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March 24, 2014
Tullow Oil Expands Disclosure of Payments to Governments
    by Robert Kropp

The voluntary disclosure of payments on a project level is the first by an oil and gas company, and comes while the American Petroleum Institute seeks to weaken a proposed Securities and Exchange Commission rule on payments to governments.


In 2013, the European Union (EU) issued a directive requiring that companies in the extractives industries disclose payments they make to governments. The EU directive followed a similar rule in the US, originally mandated by Dodd-Frank and enacted by the Securities and Exchange Commission (SEC), but in important respects went further: public and private companies registered in the EU "will have to disclose details of tax, bonus and other payments made for every project they operate, over a threshold of 100,000 Euros," according to Transparency International.

Meanwhile, “The American Petroleum Institute (API), an oil lobby group whose leading members include ExxonMobil, Royal Dutch Shell, Chevron, and BP, is trying to weaken the implementing rule for a US law that requires US-listed oil and mining companies to publish their payments on a project-by-project basis,” Global Witness reported.

According to API, the rule as issued by the SEC “required publicly traded energy companies to release commercially sensitive payment information about foreign and US projects, giving firms not subject to the rule an upper hand when bidding for energy contracts.” But according to Transparency International, the combined EU and SEC rules “will cover 90 per cent of the world's major international extractive companies.”

The EU mandate does not come into effect until 2015; however, at a conference last year, Leslie Coldham of the UK-based Tullow Oil stated that the company would report on its payments to governments in 2014. “Payment disclosure helps in the management of local expectations,” Coldham said. “If you’ve got nothing to hide you should be happy to publish contracts.”

Tullow followed up on its commitment when it released its annual report today. It became the first company in the global extractives industry “to publish details of its revenue payments to governments broken down by each project the company operates worldwide,” according to Global Witness. “These detailed disclosures will enable citizens in economically poor but resource-rich regions to monitor public revenues worth hundreds of billions of dollars and hold governments to account for how the money is used.”

"Tullow's welcome disclosure blows a hole in the argument made by some oil companies that project-level reporting will impose a heavy burden on business," said Dominic Eagleton, a senior campaigner with Global Witness. "This should encourage the Securities and Exchange Commission to create a strong payment disclosure rule that allows citizens to identify which companies are making payments and the amounts they contribute."

“This level of transparency benefits both investors and local communities,” said Ian Gary, Senior Policy Manager for Extractive Industries at Oxfam America. “Tullow’s move shows that global oil companies can disclose such information at little cost and without fear of competitive harm.”

In 2102, when the SEC adopted rules mandating disclosure by companies in the extractives industry, Gary said, “It will help empower local communities and districts to track the money and make sure it is going to help in education, rather than into the pockets of local elites.”

A subsequent lawsuit filed by API against the SEC and Oxfam succeeded in delaying the implementation of the rules. The Commission has yet to revisit the issue.

 

 
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