Nov 2010
Extractive Industries Disclosure Provision in the
Dodd-Frank Wall Street Reform and Consumer Protection Act
What does the law require and achieve?
o Oil, gas and mining companies are required to disclose what they pay to the U.S. government and foreign governments as
part of their annual filings to the U.S. Securities and Exchange Commission (SEC), which is the agency that regulates the
U.S. financial sector.
o This law creates a new global standard for company disclosure. It gives citizens in resource-rich countries information to
combat oil and mineral sector corruption and to demand government accountability for responsible resource use.
o This law shines a light on billions in payments to governments from oil, gas and mining companies.
o It is a victory for the Publish What You Pay coalition, which includes 600+ faith, human rights and development groups from
over 55 countries.
What companies are covered?
o All oil, gas and mining companies with securities listed on U.S. stock exchanges will be covered by this legislation, as well as
those which file an annual report with the SEC, but do not trade on stock exchanges.
o
This will cover a large number of the world’s largest internationally operating oil and gas companies, and eight of the world’s
ten largest mining companies. It will provide citizens in nearly every country with much needed information.
What are companies required to report?
o Companies that engage in the commercial development of oil, natural gas or minerals, will have report
1) the type and total amount of payments made for each project, and
2) the type and total amount of payments made to each government,
for the purpose of commercial development of oil, natural gas or minerals, as part of their annual reports filed with the U.S.
Securities and Exchange Commission (SEC)
o
They will be required to report taxes, royalties, fees (including license fees), production entitlements, and bonuses. The SEC
will determine which other payments should also be included in these requirements.
How will information be communicated to the public?
o The public will be able to access this information for free from the SEC website. The law requires that data be produced in an
“interactive data format” so that it can be searchable and sortable online. Companies are required to report their payments in
the following way: total amounts by category; currency used to make payments; financial period of the payment; business
segment making the payments; government receiving the payment and its country; project to which the payment relates; and,
other categories that SEC deems is “necessary or appropriate in the public interest or for the protection of investors.”
When will this legislation come into force?
o The SEC will develop regulations to implement the law by April 2010.
Is there an opportunity to influence the regulations?
o Yes. SEC has opened a public comment mailbox and welcomes comments. PWYP has submitted a comment prior to the
issuing of proposed rules. There is also an opportunity to comment on the proposed rules when they are released in
December 2010, and in response to the final rules when they come out in April 2011. To submit comments, please visit:
http://www.sec.gov/spotlight/dodd-frank/speccorpdisclosure.shtml
When can we expect to see the information?
o Once the final regulations are issued, then companies have one fiscal year to respond to the new rules. This means that the
first reports may come out in 2012.
For more information:
www.openthebooks.org | www.pwypusa.org
+1 202. 525. 2754
Nov 2010
Is this a new trend?
o This is a groundbreaking milestone in a trend towards increases in the transparency and disclosure of oil, gas and mining
payments to governments.
o
Hong Kong Stock Exchange (HSX), which carries a number of Asian majors, adopted a regulation in June that required new
applicant mineral companies to disclose “payments made to host-country governments”.
o
The International Accounting Standards Board (IASB) is considering a rule change to make disclosure of payments to
governments by oil, gas and mining companies standard.
o
Newmont Mining, the second largest gold company in the world already publishes what it pays to governments for extraction.
o
In June 2010, Chevron investors representing $10 billion in shares, supported a shareholder proposal calling on the company
to disclose its payments to governments.
How does this law support the EITI?
o The law can help to bolster the EITI's global credibility by underlining the United States commitment to transparency as a
fundamental principle in the oil and mining industries.
o
The law will produce an enormous amount of disaggregated data in a standard format, and these disclosures will be
consistent with EITI payment disclosure categories. As a result, this data can be put to work in EITI countries to accelerate
their national processes.
o
The EITI’s company coverage will, in many cases, cover companies not covered by the law. In turn, the data disclosure
standards established by the Act will help CSOs in EITI candidate countries make the case for disaggregated reporting.
o
The law can also help EITI to expand its country coverage. Since payment data will be made available for countries not yet
signed up to the EITI, this can bolster the efforts of EITI advocates who are pushing for their governments to sign on. The
availability of this data may allow them to demonstrate that part of the process is already underway, and that the government
must match those efforts with the remaining components of national EITI implementation.
o
The law may help to create public pressure on autocratic governments to be more open.
What is the history of this provision?
o The provision is based on the Energy Security through Transparency Act (S. 1700), which was introduced into the U.S.
Senate in September 2009. Similar legislation was also introduced in the U.S. Congress in 2007 and 2008 as the Extractive
Industries Transparency Disclosure Act (EITD).
Who supported this in the U.S. government?
o In the Congress, this was championed by the supporters of the Energy Security through Transparency Act (S. 1700). This
included a bipartisan (both Democrats and Republicans) group of legislators led by Senators Benjamin Cardin (D-MD) and
Richard Lugar (R-IN), with Patrick Leahy (D-VT) introducing the provision as an amendment during the conference
negotiations for the Dodd-Frank Act. Critical support came from Senators Tim Johnson (D-ND), Russell Feingold (D-WI),
Charles Schumer (D-NY) and Richard Durbin (D-IL). Both the Senate Banking Committee Chairman Christopher Dodd (DCT) and House Financial Services Committee Chairman Barney Frank (D-MA) supported the amendment.
o
The White House supported the bill passing, and Obama cited the law at the 2010 UN Summit on the Millenium Development
Goals as one of the US contributions in the global fight against corruption: “We know that countries are more likely to prosper
when governments are accountable to their people. So we are leading a global effort to combat corruption—which in many
places is the single greatest barrier to prosperity, and which is a profound violation of human rights. That’s why we now
require oil, gas and mining companies that raise capital in the United States to disclose all payments they make to
foreign governments…”
For more information:
www.openthebooks.org | www.pwypusa.org
+1 202. 525. 2754