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New US law compels oil, mining firms in Ghana to disclose “special” payments to government

The US Securities and Exchange Commission (SEC) has adopted rules mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act requiring oil, gas and mining companies listed on US stock exchanges to disclose payments they make to host governments.

Seen by many as a major transparency law to stem corruption in resource-rich countries such as Ghana, it will also provide important information to investors.

The disclosure of payments, according to the US SEC, relates to commercial development activities bordering on taxes, royalties, fees (including license fees), production entitlements, bonuses, dividends and infrastructure improvements.

Known as Section 1504 or the “Cardin-Lugar” provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the law covers more than 1,100 companies, according to the SEC, including around 90% of internationally operating oil companies and many of the top international mining companies.

This means companies operating in Ghana such as Kosmos Energy, AngloGold, Newmont and others will make public all the specific payments asked by the US SEC law.

According to the SEC, each of the companies is required to comply with the new rules for fiscal years ending after September 30, 2013.

The form must be filed with the SEC no later than 150 days after the end of its fiscal year, it said.

The new requirements clarify the types of taxes, fees, bonuses, and dividends that are required to be disclosed, according to the Commission.

It explains that these types of payments generally are “consistent with the types of payments that the Extractive Industries Transparency Initiative suggests should be disclosed.”

Meanwhile, Oxfam has hailed the new rules by the SEC. “By approving final regulations, the SEC lifts the veil of secrecy on billions of dollars that flow every year from oil and mining companies to governments around the world and will arm citizens of resource-rich countries with information they need to track the amount of money their governments receive from oil and mining companies,” said Raymond C. Offenheiser, President of Oxfam America.

“We commend the United States for taking a leadership position on increasing transparency in the oil, gas and mining industry and the SEC for implementing Congress’ intent and not caving under intense industry pressure,” Oxfam said.

Implementation of the law, Oxfam believes, will put the United States in a position to influence a draft European Union law designed to complement the law. The EU proposal requires both publicly and privately-held companies to disclose their payments to governments in countries where they do business.

“The SEC provision covers the vast majority of internationally operating oil companies and the world’s largest mining companies, and with expected European rules covering even more companies, the transparency net will be cast far and wide,” said Offenheiser.

The group argues that tight reporting requirements by the SEC will help to reverse the “resource curse” and the misuse of billions in oil and mining revenues as more than 1.5 billion people live on less than $2 a day in resource-rich countries.

“The communities in resource-rich countries like Ghana rarely share the wealth from oil and mineral extraction and the new requirements will certainly help close the gaps in the current system,” said Hannah Owusu-Koranteng of WACAM, an Oxfam partner and an Extractive Industries Transparency Initiative global board member.

“The SEC has finally implemented the law and the project-level disclosure required must provide communities and local officials in Ghana with detailed information on the revenue flowing to government from gold extracted from their lands,” Owusu-Koranteng stated in an Oxfam news report.

Owusu-Koranteng added, “We encourage developing countries to enshrine similar requirements.”

The information will not only benefit communities in Africa and in mining towns across Latin America and Asia, it will also benefit investors on Wall Street who will now have better information to assess high-risk investments, Oxfam says.

Companies will also benefit from better relations with local communities next door to their multi-billion dollar investments, creating better operating environments and more secure jobs for Americans, it added.

Ghanabusinessnews

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Reporting Oil and Gas project was launched on 4th June 2009atTakoradi, Western Region, Ghana by Penplusbytes (PPB – www.penplusbytes.org) with the vision of providing a one stop online information and knowledge about Ghana’s oil and gas sector
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