U.S. Oil Majors Must End Transparency Hypocrisy

In a recent debate over tax transparency in Australia, an ExxonMobil executive said that the company “strongly supports transparency initiatives that improve governance and revenue accountability.” These words ring particularly hollow in the light of a multi-year campaign led by ExxonMobil and Chevron against the disclosure of oil companies’ payments to governments.
 
Armed with details of such payments, citizens of oil-rich but often quite poor countries can demand that their governments use revenues to promote national development priorities and ensure that oil money doesn’t fall into corrupt hands. Investors in oil companies also value this payment transparency when seeking to manage risk.
 
In the United States, ExxonMobil and Chevron’s efforts to keep such payments in the dark have been particularly strident and successful, with the Trump administration seemingly giving them free rein. But for almost a decade, these behemoths have fought against a ground-breaking U.S. transparency law, Section 1504 of the Dodd-Frank Act of 2010. They also precipitated the U.S. exit last year from the Extractive Industries Transparency Initiative (EITI). This last is especially disingenuous, as the two companies hold seats on the initiative’s board and claim to support its objectives.
 
Section 1504 of Dodd-Frank requires oil, gas and mining companies listed on U.S. stock exchanges to disclose their payments to governments around the world for the right to extract subsoil resources. ExxonMobil lobbied against the bipartisan law, with then-CEO Rex Tillerson (now U.S. Secretary of State) personally meeting senators to argue against the provision. In that effort, Tillerson failed, and the law passed.
 
But these companies, through their lobby the American Petroleum Institute, then litigated to block the initial Securities and Exchange Commission (SEC) rule that would have implemented Section 1504. Last year they successfully pushed for congressional action to repeal the SEC’s latest formulation of the rule.
 
For years, ExxonMobil and Chevron have asserted that disclosing their payments to governments would harm their competitiveness. ExxonMobil once argued that the disclosure of such information was even prohibited in some countries, such as Angola. But new evidence proves this claim to be false.
 
While no company has disclosed under the U.S. law (eight years after its passage), ExxonMobil and Chevron have been less successful in convincing governments in Canada and Europe to water down their own payments-to-governments laws. Compelled by these laws, hundreds of companies, including BP, Royal Dutch Shell and Total, as well as state-owned Russian and Chinese enterprises, have now disclosed over USD 300 billion in payments to governments.
 
The laws in Canada and Europe have also forced disclosure by some ExxonMobil subsidiaries and associates. For the period 2014-2016, ExxonMobil has published the details of USD 10 billion in transactions with the governments of 8 countries (including $467 million in net tax refunds received in the U.K.). In December, an ExxonMobil holding company subject to Luxembourg law quietly disclosed over $2.2 billion in payments made in 2016 to the Angolan government for two prized oil assets – offshore blocks 15 and 17. These disclosures are crucial to improving governance in Angola, an oil-rich yet corruption-prone nation. The disclosures also demonstrate the fallacy of ExxonMobil’s arguments that it may be forced to cease doing business in the country; it still operates there unimpeded.
 
ExxonMobil and Chevron’s approach to U.S. implementation of the complementary EITI further demonstrates the hypocrisy of their claims to support transparency. Disclosure of taxes paid to governments by oil companies is a key requirement of EITI. The companies’ refusal to disclose their tax payments to the American government was central to the initiative’s failure in the U.S. and the U.S. government’s subsequent withdrawal from the process in November.  
 
Given the companies’ actions in the U.S., some watchdog groups have called for the two companies to be removed from the initiative’s board, which meets Tuesday in Oslo. Indeed, a commitment to practicing real transparency ought to be a prerequisite for any company to occupy such a position.  
 
If ExxonMobil and Chevron truly support transparency and wish to retain the reputational benefits of leadership in initiatives like EITI, they must end this deep hypocrisy. They should take the opportunity of the upcoming EITI meeting to change course and support full implementation of Dodd-Frank 1504 in the U.S. (in line with laws in Europe and Canada) and disclose their tax payments in the U.S. and all other countries where they operate. Other European oil companies like BP, Royal Dutch Shell, Statoil and Total (themselves on the EITI board) should remind ExxonMobil and Chevron that transparency doesn’t result in a loss in competitiveness, as ExxonMobil’s own Angola disclosure experience demonstrates.
 
As enlightened multinational companies and reformist governments around the world know too well, real transparency is essential to achieving sustainable growth, deterring corruption and benefitting citizens.   
 
Daniel Kaufmann is the president and CEO of the Natural Resource Governance Institute (NRGI), and a member of the Extractive Industries Transparency Initiative board. Joseph Williams is a senior advocacy officer with NRGI.