The $1.55 trillion in 'lost' oil revenues represents five times the existing funding gap for 42 of the world's poorest countries in both education and health, says Oxfam America
Thanks to “foot dragging by the Securities and Exchange Commission” combined with “aggressive lobbying and legal challenges by oil industry laggards,” a U.S. law meant to increase transparency around fossil fuel operations in developing countries has been stalled for nearly five years, charges a new report from Oxfam America.
The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act sought to help citizens “follow the money” by including the groundbreaking provision known as the Cardin-Lugar provision, or Section 1504, that would require all oil, gas, and mining companies listed on U.S. stock exchanges to disclose payments made to governments around the world for each project.
“More than 663 million people in developing countries live in absolute poverty. And they have a right to know: how much do their governments receive for each project and where does the money go?”
Such payments include taxes, royalties, fees, production entitlements, bonuses, dividends, and payments for infrastructure improvements.
As Oxfam’s report, Show Us the Money! (pdf), points out, “more than 663 million people in developing countries live in absolute poverty. And they have a right to know: how much do their governments receive for each project and where does the money go?”
But while July 21, 2015 will mark five years since Dodd-Frank was passed, there is still no sign of an official Section 1504 rule from the Securities and Exchange Commission (SEC).
And that means “following the money and holding governments accountable is next to impossible for citizens of developing countries,” said Oxfam America president Raymond Offenheiser. In fact, because so many of these transactions remain shrouded in secrecy, they are more likely to be siphoned off as bribes, mismanaged or wasted, or even used to fund violence or conflict, Oxfam says.
What’s more, fossil fuel industry lobbyists have fought the disclosure law every step of the way, to the tune of hundreds of millions of dollars. The American Petroleum Institute alone has spent at least $360 million lobbying against Section 1504 in the U.S. between 2010 and 2014, Oxfam reports.
The non-profit estimates that in the five years since the Dodd-Frank Act passed, oil produced in developing countries was worth an estimated $1.55 trillion for those governments.
“With payments for oil and mining projects out in the open, citizens can demand their governments spend these funds in the communities where drilling is taking place — using it to fight extreme poverty and build roads, schools, and hospitals,” Offenheiser explained. “With secrecy, funds may be lost to corruption and waste, as we have historically seen in oil-rich countries still suffering from high rates of poverty and low development.”
In Angola, for example, there is “a long and well-documented history of large-scale corruption in the oil sector, resulting in revenues that could have been used to promote the country’s development being siphoned off or wasted,” said Elias Isaac, country director for the Open Society Initiative for Southern Africa–Angola, in a January 2015 letter (pdf) to the SEC.
Managed properly, Oxfam argues, revenues generated from the oil industry could dramatically reduce poverty while improving education, health care, and agriculture. In fact, the estimated $1.55 trillion represents five times the existing funding gap for 42 of the world’s poorest countries in both education and health, according to the report.
“With this huge sum at stake, it’s crucial that we have transparency for these payments,” said Ian Gary, senior policy manager at Oxfam America. “The Securities and Exchange Commission has the power to end secrecy from U.S.-listed companies, and needs to obey the law and finish the job with strong rules.”
Specifically, Oxfam is calling on the SEC to finalize the Section 1504 rule by the end of this year—and to ensure that it requires “mandatory, public disclosures by company, at the project-level, for each country with no exemptions.” In 2014, Oxfam America argued in the U.S. District Court for the District of Massachusetts that the SEC is required by Congress to act promptly to finish the rule, and sought a court-ordered timeline to finish the process. A decision in the case is still pending.
According to Reuters, “[a]fter several postponements, the SEC has said it plans to issue new disclosure regulations by spring 2016.”