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August 22, 2011

Disclosure by Extractive Industries Could Help US Taxpayers
    by Robert Kropp

The Office of Natural Resource Revenue writes to the Securities and Exchange Commission in favor of rules requiring disclosure of payments to governments, stating that they could help ensure that energy companies are reimbursing US taxpayers. -- The Dodd-Frank Wall Street Reform and Consumer Protection Act directed the Securities and Exchange Commission (SEC) to address disclosures by extractive industries, and among the rules proposed by the Commission was one requiring companies engaged in resource extraction to disclose payments made to the US or foreign governments.

When the rules were first proposed, Ian Gary, senior policy manager for extractive industries at Oxfam America, told, "We believe this provision has a dual purpose. One is to inform investors about the types of risks these companies are exposed to. But an important second purpose is to support good governance, transparency, and accountability for payments."

A recent blog post by Gary acknowledged, "We were largely focused on the impact that these new disclosures would have on resource-rich developing countries."

However, the post pointed out, a letter submitted to the SEC earlier this month by the Department of the Interior's Office of Natural Resource Revenue (ONRR) suggests that there may well be benefits for the US taxpayer as well.

ONRR, which, according to the letter, "collects, accounts for, analyzes, audits, and disburses revenues associated with energy and mineral leasing on the Outer Continental Shelf (OCS) and onshore Federal and American Indian lands," wrote to the SEC that the proposed rules could help "ensure that energy companies are reporting correctly and paying every dollar due to the American taxpayer."

In his blog post, Gary observed, "The newly formed ONRR replacing the scandal-ridden Minerals Management Service is trying to turn a new page and has recently penalized Chevron, Anadarko and other companies for improper deductions and knowingly underpaying royalties."

Meanwhile, the SEC has yet to implement the new rules, despite a deadline of April 2011, as extractive industries trade associations such as the American Petroleum Institute (API) seek to undermine implementation. Nevertheless, Gary pointed out, "Interior has told the SEC that, if feasible, payment data should be reported at the lease level, mirroring our project-level definition recommendation."

ONRR's letter to the SEC concluded that disclosure of payments would "provide a valuable cross-check for the data we receive from resource companies, and help ensure that the Federal Government and American taxpayers are receiving the proper returns for extraction of these valuable public resources."

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