In a letter to SEC Chair Mary Schapiro, Arlene McCarthy, a Member of the European Parliament, urged the Commission to adopt strong reporting rules for the resource extraction industries at the scheduled August 22 open meeting. She noted that there is a strong majority in the European Parliament for tough reporting requirements, including project level reporting. The MP said it is equally clear that investors are demanding more information and transparency on companies' activities. In her view, strong SEC regulations in this area would send a clear and unequivocal message that the EU and the
united in their drive for stronger
transparency rules for the resource extractive industry.
The MP emphasized the importance of the consistent cross-border regulation of global extractive industries, which depends on the EU and US adopting strong common and equivalent oil and mining company transparency rules. Member McCarthy is Parliamentary draftsperson on the EU Transparency rules for the extractive sector. She is also the Vice Chair of the Economic and Monetary Affairs Committee.
Section 1504 of the Dodd-Frank Act directs the SEC to adopt regulations requiring resource extraction issuers to include in their annual reports information on any payments made to foreign governments or to the federal government for the purpose of the commercial development of oil, natural gas or minerals.
Specifically, the MP said that project level disclosure is essential if these regulations are to be effective and deliver the necessary transparency to enable local communities to hold their governments to account for the use of revenues from the extraction of natural resources and to be able to link payments to local resources. The decision the SEC takes on August 22 will send an important signal to legislators and regulators globally of the SEC’s intention to introduce tough rules in the spirit of the Dodd Frank legislation.
The MP further noted that there is no evidence that tough reporting requirements for project reporting will either be harmful to companies competiveness or be overly burdensome. She cited Lord Browne, the former Chief Executive of BP, who pointed out in his Op-Ed in the Financial Times (April 25, 2012), that the rules would not force disclosure of information during negotiations, which is the most sensitive period for dealings. Furthermore, with both the
US and EU
implementing disclosure of payments to government, around 90% of the
world's extractive companies will be
covered by the rules.
Again referencing Lord Browne, the MP said that the alleged administrative cost to the extractive industries is greatly exaggerated. The largest companies already spend a vast sum on compliance with both national and international reporting standards. The SEC itself estimated that increased costs arising from the new requirements would only be around 0.33%. If companies operating in the extractive
industries are already complying with international good governance codes, reasoned the MP, then they will already be maintaining extensive internal records tracking the payments that the company makes.