ANALYSIS – Miners less resistant to transparency than big oil

Source: Thomson Reuters Foundation
Date: 1 Aug 2021

LONDON (Thomson Reuters Foundation) - Extractive companies are under increasing pressure from governments and campaigners to be more transparent in their business dealings, but differences are beginning to emerge between mining and oil companies in their attitudes to transparency, experts say.

They say mining companies tend to be more open, partly because they have closer ties to local communities - leasing their land, employing locals and using their transport systems - while oil firms use mainly foreign staff and their pipelines are often offshore or guarded.

About 3.5 billion people live in countries with extensive oil, gas or mineral reserves, but poor governance and corruption mean many of them do not benefit from the wealth created by their extraction.

Transparency campaigners and a number of Western governments have pushed for greater transparency in the extractive sector so that citizens of resource-rich countries can better hold both their governments and extractive companies to account.

Campaigners said it was not a hard and fast rule that mining companies were more transparent than oil companies.

“In some respects it is true but not universally true,” said Brendan O’Donnell, head of oil campaigns at anti-graft watchdog Global Witness, noting that what he called “more progressive” oil firms such as Tullow Oil and Norway’s Statoil publish the payments they make to governments on a country-by-country level.

However, most transparency campaigners would like oil companies to disclose their payments on a project-by-project level.

“In terms of project-by-project reporting, mining companies have seen the light,” O’Donnell said.

ATTITUDES TOWARDS MANDATORY REPORTING

Both the United States and the European Union have passed laws that require oil, gas and mining companies to publish on a project-to-project basis the payments they make to governments in the form of taxes, royalties and bonuses. The Canadian governmentannounced on June 12 that it too intended to pass mandatory disclosure laws for its extractive industry.

However, the American Petroleum Institute (API), the trade group for the U.S. oil and natural gas industry, last month succeeded in having the rules that implement the U.S. disclosure lawoverturned in court .

The API argued that the rules, as written by the U.S. Securities and Exchange Commission (SEC), would cost billions of dollars and yield little shareholder benefit. The API also said the SEC failed to include common-sense exemptions by forcing disclosure of payments to countries like China and Angola, where, it said, such disclosures are illegal.

U.S. District Judge John Bates, in the U.S. District Court for the District of Columbia, agreed.

“U.S. companies are leading the way to increase transparency, but the rule would have jeopardized transparency efforts already underway by making American firms less competitive against state-owned oil companies,” Harry NG, API vice president and general counsel, told Thomson Reuters Foundation.

The U.S. National Mining Association (NMA) was not a part of the lawsuit.

O’Donnell said that in the European Union, consultations over the wording of the EU extractive disclosure law showed mining companies were willing to be “more progressive” than oil companies.

THE CASE OF CANADA

Canadian transparency organisation Publish What You Pay (PWYP) – Canada and the U.S.-based Revenue Watch Institute announced in September 2012 that they had formed a working group with Canada’s two mining associations, the Mining Association of Canada(MAC) and the Prospectors and Developers Association of Canada (PDAC).

“The group aims to develop a framework for the disclosure of payments to governments for Canadian oil and mining companies operating domestically and internationally by June 2013,” a statement on the PWYP-Canada website said.

“Once complete, the working group will make policy recommendations to federal government policymakers and/or provincial security regulators for the Canadian adoption of mandatory disclosure requirements based on the framework,” the statement added.

The Canadian Association of Petroleum Producers (CAPP) was invited to join the working group but said the group’s work was “not a priority right now”, Kady Seguin, a programme analyst at PWYP-Canada, told Thomson Reuters Foundation.

“Generally, I think from our engagement on this in Canada, there have been differences in openness and mandatory disclosure,” Seguin said.

“However, it is important to note that CAPP did welcome the announcement by Prime Minister Harper that Canada would implement mandatory disclosure laws,” she added.

A representative of CAPP denied that the association did not prioritise transparency initiatives.

“We are aware of the dialogue between MAC and other groups at a high level. But they are very focused on some very specific mining concerns... we are going to continue to monitor (the working group),” said Bob Bleaney, vice president of external relations at CAPP.

“We are supportive of mandatory reporting but it should have a level playing field for all, SOEs (state-owned enterprises) as well as publically and non-publically traded companies,” Bleaney added.

‘CULTURAL FEAR OF TRANSPARENCY’?

If mining companies are less resistant to transparency than oil companies, it may be because historically mining companies have had more interaction with the local community, Carlo Merla, Africa programme manager at the UK-based PWYP Secretariat, told Thomson Reuters Foundation.

“Mines affect local livelihoods, access to land and territory, changing even traditional use of these important community assets,” Merla said. “They have much more economic linkages to the local economy than oil, they need local workers and suppliers to operate,” he added.

Another possible reason for the difference in attitudes to transparency is the way in which the natural resources are transported.

“Miners often need to move large amounts of stuff along roads which can easily be blockaded by disgruntled local people, so they put more of a premium on showing local communities that they're contributing financially,” Diarmid O’Sullivan, a civil society campaigner, said.

“Oil pipelines are harder to block, they're often offshore or heavily protected by the security forces,” he added.

Not all transparency campaigners were as diplomatic in their views on why oil companies tended to be less transparent than mining firms.

“There is a cultural fear of transparency in the oil industry,” O’Donnell said.

“The only thing we can point to is the questionable deals that we have exposed in the oil industry,” he added. “Perhaps the oil companies feel they cannot carry out business that involves questionable deals as before if their payments are made transparent.”

No mining or oil association was willing to comment on the attitude of the other towards transparency.

By Luke Balleny 

Thomson Reuters Foundation