Environment

House votes to repeal anti-corruption law for oil companies abroad

House Republicans have pushed to roll back a rule that forces oil and gas companies to disclose payments to foreign governments. 

In this image released on Thursday, August 1, 2013, workers are working on an oil spill in Oloibiri Town, Niger Delta, Nigeria.
Ed Kashi/ National Geographic Stock/WWF-Canon via AP
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Lawmakers in the House of Representatives voted 235-187 on Wednesday to repeal an anti-corruption rule included in the 2010 Dodd-Frank Act, as regulations on industry come into Republican crosshairs.

The Cardin-Lugar amendment required oil, gas, and mining companies to publicly disclose all payments made to the governments of foreign countries where they operate. Subject to disclosure are taxes, royalties, licensing fees, and a wide range of other project-level payments.

The push to repeal seems to reflect the Republican Party’s shift away from expansive foreign-policy idealism and toward a business-first approach. And it highlights the United States' retreat from the forefront of international transparency efforts, amid extractive-industry legal challenges that delayed the amendment’s finalization until 2015.

If the rule survives congressional votes this week, its mandates for disclosures will go into effect in late 2018 or early 2019.

“It was a pioneering measure in this bigger movement to promote transparency in extractive industries, and it inspired the EU and Canada to take up similar initiatives,” says Michael Ross, a University of California-Los Angeles political scientist who studies resource-rich countries.

"While the world has moved on," with "a lot of progress on this," he tells the Monitor, the oil, gas and mining industries and their GOP allies "apparently feel that now is the opportunity to roll back this measure."

Bipartisan-authored and far-sighted in its foreign-policy aims, the rule was spearheaded largely by Richard Lugar, a former Republican senator from Indiana who was a major voice on foreign-policy issues for nearly four decades before being swept out of office by the 2012 tea party insurgency. 

By improving transparency in countries beset by the “resource curse” – in which oil and other natural resources end up pitching local societies into conflict rather than prosperity and democracy – the amendment sought to encourage stability and economic self-sufficiency.

“This is all part of a wider narrative about countries being self-sufficient and not having to rely on aid,” says Joseph Williams, a senior advocacy officer for the Natural Resource Governance Institute, which opposes the repeal.

“If [extractive-industry] payments are going to health, education, and sanitation projects in countries around the world, then that’s a good thing, because taxpayer money from USAID and other parts of the US government won’t have to fund those things. The cost of doing business there can fund that,” he tells the Monitor.

Dr. Ross also points to national-security benefits.

“The resource curse has sort of a boomerang effect on the US,” he says. “Many of the countries that pose the greatest dangers or challenges to the US are oil-producing countries – like Iraq, Iran, Venezuela, and Libya.”

“In these countries, it would give civil societies a tool to ultimately hold their own legislators accountable and even reduce foreign aggression, terrorism, and all of the complex symptoms of the resource curse.”

Industry representatives see it differently, claiming it exposes American companies' playbooks to competitors. The regulations are also costly: the GOP claims compliance costs $590 million per year, according to the Associated Press.

In an email to the Monitor, a spokesperson from the American Petroleum Institute called the House plan to repeal the rule “a needed step by Congress to establish sensible regulations that balance increasing transparency without diminishing our industry’s competitive advantage.”

Transparency advocates reject that argument, pointing to similar legislation already in force in Norway, Canada, and the European Union, where hundreds of extractive companies make disclosures.

“We haven’t seen any of those companies that already disclose suffer competitive harm,” says Mr. Williams.

There’s some evidence that early international transparency measures were of limited use in countries considered resource-cursed. One April 2016 study of 16 countries that implemented the first variation of those laws in the mid-1990s found that the initiatives had little effect on those countries’ performances on metrics of official corruption, and postulated that civil societies there were too weak to take advantage of greater transparency.

Williams says those initiatives were a useful, voluntary precursor to laws that later created mandatory reporting, and points to the case of Nigeria, where they have helped recoup billions in oil revenues that had been misdirected or stolen

“We are in that stage where we’re just about getting good data,” he says. “I think we’re at the cusp of what’s possible.”