In what advocates say is a major blow to government accountability, a bill that repeals a regulation that forces companies in the extractive industry to disclose payments to foreign governments is headed to President Donald Trump after passing the U.S. House and Senate this week.
“Instead of taking on corruption as they had promised, Congress and the new administration have gutted an important anti-graft measure that helps keep Americans safer and more informed,” Jana Morgan, director of Publish What You Pay-US, said in a statement.
“The Cardin-Lugar rule is critical for ensuring that authoritarian regimes around the world cannot treat oil and mining revenues like state secrets, breeding corruption, distrust, and conflict that harms U.S. security and energy interests,” Morgan said. “Many of the terrorist threats faced by the U.S. and its allies originate in resource-dependent regions, where corrupt elites have looted natural resource revenues to line their own pockets and fund extremist groups.”
Publish What You Pay led the effort to include the Cardin-Lugar rule – also known as rule 1504 – in the 2010 Dodd-Frank Financial Reform Act. It was championed by the Enough Project alongside another rule that forced more transparency on the mining sector in the hopes of preventing support for armed rebel groups in Democratic Republic of the Congo. The second rule was controversial among aid experts, but there was broad support for 1504 aside from oil industry opposition.
Some question the timing of the repeal and the nomination of Rex Tillerson as secretary of state. Tillerson opposed the rule as ExxonMobil CEO. Oxfam raised the issue in a few blog posts that opposed the repeal. Amnesty International went further calling it “suspicious” given Tillerson’s attempt to block the rule from coming into action.
“Transparency, accountability and the rule of law are essential to the protection of human rights. Congress should be promoting those principles internationally not undermining them. Are we really going to let Congress make it easier for companies to finance governments that commit human rights abuses?” according to Amnesty’s call to action.
Companies registered with the Securities and Exchange Commission that work in the oil, gas and mining had until 2018 to disclose payments to the United States and foreign governments. Industry lobbyists objected to the rule saying it harmed their competitiveness abroad. However, similar transparency rules for Canadian and European natural resource companies are already in place.
Thirty other countries passed extractive transparency rules in the years after rule 1504’s adoption. Nearly $150 billion in payments to governments were disclosed over the past year, according to Publish What You Fund. It pointed to the global improvements as evidence of a growing movement toward transparency and a sign of hope amid the news of the repeal.
Many groups, including Oxfam, championed the rule as a means to bring transparency on resource-rich developing countries. In the past, payments by oil and mineral companies to governments were hidden from the public. There was no way to track the revenues and ensure the money went to fund government services. The rule changed that for the better, advocates said, who decry the impending repeal.
“This represents a travesty of important effort to improve on governance of extractive resource in poor countries where the secrecy around resource rents activates bribery, greed, corruption, extreme poverty and many other social injustices,” Mohammed Amin Adam, the executive director of the Africa Center for Energy Policy, said in a statement this week.
“Ghana, like many other countries, has been a direct beneficiary of SEC rules through contracts and payment disclosures which empowers citizens to demand accountability from their government,” Adam said. “This ‘U-turn’ proposed by the Senators is only an attempt to entrench minority business interest against that of the suffering masses who live the ‘paradox of plenty’ daily.”
Adam and others argue that transparency can help countries break away from what is called the ‘resource curse.’ Todd Moss with the Center for Global Development said that transparency and accountability are why places like Alaska and Norway manage their oil resources well. In both places, residents are eligible for a cut of the government revenues, which requires complete transparency.
The basic belief in transparency drove the bipartisan support that helped pass rule 1504. Sens. Ben Cardin, D-Md., and Richard Lugar, R-Ind., crossed party lines to co-sponsor the provision. It survived legal challenges from the American Petroleum Institute and public opposition from oil companies ExxonMobil and Chevron. Now all it takes is Trump’s signature to overturn it.
“Congress has given a gift to Big Oil and kleptocratic governments around the world,” said Morgan. “It is clear that the interests of the American public have taken a backseat to those of deep-pocketed lobbyists and secretive corporations.”