The benefits of oil payment reporting

Today, in the Middle East, we are seeing the real consequences when secretive and corrupt dictators are free to treat their country’s oil wealth as family property without any public accounting. Citizens are paying the price in blood. Oil facilities are being bombed. Communities and markets are thrown into turmoil.


The API’s specific objections bear close scrutiny. A well-worn industry protest is that transparency of payments and contracts is “anti-competitive,” revealing mission-critical or proprietary information, and handing an advantage to other market players. However, the new U.S. law covers 29 of the world’s 32 largest internationally-operating oil companies and eight of the 10 largest mining companies. Half of the world’s most profitable nationally-owned companies are covered, and the majority of those not covered operate only in their home countries, and do not compete internationally.



API argues that the new law would cause U.S.-listed companies to expose their bidding strategies. It doesn’t explain how after-the-fact taxes and other payments, which are what would be reported under Dodd-Frank, reveal the bidding terms for a new oil block. Moreover, research by Columbia Law School and Revenue Watch has found that the fiscal terms in a bidding process are generally known among industry players.

API also claims that the law could unfairly expose too much operational detail to competitors by demanding individual payment reports “on every single well.” In fact, the law requires reporting of payments on a country-by-country and project-by-project basis. A well-by-well standard is neither mandated by the law, nor was it requested in any of the submissions made to the SEC during the rule’s comment period.

Many oil and mining companies endorse and participate in the Extractive Industries Transparency Initiative (EITI), an international program for voluntary reporting of company payments and government receipts. Monday’s API comments suggest that Dodd-Frank could somehow undermine or compete with the EITI. But at the just-concluded EITI global conference, speakers from EITI implementing countries strongly endorsed mandatory disclosure rules. Senior UK and German officials at the EITI venue announced their governments’ strong support for EITI and their intention to have Europe adopt Dodd-Frank-type extractive industry disclosure legislation. Since the law was passed in July 2010, four new countries have signed up to EITI. In short, EITI is alive and well, and fully compatible with Dodd-Frank.

In the meantime, investment institutions with more than $1 trillion under their management have joined the call for the SEC to interpret the law strictly.

It’s no secret that the oil industry is uncomfortable with regulation. As a bipartisan commission investigating the BP oil spill noted in January, API “regularly resists agency rulemakings that government regulators believe would make [industry] operations safer.” While safety standards address a different set of risks, the parallels with API’s approach to reporting standards are clear.

The imagery of Dobermans ripping apart teddy bears should not distract us from the fact that the oil lobby is the 800-pound gorilla in this discussion, and its deep-seated resistance to regulation the elephant in the room.

Standardized, mandatory reporting of oil payments to governments will make governments more transparent, and in the process protect American investors and consumers, all without imposing an undue burden on industry.

Karin Lissakers is Director of the Revenue Watch Institute.