.
These are important details that can determine how useful the information is to the people living near oil, gas and mining projects. The more information people have, the easier it will be for them to hold their governments accountable for resource revenue. And likewise, any attempts to anonymize or exempt companies from disclosing will “rob citizens of the economic benefits of natural resource wealth,” said Claire Woodside Director of Publish What You Pay Canada, the global network of organizations pushing for payment disclosure last July.
And the Canadian oil and gas industry is not as supportive of a strong rule as the Canadian mining industry is. The Globe and Mail reported last week that “the Canadian Association of Petroleum Producers supports the principle of transparency, but has concerns about how it may be implemented.”
Talisman Energy Inc., a Canadian oil and gas company, is openly calling for a weaker rule. The company said in a letter to Natural Resources Canada in May that it does “not believe that trying to draft Canadian rules so that they are ‘equivalent with the most severe set of rules currently proposed is of any service to Canadian companies.’”
The letter goes further, pointing out that “the EU Accounting Directive was drafted to align with the then-existing Dodd Frank 1504 rules in order to establish a global reporting standard. Those Dodd Frank rules were subsequently vacated. If Canada drafts its revenue transparency rules to align with the EU Accounting Directive…it is ignoring the lessons learned in the U.S.”
Talisman and I are making the same point: even when you think you have a law in the bag, things can change very quickly. So let’s not ignore the lesson learned in the U.S. and make sure that we don’t let a perfectly good transparency law get undermined by weak rules and red tape.