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Canadian oil companies ready to disclose more of their payments than U.S.

Source: Fri, 14 Feb 2014 15:48 GMT
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Employees of the Canadian Pacific Rubiales Petroleum Company work at an oil excavation pipe in eastern Colombia, January 23, 2013. REUTERS/Jose Miguel Gomez
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(Corrects to "foreign governments" from "foreign companies" in the lede)

TORONTO (Thomson Reuters Foundation) – In contrast to its counterpart in the United States, the Canadian oil industry is collaborating with the government to craft a rule on the disclosure of payments to foreign governments for drilling rights, an initiative aimed at helping local communities hold their leaders to account.

While it is unclear what the final rule will look like, the Canadian Association of Petroleum Producers (CAPP) supports project-level reporting, as long as there is some flexibility in how a project is defined, said Bob Bleaney, spokesman for CAPP.

This puts the Canadian industry at odds with the American oil lobby, which is fighting project-level disclosure at the U.S. Securities and Exchange Commission (SEC). 

The movement for transparency in the oil, gas and mining industries began in 2002 when Publish What You Pay (PWYP), a global network of 750 organizations, launched a campaign calling for companies to publicly disclose what they pay foreign governments for resource extraction. They say billions of people are living in poverty because the revenues from natural resources are not being spent wisely by governments.

If citizens could see how much their governments receive for projects in their communities, they would be in a better position to hold political leaders to account, says Jonathan Kaufmann, legal advocacy coordinator for Earth Rights International, a member of PWYP US.

In 2010, the U.S. Congress passed a disclosure law, requiring its publicly traded companies to report their payments. The European Union followed suit in April 2013. After the G8 summit last June, Canada’s prime minister, Stephen Harper, joined the transparency drive and pledged that his country would take steps toward mandatory reporting of payments to governments for resource development at home and abroad.

Natural Resources Canada, a federal agency, is aiming to have a reporting system in place within the next year-and-a-half that will apply to mining, oil and gas companies, says Jacinthe Perras, a spokeswoman for Natural Resources Canada .

The inclusion of Canada to a global reporting system would be a significant boost to the global transparency movement.  The Toronto Stock Exchange represents 14 percent of the global value of coal, oil and gas industries, with 556 companies listed, including BP, Suncor Energy Incorporated and Barrick Gold Corporation, according to the Revenue Watch Global Calculator. If the Canadian government joins the U.S. and E.U. in passing a transparency law, 70 percent of the world's coal and oil and gas companies would be covered by mandatory disclosure rules.

Bleaney said the prime minister’s announcement last June was "the driver" behind CAPP’s willingness to engage on this topic, even though their American counterparts have resisted detailed disclosure rules.

The American oil industry was taken by surprise when Section 1504 on extractives transparency was tucked into the 2010 Dodd Frank bank reform act at the last moment, said Michael Ross, professor of political science at the University of California, Los Angeles. 

Now that the law is passed, the American Petroleum Institute (API) is trying to have its voice heard at the SEC in the hope of amending the rules to reflect what it regards as the best interests of the industry. Failing that, the API may continue to fight the law in court. 

In Canada, the oil industry supports rules that would require reporting on a project-by-project basis, under the condition that they “have some flexibility” in how they define a project, because that term means different things for different industries, said CAPP’s Bleaney. 

To that end, Bleaney said the oil industry was "supportive of project-level reporting, as characterised by the SEC” in their August 2012 rules, which leaves “the term 'project' undefined to provide resource extraction issuers flexibility in applying the term to different business contexts."

Last July, the U.S. District Court for the District of Columbia ordered the SEC to either rewrite its August 2012 rules or provide a better justification for detailed disclosure after the API argued that the SEC could aggregate the data and that project-level disclosure would violate American oil companies’ constitutional rights by forcing them to disclose information for political purposes.

The API wants the SEC to write new rules that will require companies to report their project-level payments privately to the regulator, which would then publish the total payments for all companies operating in each province, state or territory of a foreign country.

This would essentially anonymize the data and make it useless to organizations and citizens who want to hold their governments accountable for projects operating near their communities, argued Jana Morgan, Director of PWYP US.

Bleaney said one of the most important issues for the CAPP was “equivalency” between the U.S. and Canadian rules so that companies could report in either country without penalty.

"From our point of view as an industry...it’s important that our reporting requirements align with requirements for comparable companies in the U.S…As long as we’re keeping in parallel requirements, for comparable competitive jurisdictions, that’s the path we’re ready to go down," says Bleaney. 

 (With additional reporting by Alia Dharssi)

(Ashley Renders is a fellow in global journalism at the Munk School of Global Affairs at the University of Toronto)

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