EU reaches preliminary deal on new transparency rules for oil, gas and mining industry


EU reaches preliminary deal on new transparency rules for oil, gas and mining industry


BRUSSELS -- European governments and lawmakers reached a tentative agreement to tighten rules requiring oil and mining companies to report in greater detail the payments they make to foreign governments, setting the bloc on track to match similar rules adopted in the United States.

The decision, announced by the Irish presidency of the European Union (EU), follows rules adopted in August by the United States Securities and Exchange Commission (SEC), and the combination of the two now will cover 90% of the world's major international extractive companies, according to Transparency International.

Negotiators from the European Parliament and representatives of European Union governments agreed to compel natural-resource companies such as Shell or Rio Tinto to report all payments in excess of $130,867 to governments and local authorities in the countries where they operate, an EU official said.

"This legislation will help create a new global benchmark for transparency in the natural resource sector" said Jana Mittermaier, Director of the Transparency International EU Office. "With this information, citizens of mineral-rich countries can ask hard questions of both companies and governments about the deals that they make" she said.

The deal, which will have to be formally backed by the full Parliament assembly and the EU governments, is part of a wider directive that aims to simplify accounting rules for small and mid-sized companies, potentially saving them up to $2.23 billion a year.

But the central issue at stake is transparency in the billions of dollars that oil, gas and mining companies pay to governments and local authorities.

The preliminary agreement requires project-level reporting, which means that each company has to report payments for contracts, licenses, leases, concessions and similar agreements to foreign governments. This could include payments for pipeline-transit fees, dividends and rental fees, with the idea that anyone would be able to find, online, the amount of money that a company pays to a certain authority, and hold that authority accountable for what it does with that money.

Resources companies have been concerned that the level of detail would turn into an administrative burden and that even their internal accounts payments aren't broken down to the detail proposed by the EU. They also want to keep such details confidential because they consider them business sensitive.

Companies also have said that disclosing the amount paid by a project could create tensions in the countries where they operate, because it would highlight differences in payments within regions, or how much different central governments retain, or even open divisions where fields stretch across contested borders, for instance in the Caspian Sea.

However, the SEC's decision prompted companies that are listed both in the EU and the United States to prefer having a common set of rules, even if more stringent, rather than different, bureaucratically challenging standards.

A Rio Tinto spokesman, who declined to comment until the deal was finalized, referred to a previous statement made by the company's CFO Guy Elliott, in which he urged governments to work together to adopt a consistent approach to disclosure requirements in order to avoid unnecessary costs and compliance obligations for companies related to the reporting standards.

"Mandatory reporting must remain focused on the ultimate objectives of disclosure requirements for both companies and governments: good tax governance, accountability and transparency" he said in Rio's recently published ‘Taxes Paid Report’.

A Shell spokesman said, "Shell has always supported a mandatory global reporting rule for all companies engaged in extractive activities. It is in our interest to promote accountability and good governance wherever we operate." He added that Shell "will continue to work closely with all stakeholders to manage the practical implementation of these rules."

A spokesman for BHP Billiton declined to comment while a spokesman for BP said that it would need more time to review the preliminary agreement before commenting.

EU member states will have two years to implement the law once it is published in the EU official journal, which could be by September, an EU official said.

Dow Jones Newswires

Related News ///


Comments ///

comments powered by Disqus