WASHINGTON — The Department of the Interior has halted U.S. efforts to seek validation by the Extractive Industries Transparency Initiative (EITI), a global anti-corruption effort to bring openness and accountability to the oil, gas and mining sectors. As civil society members of the U.S. EITI, we are saddened and alarmed that the United States will no longer comply with the standard of a crucial transparency initiative that it has supported since 2003.
Mining is risky business. Some major international mining companies have billions of dollars of investment at stake in their project portfolios. Last week, Ernst & Young (E&Y) released their annual Business Risks Facing Mining and Metals report. Topping this year’s list are concepts laden with financial jargon like cash optimization and capital access. Related listed challenges involve techniques for penny pinching or turning some money in to more money. Yet, E&Y’s report also reveals some of the greatest risks mining companies and their investors face having nothing to do with markets, commodity prices, or the boom and bust cycle. In fact, in any economy, these major risks are completely avoidable.
Last month, the United States Extractive Industries Transparency Initiative (USEITI) published its first report. The good news is that the numbers match up well. A multi-stakeholder group (MSG) of industry, government, and civil society representatives decides which revenue streams the report will include. The Department of Interior’s Office of Natural Resources Revenue (ONRR) unilaterally disclosed all 2013 payments received from companies on public lands and waters. Unfortunately, only a disappointing 12% of eligible companies agreed to have their Internal Revenue Service (IRS) corporate income tax payments reconciled.
The Dodd-Frank Wall Street Reform and Consumer Protection Act passed in 2010. Section 1504 of that law required the SEC (Securities and Exchange Commission) to issue rules compelling companies that extract oil, natural gas, or minerals to publish payments they make to governments. The purpose here was to lift what is known as the “resource curse”- where some of the most mineral rich nations suffer with some of the poorest populations. The solution: shine the light of transparency on nations led by regimes where mineral riches go to only multinational corporations and corrupt government officials who exploit their indigenous populations.
Last month, I blogged about the impending scoping discussions at the US Extractive Industries Transparency Initiative (US EITI). US EITI belongs to an international movement that provides credibility to companies and governments where the flows of money between them gets reported and reconciled. Members of a Multi-Stakeholder Group (MSG) comprised of representatives from industry, government, and civil society met last week to begin discussions about which revenue streams belong in the mix. Oil and gas revenues are a no-brainer. Companies that extract oil and gas from public lands pay royalties to the Federal Government. The Department of Interior’s Office of Natural Resources Revenue (ONRR) carefully tracks these payments and conducts regular audits to ensure accuracy. The tricky part is what to do about hardrock minerals (gold, silver, copper, uranium etc.)
The Extraction Industries Transparency Initiative (EITI) is catching on. When President Obama announced the United States would join EITI in September of 2011, many hoped the United States would inspire more nations to join. Last week, the President of France, Francois Hollande, and UK Prime Minister David Cameron said they want in just as representatives from nearly 100 nations meet in Sydney over the weekend to discuss the new EITI standard.
The Extractive Industries Transparency Initiative (EITI) is an international effort to provide a robust yet flexible standard for disclosing revenues paid to governments from oil, gas, and mining companies for the people’s valuable minerals. What’s unique about EITI is the process. Rather than some international institution or government ordaining regulations, EITI establishes a collaborative process involving representatives from industry, government, and regular folks who through consensus develop the right transparency rules to fit the society.
Follow The Money
The EITI road is a two way street. Industry publishes the taxes, royalties, and other payments they make to governments. And governments disclose the money they receive. This transparency is especially critical in developing regions of the world where riches under the ground have led to enormous conflict, corruption, and strife. For wealthier nations, the transparency standards create greater certainty and reassurance for investors and stronger accountability for elected officials. Right now, the United States is vetting nominees to serve on our own EITI working group.