Alan Detheridge worked as a senior executive in the oil industry until 2006, and is a member of the governing board of the Natural Resource Governance Institute.
There is a vitally important Canadian transparency law currently sitting before Parliament. If improved and passed, the Extractive Sector Transparency Measures Act will go a long way toward helping people in natural resource-rich countries hold their governments to account. But the oil industry is arguing for a weaker law.
I worked for Royal Dutch Shell for 30 years, including as a vice-president of Shell Canada, and I am concerned by the industry's efforts to undermine this legislation. The law would require oil, gas, and mining companies in Canada to disclose their payments to governments around the world. This legislation is meant to fulfill Prime Minister Stephen Harper's G8 commitment to establish "new mandatory reporting standards for Canadian companies operating in this sector."
Extractive companies can bring great wealth to the countries where they operate. Resource revenues have the potential to drive economic growth and reduce poverty. However, in some resource-endowed countries, these revenues are lost to corruption and mismanagement, with few benefits flowing to the general population.
Providing government officials, parliamentarians, journalists and civil society groups with information about companies' payments to governments for oil, gas and mining projects enables them to hold their governments to account. Closer to home, the more we can do to help developing countries effectively use their own domestic tax base (billions of dollars of which come from oil– and mineral-sector payments), the less strain there will be on the foreign aid budget funded by Canadian taxpayers.
When I was at Shell I helped launch the Extractive Industries Transparency Initiative (EITI), a global, voluntary effort to improve revenue transparency. But voluntary disclosure is not sufficient. Regulation, such as the proposed legislation, fills the gap where transparency is needed most – in countries where payments remain secret.
That is why I testified before the U.S. Congress in support of similar transparency legislation, which subsequently became law in 2010. I also supported the well-defined and comprehensive European Union rules agreed in 2013 that national governments across Europe are now enacting.
The Canadian mining industry has already gone on the record proposing strong transparency rules. We should applaud its members for taking such a proactive approach. Unfortunately, the oil industry is working against them.
First, the oil industry is opposed to publishing information for individual projects. Rather than provide meaningful information at the project level for communities and local governments to use, some major oil companies, including Shell, argue that they should be able to report at aggregated levels. In Canada, the current legislative draft does not require project-level reporting. That is a significant weakness in legislation that the government of Canada said would be established with a view to "ensuring Canada's framework is consistent with existing standards and aligned with other G8 countries." Legislation passed in the U.S. and EU categorically requires project-level reporting.
Second, some oil companies want exemptions from reporting payments when they operate in countries with laws or contracts that prohibit such disclosure. Apart from failing to provide transparency where it is needed most, allowing exemptions would only serve to encourage those governments who wish to withhold information from their citizens to enact such legislation. Failure by Canada to rule out exemptions would undermine the fundamental purpose of the proposed transparency law, which is to place information into the hands of those that can use it to effect positive change. The Canadian rules should align with EU legislation, and not permit exemptions.
Canada is a world leader in promoting transparency and accountability, and so I hope that lawmakers will resist this pressure from the oil industry. The Canadian legislation should require reporting in all countries, and for every project, without exception.