A number of US NGOs have written to the chairman of the global transparency body, EITI, seeking the removal of ExxonMobil from its board for failing to disclose tax payments over the period that the standard was implemented in the US.
The Extractive Indus-tries Transparency Initiative (EITI) is a global standard for the good governance of oil, gas and mineral resources and tracks all financial flows from companies like Exxon to governments.
Under the Donald Trump administration, the US has withdrawn from EITI which would formally release Exxon and other oil companies from reporting tax payments and other outlays to governments. The initiative by the US NGOs aims to sanction Exxon and fellow American oil giant Chevron for not complying with the EITI standard in 2015 and 2016.
For Guyana this issue will be considered as significant as the tracking of payments by ExxonMobil to the Government here will become increasingly important. It was in 2015 that the huge offshore oil find was made at Liza 1 which means that if Exxon had made payments to the Guyana Government that needed to be reported in the US, it didn’t do so. Chevron is another company that is seeking entry into the oil exploration sector here and the disinclination of the two huge companies to comply with the EITI standard will be cause for concern.
By contrast, Guyana is now a candidate member of EITI and intends to fully pursue membership. It has established the required Multi-Stakeholder Group (MSG) as part of accession proceedings to the EITI.
In their February 7th 2018 letter to Chairman of EITI, Fredrik Reinfeldt, a former Swedish Prime Minister, the US NGOs said “We are writing to draw your attention to actions by EITI Board members that we believe constitute violations of the EITI Code of Conduct and, as such, are grounds for their immediate removal from the Board.
“Specifically, we urge that the February EITI Board meeting include a discussion about the refusal of ExxonMobil and Chevron to disclose their tax payments through the term of implementation of the EITI Standard in the United States. We believe strongly that the refusal to engage in this most basic aspect of compliance with the EITI Standard constitutes a repeated and willful violation of the EITI Code of Conduct, the EITI Constituency Guidelines, the Terms of Reference of the now defunct USEITI MSG, and an act of bad faith that is counter to the spirit of the EITI movement itself. These actions not only contributed to the demise of the USEITI process, but damaged the credibility of the Standard and of the EITI both in practice and in the eyes of the global community”, the letter said.
The letter pointed out that ExxonMobil and Chevron were members of the USEITI MSG from its creation in December 2011 to its dissolution in November 2017 when the US withdrew from EITI. It said that both companies are members of the EITI International Board’s industry constituency and have served in that role with brief exceptions since its creation in 2003. From its inception, the NGOs said that EITI and its Standard have required comprehensive disclosure of material payments from companies to governments, including taxes.
The NGOs said that in the USEITI report issued in 2016, 12 of the 38 eligible companies disclosed their taxes. In the USEITI report issued in 2015, 12 of the 41 eligible companies disclosed their taxes.
“ExxonMobil and Chevron were among the companies that refused to disclose their tax payments in both cases”, the NGOs lamented.
In its 2016 USEITI Annual Progress Report to the EITI Secretariat, the NGOs said that USEITI MSG acknowledged, “With the exception of corporate income taxes, the 2016 Report comes very close to fully meeting the requirements of the EITI Standard.”
During the December 2015 USEITI MSG Meeting, the NGOs said that an ExxonMobil representative provided the following explanation of his company’s decision not to disclose taxes through the USEITI process:
“… knowing that income tax reporting will soon be required under Section 1504 of the Dodd-Frank Act, companies may have chosen to wait until that rule was finalized and the requirements more clear. (The ExxonMobil representative) added that many of these companies have exercised leadership in EITI around the world, and are very committed to USEITI and to tax reporting, but are awaiting the finalization of the SEC’s rulemaking.”
This would have been months after the major oil find was announced in Guyana.
According to www.offshore-technology.com, inextricably linked to the US withdrawal from the EITI is the political battle in the US over the bipartisan Cardin-Lugar Amendment, otherwise known as Section 1504 of the Dodd-Frank Act.
That 2010 law requires US-listed companies to publish details of payments to governments in return for rights to natural resources, and inspired 30 countries to follow suit.
Rules issued by the US Securities and Exchange Commission (SEC) sought to ensure that Section 1504 would complement the EITI – for example, the definition of “payment” specifically referred to the EITI.
However, in February 2017, President Trump signed into law Congressional action to repudiate the rule submitted by the SEC. The US House Financial Services Committee subsequently voted on 14 December to proceed with a bill (H.R. 4519) that would repeal Section 1504 of the Dodd-Frank Act.
The NGOs charged in their February 7th letter that the American Petroleum Institute of which ExxonMobil’s CEO Darren Woods is Chair-man, and Chevron’s recently retired CEO and Chairman John Watson is a board member, also used false arguments to lobby against Section 1504, despite also being an industry representative on the USEITI MSG.
The NGOs added that in the November 2017 statement announcing the end of USEITI implementation, the U.S. Department of Interior falsely suggested that U.S. laws restrict companies from voluntarily disclosing information, including taxes. However, a May 2017 Interior Department Inspector General assessment of USEITI points out that the Internal Revenue Service may disclose tax data with the authorization of the taxpayer. The NGOs added that the Department of Interior’s November 2017 assertion echoes false insinuations by both ExxonMobil and Chevron that indicate laws prohibit tax payment disclosure.
“To the contrary, Dallas-based Kosmos Energy has voluntarily disclosed its U.S. tax payments for years, and BHP Billiton, one of the largest mining companies in the world, voluntarily disclosed its tax payments to the U.S. government before it was required to do so by the EU Directives”, the letter said.
The NGO signatories to the letter include Project on Government Oversight, Livelihoods Knowledge Exchange Network, Global Witness and Crude Accountability.