Two weeks have passed since the official end to the comment period for the U.S. Securities and Exchange Commission’s (SEC) proposed rule for the implementation of Section 1504 of the Dodd-Frank Act. (Section 1504 is the beleaguered 2010 law that requires U.S.-traded oil, gas and mining companies to reveal the payments they make to governments around the world.)
 
Given the unprecedented disruptions caused by the coronavirus pandemic and authorities’ response, groups have called for a delay to all federal rulemaking. That notwithstanding, a review of comments already submitted to the SEC in the publicly available comment file shows that an overwhelming number of concerned parties, from small NGOs to corporate behemoths, have urged the regulatory body to align the rule with global payment transparency norms.
 
Section 1504 inspired the adoption of similar laws around the world requiring project-level payment transparency. The EU, U.K., Canada and Norway have laws requiring contract-based project-level payment transparency, and the Extractive Industries Transparency Initiative 2019 Standard now also requires all EITI-participating countries to report the same way.
  
But 1504 has never been implemented in the U.S. due to objections from industry—primarily voiced by the American Petroleum Institute.
 
The rule proposed in December 2019 is the third attempt. And it is a very weak one, failing to align with the international transparency standard that the original U.S. law helped to establish, and failing to require the granular level of payment disclosure necessary to deter corruption in the natural resource sector.
 
In early 2020, the SEC initiated a 60-day period in which it accepted comments on the proposed rule. In response, major multinational extractive companies, citizens groups in resource-rich countries, investors and others have urged the SEC to align its disclosure requirements with those in Europe and Canada. Some highlights include:
 
Companies
 
Companies including BHP Billiton, BP, Kosmos, Newmont and Rio Tinto all stated support for a stronger rule that aligns with the EITI 2019 Standard. Total S.A., in a comment to the commission, stated that its reporting costs are “in the region of $200,000 per year.” NRGI analyzed the project-level disclosures of 731 companies made under laws in non-U.S. jurisdictions and found that Total disclosed payments for 155 identifiable projects, the largest number of any reporting company, challenging the notion embodied by the proposed rule that such reporting is costly and burdensome.
 
Civil society organizations in resource-rich countries
 
Payments-to-governments laws in Europe and Canada have resulted in four years of company reporting. Citizens in resource-rich countries across the globe have begun using this data to demand accountability from their governments and from companies for the resource revenues generated. Nigeria’s Paradigm Leadership Support Initiative submitted a comment to the SEC outlining the work it has done to empower citizens in the Niger Delta to use payment data through their online community platform Resource Benefits. Publish What You Pay Indonesia wrote to the SEC to outline how the organization has partnered with NRGI to enable journalists and civil society organizations to use international oil company payments data as part of the Indonesia Oil and Gas Revenues project.
 
Investors
 
A group of institutional investors with over $5.3 trillion assets under management detailed the importance of publicly available, project-level disclosures for sector investors. Their submission notes that  a rule with company-by-company, project-level payment disclosures consistent with the EU, U.K. and Canadian laws would represent “a significant improvement in the potential for analysts to assess and act on a variety of considerations essential to understanding an energy or mining security's proper valuation and risk profile.”
 
NRGI
 
NRGI staff also submitted several comments during this period, leveraging our data repository of existing payment-to-governments disclosures, www.resourceprojects.org. For one submission, NRGI analyzed the most recent year of reporting for 731 companies, which disclosed data on over 4,000 projects in 135 countries, to demonstrate the negative impact that the project definition introduced in the proposed rule would have on the payments reported and utility of this data for accountability purposes. The SEC’s proposed approach would allow many companies to aggregate information about numerous projects together, greatly diminishing the rule’s potential to deter corruption and improve governance. And NRGI advisor Alexandra Gillies wrote to the SEC demonstrating the importance of contract-level payment transparency in fighting corruption in the oil industry.
 
It has also become clear that to be effective the SEC’s rule should also include vast and corruption-prone commodity trading payments (by which companies purchase oil, gas and minerals directly from governments and state-owned enterprises). NRGI’s Joe Williams urged the SEC to include these payments and thereby align with the EITI and commitments made by governments in other major trading hubs such as the Switzerland and the U.K.
 
It has been ten years since the U.S. took a global leadership role in combatting corruption in the extractive industries with the passage of Section 1504. In that time, while the U.S. has repeatedly failed to implement this disclosure requirement, other authorities have required almost 800 companies to disclose over $800 billion in contract-level payments in over 150 countries—all with no major issues reported.
 
The U.S. SEC should strengthen the requirements in its final rule, aligning it with the global standard of extractive-sector payment transparency.
 
 
Alexander Malden is a governance officer with the Natural Resource Governance Institute.