First USEITI Report Shows Some Leadership, Need for Improvement

The release of the first U.S. Extractive Industries Transparency Initiative (USEITI) report is both a laudable achievement and an indication that EITI cannot succeed without full accountability for all multi-stakeholder group (MSG) participants.

The report is a promising, major first step in fulfilling the commitment President Obama made to the EITI process in September 2011. It makes public details about the extractive industries that should help inform the discussions and decisions of a wide range of stakeholders. However, the report’s shortcomings include the absence of public tax reporting by most companies, including members of the EITI International Board and longtime EITI supporters, such ExxonMobil, Chevron and ConocoPhillips.

The 21-member USEITI MSG’s report includes several advancements in U.S. extractives industries disclosure and the objectives of the EITI movement. For example, the report and its online portal include company specific payment data that is a vast improvement over how U.S. extractive payment information was shared in the past. The report’s 12 narratives at the county level provide snapshots of the impact of extractive development on local communities that should begin important discussions and set strong precedents for future EITI reporting.

The report also points out the importance of mandatory payment disclosure through Dodd-Frank Section 1504 and the EU Transparency and Account Directives to implementation of the EITI Standard. It demonstrates that the lack of royalties on hard rock mining (including for gold, silver and copper) represents a significant lost revenue opportunity for the U.S.

Despite its strengths, the report falls short of the EITI Standard in several areas. As noted above, the refusal of most of the 44 in-scope companies to report taxes, including International Board members and longtime supporters of EITI, is disappointing. It is notable that several large European-based USEITI reporting companies, such as BP and Royal Dutch Shell, did disclose their tax payments. Tax reporting was also more likely among smaller operators than their largest peers.

The USEITI report also does not include project-level payment reporting. Although reporting in a manner consistent with the Dodd-Frank Act and the complementary EU laws is required by the EITI Standard and is being done by companies around the world, the MSG was unable to reach consensus on this requirement in the necessary timeframe. The December 11 announcement of the proposed implementation rule for Section 1504 of the Dodd-Frank Act makes it clear that the global standard for project-level disclosure is at a contract-level, inspired by the definition of “project” in the EU laws and Canadian draft reporting specifications.

Finally, while the USEITI report includes some subnational reporting in line with its adapted implementation of the Standard, the comprehensiveness and detail of this disclosure will need to improve when the 2016 USEITI report is submitted for the validation of the International Board. This will require improvement in outreach to Native Americans as well as state and local representatives and communities.

The USEITI implementation process has been an example for other countries in many ways. In fact, other OECD countries such as the United Kingdom, France, Germany, the Netherlands and Italy have followed the lead of the U.S. in committing to implement this important initiative. The first USEITI report is a step toward maintaining that leadership. However, failure to heed the EITI Standard and mandatory reporting requirements in the 2016 USEITI report, which must be validated by the EITI international board, would prompt significant scrutiny.

Paul Bugala represents civil society on the USEITI multi-stakeholder group and is a consultant for NRGI.