WASHINGTON — The United States has been accepted into a landmark global initiative aimed at strengthening transparency in the extractives sector, a move that proponents are hoping will improve the ability of local communities to ensure accountability and engage in informed decision-making regarding mining and drilling projects in their areas.
A three-year process will now begin to bring the U.S. into conformance with standards put forth by the Extractives Industry Transparency Initiative (EITI), a decade-old process headquartered in Oslo. While EITI has traditionally been aimed at reducing corruption and promoting good governance primarily in developing countries, the U.S. is the first leading industrial nation from the Group of Eight (now the Group of Seven) to participate, joining 41 other countries.
“Citizens in the United States of course expect that government-owned natural resources are managed properly and that the revenues are put to good use,” Clare Short, EITI’s chair, said on March 19, after the EITI board accepted the U.S. application for candidature. “Through the U.S. EITI, they will be able to follow the natural resource money from the ground into government coffers, and use this information to hold the government to account.”
At its base, the EITI standard mandates that governments and companies provide regular disclosure of royalties and revenues from natural resource extraction. The idea is that these parallel reports, verified by independent auditors, will allow for easy understanding of money owed to local communities – and the source of any discrepancies.
Importantly, EITI’s standards are based on a mandatory process of equal input from government, industry and civil society. The United States’ application, too, was jointly fashioned and approved by representation from each of these sectors.
“We view this as a welcome opportunity to work collaboratively with NGO and government interests,” Luke Popovich, a spokesperson for the National Mining Association, a prominent trade group that was involved in drawing up the U.S. EITI application, told MintPress News. “But it’s also an opportunity for us to promote the benefits that extractive industries like ours provide to host governments and their people.”
Informing public policy
The U.S. application says the country will go beyond the EITI standards, to include, for instance, renewable energy sources and additional minerals. In 2013, the U.S. federal government collected some $14 billion from companies involved in natural resource extraction, typically the country’s second largest source of revenue.
Yet critics say domestic accountability mechanisms are too opaque, both for investors and local communities.
“From an investor’s perspective, we feel there’s a black hole in terms of the information we can get about extractive companies around the world,” Paul Bugala, a senior analyst with Calvert Investments, a socially responsible firm, told MintPress. “The last time that U.S. production-disclosure guidelines were updated was 1975, during the time of the oil crisis. Clearly the world has changed dramatically since then.”
Bugala, a member of the panel that drew up the U.S. EITI application, appreciates the uniquely face-to-face discussions that the EITI process has resulted in, and which continue.
These discussions and their results to date “show a degree of maturity of the issue of transparency,” he said. “This is no longer a niche issue, but rather one where the common ground is clear for all three parties – we have shared goals because everyone appreciates transparency and consistency. This shows that the time for transparency has come.”
Under the current U.S. reporting system, publicly available information is available by year, by state and by some commodities, but it’s not available on a project-to-project basis. As in many developing countries, critics say that this lack of transparency takes away an important tool for local communities to engage in real oversight and informed decision-making.
“Aggregated information is only so useful for the people in the communities where extraction is taking place,” Mia Steinle, the U.S. EITI civil society coordinator and an investigator at the Project on Government Oversight, a watchdog group here, told MintPress.
“What we’re hoping for more is more disaggregated information, where we can see things at a local level, at the project level, and about which companies are involved. At the end of the day, the goal in every EITI country is to make sure the citizens are holding the government accountable and that the government is holding the industry accountable.”
In this sense, the focus for the EITI standard in the U.S. is less on rooting out corruption and more on facilitating public policy discussions.
“For me, transparency and corruption issues aren’t necessarily the problem in the United States,” Veronica Slajer, a member of the U.S. EITI multi-stakeholder group, told MintPress.
“Transparency is important in that this information needs to be put in a format that allows communities to understand it. Then we can have a level, rational conversation about what value we’re getting from the extractives industry and how it’s benefiting the communities.”
Slajer, an independent consultant working with indigenous communities, said the U.S. is different from other EITI countries not only in its federal structure but also in its more than 550 sovereign indigenous populations. In order for the EITI process to function here, the next step of the process will require significant formal representation and input from both the states and the tribes.
Eventually, the U.S. EITI body will fill two seats dedicated for the tribes. Yet more broadly, Slajer suggested that the EITI process offers a potent opportunity for the U.S. government to redefine its relationship with the country’s indigenous communities.
“It often seems that there is a conversation that takes place with indigenous communities through the United Nations, and there’s a whole separate conversation within the U.S. I’d like to see those conversations pulled together,” she said. “Transparency’s happening, and we need to step in and be part of the rest of the world.”
Project-level reporting
While the U.S. now has three years to come into compliance with the EITI requirements, outstanding disagreements persist over how exactly that work will be done. One of the most pressing issues, which will be the focus of negotiations over the coming year, will be over the degree of detail offered by the EITI-mandated reports.
For several years, the U.S. was an international leader on transparency mandates in the mining and drilling industries. As part of the massive 2010 financial overhaul legislation known as the Dodd-Frank Act, Congress also directed large U.S. extractives companies to disclose all payments made to foreign governments.
This part of the law, known as Section 1504, continues to be seen as trailblazing, most notably credited with leading the European Union to pass its own transparency requirements. But while the EU mandate, known as the Accounting Directive, is set to go into effect next year, Section 1504 remains unimplemented even four years after it became law.
Due to intense industry pushback, regulators with the Securities and Exchange Commission held off until 2012 to unveil a final proposal for how they would implement Section 1504. Then, last July, a federal judge struck it down, ruling that the SEC had overreached its original congressional mandate.
Proponents of the rule have noted that the decision was technical and fairly easy to fix, though there is no public timeframe for doing so. Now, campaigners are now pointing to the United States’ formalized EITI candidacy as added impetus for the SEC to speed up its work rewriting the rule.
“The SEC needs to move quickly to schedule a rulemaking to implement Section 1504,” Jana Morgan, national coordinator for Publish What You Pay U.S., a pro-transparency group, said in a statement. “It is important that Section 1504 and the U.S. EITI are able to work hand in hand to give citizens a clear picture of the costs and benefits associated with America’s natural resource sector.”
Some of the most stringent industry critics of Section 1504 are also part of the U.S. EITI multi-stakeholder group. Steinle of the Project on Government Oversight said this group will be focusing intently on the issue during public meetings in coming months.
“The EITI standard requires that reporting be in line with the E.U. law and Section 1504,” she said.
“For now, the industry groups say that because Section 1504 is up in the air, they can’t make a decision yet. As such, we’ve put our decision on this on hold in terms of defining project-level reporting, but it remains a huge priority for civil society.”
U.S. officials say they currently plan to file the country’s first EITI report in two years.