Making oil and mining dollars transparent
By Raymond C. Offenheiser The opinions expressed are his own.
For most of us, this July 15th will be the start of just another hot summer weekend. But for many, the day marks the one-year anniversary of Congressional approval of a landmark law that will lift the veil of secrecy on billions of dollars that flow every year from oil and mining companies to governments around the world.
Tucked into the massive Dodd-Frank Wall Street Reform and Consumer Protection Act is a provision requiring oil, gas and mining companies reporting to the US Securities and Exchange Commission (SEC) to disclose the payments they make to host governments.
From rural villagers in Africa to investors on Wall Street, the groundbreaking law casts the transparency net far and wide, arming the public with information it can use to track the amount of money governments receive from oil and mining companies. The provision, backed by a bipartisan group including Senators Lugar and Cardin, among others, requires annual reporting of taxes, royalties and other payments, and covers a broad range of US, European, Chinese, Brazilian and other companies. By law, the final regulation from the SEC — the regulatory agency responsible for implementing the law — should have been issued in April. However, no final rule has been issued.
One of the reasons for the financial crisis was a lack of public information about the real risks of investments. In the case of the oil and mining industries, investors need to know how and whether companies are exposed to political and expropriation risks in volatile resource-rich countries. In some places, companies can make up front payments of over a billion dollars before a drop of oil is produced and this information is not disclosed to investors. This disclosure provision — in addition to providing useful information to citizens in resource-rich countries — also provides valuable information to investors on how to assess risk. This is part of the SEC’s core mandate. As a display of investor interest, investors representing more than $1.2 trillion in assets under management, including TIAA-CREF and others, have called on the SEC to implement strong rules for this provision.
We at Oxfam America joined NGOs in the Publish What You Pay coalition, faith groups and investors representing over $1.2 trillion in assets to commend the SEC for drafting a regulation in December that followed Congressional intent. Industry and other stakeholders have had plenty of time to comment on the draft — the SEC even extended the comment period.
The time for the SEC to act is now. The world is waiting to follow our lead. The longer the SEC waits, countries such as Ghana, Africa’s newest oil producer, are at risk of falling victim to the resource curse. We’ve seen it happen in Sierra Leone, Nigeria and Libya and in mining towns across Latin America, where corrupt government officials squander oil and mineral wealth instead of investing in education, health services and food security.
Third time unlucky for BHP
- The opinions are the author’s own -
No one doubts BHP Billiton is the smartest, most innovative mining company in the world. It has shaken up a once-sleepy sector and transformed pricing and marketing of raw materials from copper to coal and iron ore. BHP is the mining sector’s Goldman Sachs. It employs the best minds and campaigns to change practices which have been long-established but which the firm considers outdated in a successful quest to unlock immense value for its shareholders.
According to the firm’s website “At BHP Billiton we’re looking for people who want to grow with us around the globe, take chances and stand out from the crowd. We need people who embrace tomorrow, have vision, love stretching their minds and going far beyond what they thought was achievable.”
But like Goldman, BHP’s success has come at a price. The company is unloved. BHP’s success has bred envy among its competitors. Worse, the company’s aggressiveness has made it a host of enemies among competitors, customers and regulators. Now that backlash is hampering the company’s ambitions to grow.
In the past few decades, the company which revels in its nickname as the Big Australian has found itself embroiled in acrimonious battles with China over the price of copper and iron ore; steelmakers in Europe and Asia over pricing; Australia’s Labor Party over mineral taxes; and competition authorities around the world over the proposed takeover and later the joint venture with Rio Tinto, both now abandoned.
While BHP has won many battles, it has left a legacy of bitterness and mistrust, which is now shaping the reception of big deals. Regulators in particular have become very sceptical when reviewing the firm’s plans.
DEAL MACHINE SPUTTERS
How about the U.S. doing the something like the U.K. did. Ban corporations, unions, PACS, etc… from contributing to either political parties or candidates for any government office whether elected or appointed. As we are a global economy that prohibition should extend to all foreign interests as well. Paid for political adds should also be prohibited by all except the candidate’s campaign fund. Only voting United States citizens should be able to contribute and those contributions should be limited to a maximum of $1000 dollars in total per election year. The Constitution’s preamble reads “We the People” not “We the Corporations”.
For democracy to work there must be informed consent of the People. Incumbents have a tremendous advantage at raising funds(for political favor?) The House has a better than 90% reelection rate. As long as tens(Senate) or even hundreds of millions(President) or dollars are spent on political campaigns, it is clear to me politicians will say what brings in the money and not the truth as best as they understand it to be.
This is why I believe there is never a serious discussion of the issues our nation faces during election campaigns. Where is the Press in all of this? Perhaps newsrooms should go back to operating not for profit and fulfill their service to the People.