The Board looks at opportunities and challenges following US repeal of implementing regulations giving effect to Dodd-Frank 1504
President Donald Trump’s repeal of the implementing regulations for Section 1504 of the Dodd Frank Act has been given a lot of attention in recent weeks. Understandably so. For those of us that work to advance transparency in payments from the oil, gas and mining industry to governments, the actions in Washington are a step backwards, creating significant uncertainty in long-standing efforts to agree on globally consistent reporting requirements.
The EITI requires that revenue data is presented by project, provided that it is consistent with the SEC Rules and the EU Accounting Directive. It is hard to tell what impact the repeal of the implementing regulations will have on the stance of EITI countries to publically disclose revenue data on a project-level basis.
Speaking to representatives of government here in Manila earlier in the week, they all pointed out that current company reporting to the government is already done on a project-level basis as this is how royalties and other payment liabilities are levied. Publishing the data this way would also simplify EITI reporting. This is why countries like Indonesia and the oil, gas and mining companies operating there have been reporting by project since their first EITI Report in 2009. Azerbaijan also opted for project-level reporting when disaggregation became mandatory for EITI countries in 2013. Project-level reporting can also serve other goals. A representative from the Liberia Revenue Authority explained to the EITI that ring-fencing of tax calculations on a project-level basis curbed the most basic form of transfer pricing.
Most local company representatives operating in implementing countries that we have spoken to, agree that project-level reporting is a good idea. Companies in the Philippines have been quick to emphasise that project-level reporting would be helpful to the companies in terms of showing the benefits that each oil and mining site are bringing to local communities. Nobody could think of any technical or commercial reason not to do so. When discussing project-level reporting with an international oil company (IOC) operating in Nigeria, it was pointed out that project-level reporting could be useful in terms of assessing the efficiency of the producing assets from which IOCs had divested in the past five years.
Against this backdrop, many see the actions by the US government as sending an unfortunate signal that transparency in a sector that has for so long been characterized by opacity and corruption, is no longer important. As Victor Hart, EITI Board member representing the government of Trinidad & Tobago wrote last week:
“The impact on T&T of President’s Trump’s action will be negative, if only because it strikes a blow against government’s policy to bring increasing transparency and accountability to the local extractive sectors (oil, gas and quarrying) by its membership of the EITI since March 2011”.
Member of Parliament Olga Bielkova also pointed to the effects on the reforms she is trying to push in Ukraine, stating that
“I am having hard time trying to oppose some of the opinions here that "even USA is giving up" on some of the transparency requirements”.
The EITI will now need to consider what to do with the reference to the SEC in the EITI Standard. Some have suggested that the EITI should maintain its current policy until a rewritten SEC rule is issued next year. An alternative is to move ahead with project-level reporting so that EITI implementing countries can continue to lead the way, drawing on the existing standards in Canada and the EU.
