It has been a long journey. When Sen. Ben Cardin (D, Md.), now the Ranking Member of the Senate Foreign Relations Committee, and I first proposed a law in 2009 to fight corruption in mineral-rich developing countries through transparency, there were very few jurisdictions where such reporting was legally required. Since then, extractive industry transparency has blossomed into a true global norm supported by governments like the European Union and Canada, operating oil companies like Italy’s Eni and France’s Total, and investors managing over $9 trillion in funds. As a result of our bipartisan efforts, the U.S. government itself is leading by example as a member of the voluntary Extractive Industries Transparency Initiative, an Oslo-based international organization whose member governments agree to make annual public reports on how much money they derive from oil, gas, coal, gold and other mineral production on their lands.
Most attention is focused on the humanitarian and governance benefits of transparency, which are significant in holding governments accountable for the often-considerable sums they receive from oil, gas, coal, cooper, etc. Today’s lower commodity prices reinforce the urgency for those purposes. Governments from Nigeria to Albania are seeing their fiscal situations worsen, so we need to refocus on ensuring that citizens get the revenues due to them and those revenues are used effectively. That starts with transparency at the source.
The importance of transparency is far broader, however. Oil and gas production companies, for example, see their social license to operate reinforced when communities have more trust that they are getting a fair deal. Investors in those companies can better assign valuations and risk premiums in jurisdictions that often have opaque rule of law.
Moreover, in my view, the energy security benefits have been greatly under-appreciated. In Europe, the fundamental risk to secure and reliable supplies of natural gas from Russia is the lack of transparent, competitive markets. Cardin-Lugar, the EU rules, and voluntary initiatives can reinforce efforts in that area. To name just two avenues, the influence of unsavory actors will be more easily seen in Europe and investment in domestic resources will be encouraged.
For those reasons, I am hopeful that we will see a final rule on the Cardin-Lugar Amendment by the SEC’s new June deadline. I also believe that extractive industry transparency should be included in the Trans-Atlantic Trade and Investment Partnership, or TTIP, a trade agreement with Europe now being finalized. Both initiatives would benefit trans-Atlantic shared interests and help push a global norm.
Sen. Cardin and I were able to achieve this success because we recognized that battling corruption in the developing world, improving energy security for ourselves and our allies, and promoting transparency in the oil and gas sector are not Democratic or Republican issues. They are American issues, and we addressed them in the spirit of bipartisanship. I hope that spirit will again become the norm in our political life.
