The oil industry wants to water down transparency rules – Europe must resist

http://www.guardian.co.uk/commentisfree/2013/feb/07/oil-industry-transparency-europe

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As a former oil company executive, having spent 30 years with Royal Dutch Shell, I am concerned at my former industry's efforts to undermine a key European transparency law which is close to agreement.

New European legislation, which is being agreed through the EU Accounting and Transparency Directives, will require oil, gas, mining and logging companies to disclose their payments to host governments around the world.

Oil companies can bring great wealth to the countries where they operate. The revenues from the industry have the potential to drive economic growth and be a powerful force in reducing poverty. However, in some resource-rich countries, these revenue flows are vulnerable to corruption and mismanagement, with little benefit going to the population at large.

Transparency is crucial to tackling this situation. Providing people with information about payments made by companies to governments for oil, gas and mining projects enables citizens to hold their governments to account for the uses to which these resources are put. Closer to home, the more that can be done to help countries effectively use their own domestic tax base, the less strain there will be on aid budgets funded by European taxpayers.

During my time at Shell I helped to launch the Extractive Industries Transparency Initiative (EITI), a voluntary effort to improve revenue transparency around the world. But voluntary disclosure is not sufficient. EITI is unable to provide information in countries which are unwilling to sign up to the initiative, which is why regulation is needed.

This is why I testified before the United States house committee on financial services in support of transparency legislation, which was subsequently enacted into law in 2010. Section 1504 of the US Dodd-Frank Act requires all oil, gas and mining companies listed on US stock exchanges to publish their payments to the governments of all countries and for every extractive project, without exception.

It is also why I applaud the European Union's determination to establish similar rules, for which final negotiations are now taking place.

There is oil industry pressure to weaken these rules in two main areas. The first is a proposal to grant exemptions to companies from reporting payments when they operate in countries where criminal laws prohibit such disclosure. Such a provision would, of course, serve only to encourage those governments who wish to withhold information from their citizens to enact such legislation. The European rules should align with US legislation and not permit exemptions. Any EU member state that supports exemptions in these rules would undermine the fundamental purpose of the legislation, which is to place information into the hands of those that need it most.

The second area concerns how oil projects are defined for the purposes of reporting. Instead of structuring project-level disclosure according to the legal agreements that companies sign with governments, companies are proposing that they should have the latitude to report according to their own internal reporting units. In the US, such a definition was, quite rightly, rejected since it did not allow for sufficient transparency. Europe should reject it too. Defining a project according to legal agreements is compatible with US rules and has the additional advantage of not imposing an undue burden on reporting companies since the relevant payments are already recorded in subsidiary companies' books of account.

Oil companies, including Shell, are trying to convince European governments to weaken the proposed reporting by pushing for exemptions and opposing project-level reporting. These same companies are also members of the American Petroleum Institute, which is going to court to try to overturn the US legislation passed in 2010 and thereby turn back the clock on transparency.

I hope that European governments will resist this pressure and stand up for transparency. The European rules should require reporting in all countries, and for every project, with no exemptions.