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February 11, 2013

Statoil Breaks with Trade Association over Lawsuit
    by Robert Kropp

Calvert Investments commends Statoil for explicitly distancing itself from lawsuit filed by the American Petroleum Institute that contests SEC regulation governing payments to governments.

SocialFunds.com -- In October of last year, industry trade groups including the American Petroleum Institute (API) filed a lawsuit against the Securities and Exchange Commission (SEC) in which they seek to overturn a recently enacted regulation requiring that companies in the extractives industries disclose their payments to governments.

In late January, API, the US Chamber of Commerce, and two other industry groups filed their final brief in the case. The brief argues that the SEC has "crafted one of the most costly rules in its history, with adverse consequences for competition, devastating losses for investors, and no ascertainable benefits."

The regulation is offensive to First Amendment principles of free speech, the plaintiffs continued, "because the content compelled here is intended to aid particular interests in a political dispute in other nations."

In an email, Paul Bugala, Sustainability Analyst for Extractive Industries at Calvert Investments wrote that if the US Court of Appeals in the District of Columbia finds that the First Amendment rights of corporations are violated by the rule, "It would throw into question almost any disclosure required by regulators such as the SEC."

Furthermore, Bugala wrote, "API maintains that there is no investor interest in seeing that Section 1504 or Section 13(q) of the Exchange Act is implemented promptly and according to the statutory mandate. In fact, investors representing more than $1 trillion dollars in assets under management submitted comments to the SEC supporting the law."

The coalition of institutional investors includes TIAA-CREF, CalPERS, and CalSTRS, as well as Calvert. In a letter to the SEC, submitted in 2011, Bugala observed, "The world’s exploitable conventional energy sources are receding further into areas where large-scale resource extraction has not taken place before."

"Unfortunately, many of these resource-producing operating environments pose reputational, regulatory and taxation risks that current reporting required of SEC-registered companies does not address adequately," he wrote. "Although some companies have taken productive voluntary steps to improve their disclosure, capital providers need the audited, consistent and comparable data regarding host government payments, such as taxes, royalties and bonuses that the Energy Security through Transparency Act (S. 1700) would provide."

Calvert is also a shareowner of Norway-based Statoil, ranked by Forbes in 2012 as the 20th largest oil company in the world. In a 2012 speech, CEO Helge Lund argued that Statoil's policy of disclosing payments to governments has not put it at a competitive disadvantage, but has "put us in a position to effectively dialogue with NGOs (nongovernmental organizations) and legislators."

It "goes without saying," Lund continued, that such a course would be a beneficial route for the entire industry to take.

Following Lund's speech, Calvert called on him to publicly support the section of Dodd-Frank that requires companies in the extractives industries to disclose their payments to governments. And while a recent letter to Global Witness stopped short of explicitly supporting the SEC regulation on disclosure of payments to governments, Statoil's Vice President for Corporate Social Responsibility did state, "Statoil has not supported the lawsuit initiated by API; in fact, Statoil has explicitly withheld support for the litigation."

In response to the letter, Calvert stated, "We commend companies like Statoil and Newmont Mining Corporation that have acknowledged the importance of these disclosures to investors and other stakeholders publicly and we hope that their peers in the oil, gas and mining industries will follow suit."

In 2012, Newmont Mining, the third largest mining company in the world, announced that it would not support the API lawsuit against the disclosure rule. Along with Statoil, Newmont is one of several companies that already disclose payments to governments in every country in which they operate.

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