On September 20, the Obama Administration announced its intent to join the Extractive Industries Transparency Initiative ("EITI"). Government members of the EITI are required to disclose the payments that oil, gas, and mining companies make to them, and companies operating in those countries publish their payments to the governments. The two can then be reconciled for greater transparency and certainty regarding payments to governments.
A working group in each EITI member country – made up of the government, companies, and civil society -- determines precisely how the reporting is conducted for that jurisdiction. In most countries, the information is presented in a partially aggregated manner so that, for example, the precise dollar amount paid in royalties by a particular company for a specific project is not clear.
The Obama Administration’s statement would make it the first G8 government to become a reporting country under the EITI. Other G8 governments are "supporters" of the EITI, but this does not require them to undertake reporting on their own extractive industry revenues. As a political gesture, the Obama Administration’s statement is significant because it implies that western countries should be subject to the same reporting standards as less-developed nations. It also means that oil, gas, and mining companies with contracts with the U.S. government would be required to report on their payments.
The Obama Administration’s statement arrives amid continuing controversy in the United States regarding the best way to increase revenue transparency. Section 1504 of the Dodd-Frank Wall Street Reform Act requires companies reporting to the Securities Exchange Commission ("SEC") to disclose their payments to the SEC on a project basis. Civil society celebrated this development, stating that it will increase the accountability of governments to their citizens regarding the use of oil, gas, and mining money, and thus ensure more benefits reach the general public. Industry, however, has raised concerns regarding the cost and political implications of the reporting required by Section 1504, which is likely to be more detailed than that required by the EITI. Industry maintains that the EITI remains the best mechanism to enhance revenue transparency. The SEC has yet to issue its final rule to guide implementation, so it is not clear whether it will demand reporting significantly more detailed than the EITI requires. Therefore, the precise implications of the law are uncertain.
NGOs have welcomed the Obama Administration’s intent to join the EITI, stating that it ensures that privately held companies with oil, gas, or mining contracts with the U.S. government will be required to report their revenues. Such companies do not report to the SEC, and therefore are not covered by Section 1504. At the same time, the American Petroleum Institute has welcomed the Obama Administration’s decision, claiming that, based on the Administration’s support for the EITI, the SEC should simply follow the EITI’s reporting standards when devising its rule. Time – and the SEC rule – will tell which side has read the tea leaves correctly.