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U.S. Withdraws From Anti-Corruption Group's Oil And Petroleum Rules

Nov 3, 2017
Originally published on November 3, 2017 3:54 pm

The U.S. has pulled out of a pledge to conform to the Extractive Industries Transparency Initiative, an international group that was formed to add transparency and accountability to how governments manage natural resources. The U.S. says it can't comply with all of the EITI's requirements.

A State Department spokesperson says the U.S. will remain as one of 17 "supporting countries" of the initiative. A U.S. representative also serves on the EITI's international board.

In response, the EITI's director cited America's prominent role in energy production and added, "This decision sends the wrong signal."

The EITI collects and shares data from government and companies that show how much money is being paid and received for oil, gas, mining and renewable energy operations on public lands. The group was first formed 2002, at a meeting of the World Summit on Sustainable Development.

President Trump's administration announced the U.S. withdrawal Thursday via a letter to the EITI's board from the U.S. Office of Natural Resources Revenue Director Gregory Gould, who said:

"While the U.S. government remains committed to fighting corruption in the extractive industries sector, and the ideals of transparency [in the EITI] ... it is clear that domestic implementation of EITI does not fully account for the U.S. legal framework. Effectively immediately, therefore, the United States must withdraw an an EITI Implementing Country."

Over the summer, the U.S. cited factors ranging from the Trade Secrets Act to tax reporting laws as obstacles to full implementation of the standards.

Gould ended his letter by saying, "Despite the fact that the U.S. laws prevent us from meeting specific provisions of the EITI Standard, we look forward to working together to promote transparency, fight corruption and ensure good governance."

The U.S. has given the EITI financial and political support that is "second to none," the director said. A State Department spokesperson later confirmed the U.S. will continue to provide support.

In response, EITI Chair Fredrik Reinfeldt said in part, via a statement:

"This is a disappointing, backwards step. The EITI is making important gains in global efforts to address corruption and illicit financial flows. Our work supports efforts to combat transnational crime and terrorist financing. It's important that resource-rich countries like the United States lead by example. This decision sends the wrong signal."

Reinfeldt said that while the U.S. team working on the EITI rules had found a simple way to make corporate income tax payments more transparent, "Regrettably, the majority of companies declined to report."

The news comes six years after the U.S. committed to implementing the EITI standards, and several years after it began issuing official compliance reports. Addressing the Open Government Partnership at the U.N. in September of 2011, President Barack Obama said:

"We're continuing our leadership of the global effort against corruption, by building on legislation that now requires oil, gas, and mining companies to disclose the payments that foreign governments demand of them. Today, I can announce that the United States will join the global initiative in which these industries, governments and civil society, all work together for greater transparency so that taxpayers receive every dollar they're due from the extraction of natural resources."

As The Hill reports, the U.S. adoption of the EITI's standards was supported by Sen. Ben Cardin, a Democrat, and former Sen. Richard Lugar, a Republican.

"The two issued a joint statement on Thursday," The Hill says, "calling the move to exit the agreement an example of 'Big Oil and Gas' money and influence' and 'a painful abdication of American leadership on transparency and good governance.'"

A State Department spokesperson says the U.S. remains committed to fighting corruption in the extractive industries. But instead of holding itself fully to the new international standards, the U.S. will return to being a "supporting" country of the EITI rather than by an EITI compliant country.

The move comes months before the U.S. was slated to be evaluated next spring for validation by the EITI's international board — a grading process that the Department of the Interior's inspector general had warned would likely result in the board finding the U.S. had "made inadequate progress toward validation."

That quote comes from a status report on the U.S. program issued in May, when Inspector General Mary Kendall cited government officials saying the U.S. "was considering all options" associated with validation.

Saying the U.S. couldn't fulfill the EITI's Requirement 4, which requires disclosure and reconciliation of the money reported by the government and businesses, Kendall said the U.S. was "unable to obtain full disclosure of extractive resource payments from companies, thus preventing the required reconciliation to Government receipts."

Still, Kendall wrote in her report, "In spite of the framework laid out in Requirement 4 and the ensuing challenges, the U.S. could still meet this requirement."

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