Lack of disclosure of contracts, payments and socio-environmental impacts characterize Mexico's coal industry. The picture shows workers at the Nueva Rosita coal mine in the northern state of Coahuila. CREDIT: Courtesy of Cristóbal Trejo

By Emilio Godoy
MEXICO CITY, May 9 2022 (IPS)

In the northern Mexican state of Coahuila the current situation of coal, used mainly to generate electricity, is opaque.

A veil surrounds the industry in terms of production, consumption, inspections, pollution, contracts and the state of the mines that supply coal to two power plants belonging to the governmental Federal Electricity Commission (CFE).

In the southern state of Guerrero, another power plant uses coal from Australia and Colombia.

Cristina Auerbach, director of the non-governmental organization Familia Pasta de Conchos, said there is a veil of mystery surrounding the industry in Mexico.

“The system is not transparent. Sometimes the issue goes unnoticed, because at a global level coal in Mexico is insignificant. But it is so problematic that they can’t make it transparent because they can’t order transparency” in the country, she told IPS.

Her organization was created in 2006, following an explosion caused by methane accumulation that year at the Pasta de Conchos mine in Coahuila, which left 65 workers dead, 63 of whom were buried in the explosion and whose bodies have never been recovered.“With regard to coal…there is no national registry of how many pits there are. There have been complaints about illegal coal mining. The final results are quite poor. We don't know if it is lack of commitment, or a lack of interest in promoting transparency.” -- Sol Pérez

Coal is mined in Coahuila and Tamaulipas, in the north of this Latin American country. In December 2020, according to official figures, Mexico produced 459,414 tons of coal, which is highly polluting and harmful to human health.

But to meet domestic demand, the country imports about nine million tons per year.

Last March, coal-fired generation contributed more than 2,000 megawatts of electricity, three percent of the national total. In Coahuila, there are some 40 underground coal mines.

Ignored

Coal has been left out of the natural resource transparency schemes negotiated between the federal government and international civil society organizations in platforms such as the Extractive Industries Transparency Initiative (EITI) and the Open Government Partnership (OGP).

EITI, created in 2003, brings together more than 50 countries and promotes open and accountable management of oil, gas and mineral resources. Mexico joined EITI in 2017 and is currently undergoing the first review of its compliance with the standards, a process that began last August and whose results are to be published in the coming months.

In Latin America, Colombia, a producer of hydrocarbons and coal, has the most advanced status, receiving a rating of “satisfactory progress” in implementing the EITI standards. The South American nation practices proactive transparency, issuing a biannual report.

Peru, another oil and gas producer, has made “significant progress,” according to the global transparency standard.

Argentina, Ecuador and Trinidad and Tobago are other hydrocarbon producers in the region that are also under evaluation, while Brazil and Venezuela do not belong to EITI.

The José López Portillo thermoelectric plant, owned by the governmental Federal Electricity Commission and located in the northern state of Coahuila, burns coal to generate energy in Mexico. CREDIT: CFE

OGP, founded in 2011, groups 78 nations and hundreds of civil society organizations. In Mexico, the 4th National Action Plan 2019-2021 revolves around 13 topics, including transparency in final beneficiaries of companies in the hydrocarbon and mining sector.

Transparency can help strengthen accountability, the fight against corruption, the evaluation of public policies and informed decision-making by stakeholders, such as local communities.

Sol Pérez, a researcher at the non-governmental Fundar, Centro de Análisis e Investigación, questions the lack of exhaustive information on fossil fuels.

“There is no effective access to information” in the state-owned oil giant Petróleos Mexicanos (Pemex), she told IPS.

“With regard to the issue of coal, the picture is very similar,” she added. “There is no national registry of how many pits there are. There have been complaints about illegal coal mining. The final results are quite poor. We don’t know if it is lack of commitment, or a lack of interest in promoting transparency.”

The “EITI-Mexico Shadow Report: Progress and Challenges in Socio-environmental Transparency”, published in May 2021, concluded that the government and companies have persisted in their refusal to disclose disaggregated socio-environmental information on the extractive sector.

The report, prepared by organizations participating in EITI, exposed phenomena such as the partial existence of data on royalty payments for the exploitation or use of national waters and the lack of complete files on environmental matters.

Another case addresses the unavailability of geo-referenced oil well locations.

The document found that out of 49 hydrocarbon contracts of EITI companies, only 10 include social impact assessments, while only two contain an environmental impact analysis.

Mexico ranks 12th in the world in oil production, 17th in gas extraction, 20th in proven crude oil reserves and 41st in proven natural gas deposits. But its position in the oil industry is declining due to the scarcity of easily extractable hydrocarbons.

Since 2020, hydrocarbon production has been dropping. In February 2020 oil extraction totaled 1.73 million barrels per day; the following year, 1.67 million; and last February, 1.63 million, according to the government’s National Hydrocarbons Commission.

Gas has followed a similar trajectory, with production totaling 4.93 billion cubic feet per day in February 2020; 4.838 billion cubic feet per day 12 months later; and 4.673 billion cubic feet per day last February.

The lack of sufficient domestic gas makes imports necessary, especially from the United States, which have been on the rise since 2020, after a drop between 2018 and 2019.

Imports of gas grew six percent between 2020 and 2021 – from 853 million cubic feet to 904.6 million. Last February, imports totaled 640 million, more than half the volume of the entire previous year.

View of a service station of the state oil giant Pemex in Mexico City. The company’s activities suffer from a lack of transparency and access to information, despite commitments in this regard made by the Mexican government. CREDIT: Emilio Godoy/IPS

Empty promises

For its part, OGP includes the development of a National Action Plan to drive beneficial ownership transparency and initiate the publication of such data from hydrocarbon and mining companies, with the aim of building a corporate Beneficial Ownership Register by 2023.

Actions included the preparation of a diagnosis of final beneficiaries in Mexico and a pilot project for the dissemination of information, which have been completed.

These examples show how little importance the Mexican government attaches to access to public information and transparency in the extractive sector.

In addition, they highlight the challenges ahead for the government in implementing the regional Agreement on Access to Information, Public Participation and Justice in Environmental Matters in Latin America and the Caribbean, in force since April 2021 and known as the Escazú Agreement.

In 2020, CFE purchased 1.58 million tons of coal through 60 direct contracts awarded to producers in the Coahuila coal region, without environmental and social impact assessments, as revealed last November by the non-governmental organization México Evalúa.

Although the country evolved in the Resource Governance Index, developed by the non-governmental Natural Resource Governance Institute, between 2019 and 2021, issues such as governance of social and environmental impacts still need to be improved.

“Governance of local impacts is poor, mainly due to opacity in the disclosure of environmental mitigation plans, which the government considers confidential,” the paper states.

Increased pressure

In 2021 and 2022, EITI priorities in Mexico include providing information about the energy transition, supporting open data, providing information on investment decisions, strengthening revenue mobilization, addressing corruption risks, and measuring impact.

In the design of OGP’s new action plan, which is to be ready in August, civil society wants to include a commitment to transparency in hydrocarbons, mining and electric energy.

Auerbach, the activist, complained that communities have become “sacrifice zones” in exchange for mining.

“They don’t care if we are informed or not, if we protest or not, it changes absolutely nothing,” she said. “There are environmental liabilities from 50 years ago, from 30 years ago or from last week. And that is not included. Whatever the CFE and Pemex say is fine and the rest just go along with it. Under this government, they are untouchable. The Ministry of the Environment says that it is going to review how the area will end up when they finish exploiting the concessions in 50 years.”

EITI’s alternative report suggested publishing information on environmental impact mitigation in priority maritime areas for biodiversity conservation that host oil projects and payments for environmental licenses, environmental taxes, non-compliance with regulations or environmental impacts.

Pérez said the Escazú Agreement offers an opportunity to promote transparency and access to information.

“The ideal conditions don’t exist, but Escazú is an opportunity. On the environmental issue, the lack of information is well identified. The lack of public commitment is worrisome. We can link EITI and Escazú,” she said.

Myanmar now has three years in which to put in place a series of transparency standards and publicly report on government extractives revenues, payments from mining and drilling companies, and related issues. Credit: Bigstock

By Carey L. Biron
WASHINGTON, Oct 15 2014 (IPS)

Lawmakers here are urging President Barack Obama to put transparency in the extractives sector at the centre of an upcoming trip to Myanmar.

While the government of Myanmar has recently engaged in a series of bilateral and multilateral pledges to make its lucrative but highly opaque mining and oil and gas industries more transparent, advocates increasingly warn that officials are failing to keep these promises."The real heart of the issue for civil society in Burma is the details of these contracts. They also want to start talking about the tremendous amount of money the Burmese government makes off of these oil and gas deals, and how most of that doesn’t benefit the people of Burma.” -- Jennifer Quigley

The U.S. government has been a key sponsor in facilitating these pledges, and many now see President Obama’s visit, slated for next month, as an important opportunity to prompt legal change in Myanmar, also known as Burma. Myanmar officials are currently revising related legislation, although little is known about these secretive talks.

Supporters say reforms, particularly around public information on extractives deals and revenues, could help to ensure that Myanmar’s significant natural resources wealth is used for development rather than simply enriching businesses close to the regime.

“Despite commitments to transparency and good governance, decision-making over the management of Burma’s national resources remains largely hidden from public scrutiny … the gap between the Burmese government’s promises and its delivery is widening,” 16 members of the U.S. Congress warned President Obama in a letter sent Tuesday.

“We therefore urge you, during your visit to Burma, to call on the Burmese government to ensure provisions on transparency and accountability are incorporated into revised laws, regulations and policies governing the extractives sector, and negotiated into new contracts and licenses.”

The letter, a copy of which was seen by IPS, includes backing from both Republicans and Democrats. Last year, the United States initiated a partnership between the Myanmar extractives industry and the Group of 8 (G8) rich countries, which could offer Obama additional leverage in demanding new transparency measures.

The lawmakers’ call comes not only a month ahead of President Obama’s planned trip to Myanmar (his second), but also as a global summit on extractives transparency begins in the country’s capital, Naypyidaw. The two-day meeting of the Extractives Industries Transparency Initiative (EITI), which promotes guidelines that are currently followed by 46 countries, comes just three months after Myanmar became one of the EITI’s newest candidate countries.

Under these guidelines, Myanmar now has three years in which to put in place a series of transparency standards and publicly report on government extractives revenues, payments from mining and drilling companies, and related issues.

Just a month after its EITI candidature was accepted, Myanmar signed several dozen contracts with domestic and international oil and gas companies. Yet according to Tuesday’s letter, the terms of those contracts remain secret, as are ongoing revisions to policies overseeing the extractives sector.

“The laws and regulations governing the extractive industries are currently being revised behind closed doors, with no public consultation,” the lawmakers state.

“Drafts of the first of these new pieces of legislation contain no provisions on public disclosure of data and do not reflect any of the promises of greater transparency made by the government through the EITI process.”

Beneficial owners

The contracts signed in August were for 36 oil and gas blocks, both on land and offshore, auctioned off to 46 local and global companies over the past year. While the details of those contracts remain under wraps, until recently almost nothing was known even of these companies’ owners.

Around the country’s EITI application, an international watchdog group called Global Witness began focusing on what’s known as ultimate beneficial ownership – information on who, ultimately, controls and benefits from a company’s activities. In June, the group had such information on the companies involved in just three of the blocks.

Yet after requesting information directly from the companies, Global Witness last week reported that many more companies had come forward with these details. The companies were also asked whether any of their beneficial owners were politically powerful individuals in Myanmar.

“In total, 28 companies have now participated in Global Witness’ ownership review, and we have been provided with full beneficial ownership details of all partners in 17 oil and gas blocks,” the group says in a new report, published Friday. “This shows that businesses can and will provide such information if they have an incentive, such as protection of their reputation, to do so.”

Global Witness says the information remains unverified and that a “hard core” of 18 companies continue to refuse to provide any information. Still, the group says this corporate response has already set a surprising international example.

“Not only is this significant locally, but it puts Myanmar in the unlikely position of setting a global precedent on transparency, as it’s the first time anywhere in the world that companies have systematically declared their ultimate ownership,” Juman Kubba, an analyst at Global Witness, told IPS.

“Our findings show that companies can reveal their owners if they’re pushed to do so. It’s now up to the Myanmar government with the support of the U.S. and other backers to make that push so that all oil, gas and mining company ownership in the country is public.”

Outside the framework

Still, some worry that the recent corporate disclosure wasn’t actually carried out through the EITI framework, thus suggesting that the government’s transparency pledges remain weak. They also dispute whether beneficial ownership is of foremost importance in the Myanmar context.

“This disclosure is incredibly important on the global scale, but when it comes to Burma the real concern has never been about ownership but rather about conflict related to resources,” Jennifer Quigley, the president of the U.S. Campaign for Burma, an advocacy group, told IPS.

“This wasn’t done through the EITI in this instance, and the real heart of the issue for civil society in Burma is the details of these contracts. They also want to start talking about the tremendous amount of money the Burmese government makes off of these oil and gas deals, and how most of that doesn’t benefit the people of Burma.”

Quigley says that Myanmar’s government has long been comfortable making pledges it has no intention of keeping, and she see little prospect of that changing in the near term. Still, she says the United States has linked itself so closely to extractives transparency in Myanmar that President Obama will need to broach the subject during his trip next month.

“This is really an area in which the U.S. has married itself to the Burmese government,” she says. “So they need to be paying more attention to the fact that the Burmese government isn’t living up to its EITI promises.”

Edited by Kitty Stapp

The writer can be reached at cbiron@ips.org

Artisanal diamond miners at work in the alluvial diamond mines around the eastern town of Koidu, Sierra Leone. Credit: Tommy Trenchard/IPS

By Jim Lobe
WASHINGTON, Aug 5 2014 (IPS)

As the three-day U.S.-Africa Leaders Summit got underway here Monday, anti-corruption activists urged President Barack Obama to prod a key U.S. agency to issue long-awaited regulations requiring oil, gas, and mining companies to publish all payments they make in countries where they operate.

“The companies need to be held accountable, and we would ask President Obama to also support us in this message,” said Ali Idrissa, the national co-ordinator of Publiez Ce Que Vous Payez (Publish What You Pay, or PWYP), in Niger, a country rich in uranium and iron deposits.Anti-corruption activists are losing patience with what they see as pressure by the extractive industries to prevent the emergence of tough new disclosure requirements.

“We need to look at the entire production chain of these extractive industries; we need to continue putting pressure on this industry …so we can fight poverty and corruption and ensure we have a better development,” he added.

Idrissa, one of scores of African activists who have descended on Washington for this week’s unprecedented gathering, was speaking at a forum sponsored by the Open Society Foundations (OSF), Global Witness, Human Rights Watch, and Oxfam America, among other groups, on civil society efforts to promote government and corporate transparency and accountability on the continent.

The activists, whose numbers are dwarfed by the size of official government delegations, most of which are led by heads of state, as well as U.S. and African corporate chiefs eager to explore business prospects, nonetheless claimed at least part of the spotlight Monday.

At what was billed as a “Civil Society Forum Global Town Hall” meeting at the National Academy of Sciences, both Vice President Joe Biden and Secretary of State John Kerry echoed Idrissa’s concerns in general remarks.

“Widespread corruption is an affront to the dignity of your people and direct threat to each of your nations,” Biden declared. “It stifles economic growth and scares away investment and siphons off resources that should be used to lift people out of poverty.”

Kerry also stressed the importance of “transparency and accountability” not only in attracting more investment but also in “creat(ing) a more competitive marketplace, one where ideas and products are judged by the market and their merits, and not by a backroom deal or a bribe.”

While their words gained applause, it was clear from the OSF forum that anti-corruption activists are losing patience with what they see as pressure by the extractive industries to prevent the emergence of tough new disclosure requirements from the Securities and Exchange Commission (SEC), the federal agency that regulates U.S. stock and related markets.

At issue is section 1504 of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, an anti-corruption provision that requires all extractive companies listed on U.S. stock exchanges to publish each year all payments they make to the U.S. and foreign governments in the countries where they operate.

According to the legislation, which is designed to counter the so-called “resource curse” that afflict many developing countries, particularly in sub-Saharan Africa, taxes, royalties, fees, production entitlements and bonuses should all be reported down to the project level.

Eight of the world’s 10 largest mining companies and 29 of the 32 largest active international oil companies would be covered by the Act, which requires the SEC to develop specific regulations to implement its intent.

After nearly two years of consultations with businesses, activists, and other interested parties, the SEC issued draft regulations, but they were immediately challenged in a lawsuit filed by the American Petroleum Institute (API), a lobby group that represents the powerful oil and gas industry here.

The SEC has since reported that it does not plan to resume the rule-making process until March, 2015, a source of considerable frustration for the anti-corruption activists.

In the meantime, the European Union (EU), whose member countries have historically shown much less willingness than Washington to enact legislation to deter bribery and corruption by its companies operating abroad, has adopted and begun to enforce its own tough disclosure measures that go beyond the energy and mining industries to include timber companies as well.

“Until 2000, corruption and bribery by European [companies] was not only legal; it was tax-deductible,” Mo Ibrahim, a Sudanese-British telecommunications entrepreneur and prominent philanthropist for good governance in Africa, told the OSF Forum. “The United States, which has been a leading light on corruption, is now dragging its feet. Do you have a backbone, or what?”

He echoed the concerns of an open letter sent to Obama and signed by the heads of the national chapters of PWYP, an OSF-backed international anti-corruption group, in Guinea, Niger, Tanzania, the Democratic Republic of the Congo (DRC), Chad, Ghana, and Nigeria, on the eve of this week’s Summit.

“It has been more than four years since you signed the Dodd-Frank Act, section 1504 of which obliges all U.S. listed extractive companies to publish the payments they make,” the letter, which was also signed by the African representatives on the PWYP global steering committee. “The law will yield crucial data that can help us hold our governments to account, but it has yet to come into effect.

“We ask you to urge the SEC for a swift publication of the rules governing section 1504 to ensure that they are in line with recent EU legislation and the emerging global standard for extractive transparency,” it said, adding that more also needs to be done to strengthen multilateral rules on taxation and creating a public registry of corporate beneficial ownership information as other critical parts of the anti-corruption struggle in Africa.

Harmonising the SEC regulations with those of the EU is particularly critical, according to Simon Taylor, co-founder and director of London-based Global Witness. “If the SEC gets it wrong, we will then have a double standard,” he noted, suggesting that some European companies could move to the U.S. if the latter’s requirements are less stringent.

API and other critics of the section 1504 have argued that strict rules will put U.S. companies at a disadvantage in bidding for mining or drilling rights, especially vis-à-vis China whose trade investment in Africa, particularly in the continent’s extractive resources, have exploded over the past decade and now far exceeds the U.S.

Beijing has failed so far to join the 12-year-old Extractive Industries Transparency Initiative (EITI), an Oslo-based international organisation that promotes transparency and currently includes 44 governments, as well as extractive companies, civil-society groups, international development banks, and institutional investors.

But Ibrahim said it was “not acceptable for Europeans or Americans to say, ‘We want to be moral and ethical, but we can’t until this guy’” joins. “China is learning; it can understand and can change. They’re trying to find their feet [in Africa].”

George Soros, the billionaire philanthropist who created OSF, as well as a number of other foundations, said it was important to get China on board because “otherwise they are the spoilers. It is so important that I think we have to be willing to reconsider the whole structure of the [EITI which] they consider [to be] a post-colonial invention.

“They have to be involved in the creation of the system that they will abide by. That’s where civil society in Africa can be influential,” he added.

Jim Lobe’s blog on U.S. foreign policy can be read at Lobelog.com. He can be contacted at ipsnoram@ips.org

Edited by: Kitty Stapp

Artisanal diamond miners at work in the alluvial diamond mines around the eastern town of Koidu, Sierra Leone. So-called ‘blood diamonds’ helped fund civil wars in Sierra Leone and Liberia, but now provide much-needed jobs as well as revenue for the government. Credit: Tommy Trenchard/IPS

By Carey L. Biron
WASHINGTON, Mar 24 2014 (IPS)

An unusual combination of industry, government, investors and civil society here is celebrating the United States’ initial acceptance into a prominent global initiative aimed at strengthening transparency and accountability in the extractives industry.

Last week, the Extractives Industry Transparency Initiative (EITI) board accepted the U.S. application to become a candidate country in the grouping. The United States thus became the first Group of Eight (G8) wealthy nation to formally become part of EITI, and joins around 41 other countries that have already done so.“We’re at the end of the era of easy access to resources, where operators have to go further afield and at greater risk." -- Paul Bugala

EITI, based for the past decade in Oslo, promotes a set of global standards for the oil, gas and mining sector that works to reduce corruption and promote good governance. Proponents say the United States’ participation underlines a strengthening global trend towards transparency, particularly in the extractives sector.

“This is just another part of the wave of transparency – recognition that this information is important not only to investors but also to countries in which industry operates and to the communities that share their environment with mines and drilling,” Paul Bugala, a member of the panel that drew up the U.S. EITI application and an analyst at Calvert Investments, a socially responsible firm, told IPS.

“We’re at the end of the era of easy access to resources, where operators have to go further afield and at greater risk. If investors don’t have project-level payment information, we’re flying blind in many ways.”

The EITI process offers equal voice to government, industry and civil society representatives, and the United States’ application was jointly fashioned – and approved – by broad representation from each of these sectors.

“The oil and gas industry has worked with civil society groups and governments for over a decade through EITI to promote payment transparency in various countries,” Stephen Comstock, an official with the American Petroleum Institute (API), a central industry lobby group, told a trade journal last week.

“Expanding this effort to the United States will hopefully provide U.S. citizens with a new perspective of the significant revenue and economic impact generated from U.S. exploration and production.”

Project-level information

At its base, the EITI standard mandates that governments and companies provide regular disclosure of royalties and revenues from natural resource extraction. The idea is that these parallel reports will allow for easy understanding of money local communities may be owed – and where any discrepancies may be coming from.

The U.S. application will go beyond the standard, to include renewable energy sources and additional minerals. In 2013, the U.S. federal government collected some 14 billion dollars from companies involved in natural resource extraction, typically the country’s second largest source of revenue.

Yet critics say domestic accountability mechanisms are too opaque.

“The kind of information that’s available for the public is aggregated, searchable only by year and state and some commodities,” Mia Steinle, the U.S. EITI civil society coordinator and an investigator at the Project on Government Oversight (POGO), a watchdog group here, told IPS.

“Coal mining communities, for instance, can’t really tell whether they’re getting the money due to them by the federal government. If industry wanted to work in a community that had project-level information, however, its members could make a decision based on whether a previous project had been worthwhile or not.”

Empowering the public with such data is, of course, of particular importance in developing countries, where extractives contracts have often been struck between powerful companies and governments that can be oblivious to local benefit. EITI currently lists 26 countries as compliant with its standards, and another 18 countries as candidates.

The initiative is being bolstered by landmark though pending legislation in the United States and the European Union. Due the E.U. moves, Tullow Oil, a British company, on Tuesday became the first drilling company to offer project-level payments reporting in every country in which it’s operating.

“Tullow’s move shows that global oil companies can disclose such information at little cost and without fear of competitive harm,” Ian Gary, a senior policy manager at Oxfam America, an anti-poverty campaigner, said Tuesday. “The disclosures … show that some oil and mining companies are embracing – rather than fighting – the global transparency tide.”

1504 pending

Yet even as the E.U. moves towards implementation of its new transparency requirements, known as the Accounting Directive, by next year, a similar proposal in the United States remains stuck in litigation. The provision, known as Section 1504, became law back in 2010, but its implementation has since been held up by regulators and industry pressure.

Last year, a proposed Section 1504 rule, which would require disclosure of all payments made by U.S.-listed extractives companies to foreign governments, was struck down in the courts. Campaigners are now pointing to the United States’ EITI candidacy as added impetus for the main regulator, the Securities and Exchange Commission (SEC), to speed up its work rewriting the rule.

“The new EITI standard … calls for fully public reporting, by company and by project. This is what the SEC proposed in its 2012 rule,” Jana Morgan, coordinator of Publish What You Pay USA, a pro-transparency group, told IPS.

“The EITI board’s decision puts additional pressure on the SEC to prioritise scheduling a rulemaking for Section 1504. U.S. government support for the Section 1504 rule released in 2012, coupled with its advocacy for U.S. candidacy in the EITI, makes clear that the [Obama] administration views these initiatives as complementary.”

Interestingly, the legal challenge to Section 1504 was spearheaded by the American Petroleum Institute, the group that helped fashion the U.S. EITI application and which has welcomed the country’s new candidature. POGO’s Steinle says that, given the recent court decision, EITI-related project-level reporting for the United States remains unresolved and will be discussed this year.

Nonetheless, she stresses that the EITI discussions between civil society, industry and government representatives were surprisingly fruitful.

“It’s so useful and powerful for those three sectors to be face to face for these types of discussions. We’ve broken down a lot of walls, simply having people get together who would normally never talk to one another,” she says.

“As other countries are committing to EITI or similar initiatives, it’s very important that the United States is now following these good international examples. Hopefully this will help to set an example for those countries that aren’t yet on board.”

The United States will now have three years to bring its reporting into alignment with the EITI standard. U.S. officials say they plan to file their first report in 2015.

A major international initiative aimed at promoting transparency in the extractives industry is coming under harsh criticism for accepting an application from Ethiopia, despite significant ongoing legal restrictions on the country’s civil society.

The Extractive Industries Transparency Initiative (EITI), a standards programme based in Oslo, had declined a previous application for candidature from Ethiopia, in 2010. The previous year, the Ethiopian government had passed a law widely seen as repressive, and the EITI board stipulated that the country’s application would be deferred until that law was struck down."The simple fact is that the EITI process won’t be able to advance any improvements unless civil society is at the table and has a voice." -- Lisa Misol

Yet despite the fact that the law remains in place, on Wednesday the EITI board voted to accept Ethiopia’s application to become a candidate for full membership in the organisation. Some say the group has now violated its own rules.

“We’re very disappointed by this. If these people don’t follow the criteria, what’s the point of having criteria?” Obang Metho, executive director of the Solidarity Movement for a New Ethiopia, a Washington-based advocacy group, told IPS.

“Today it is impossible for civil society to function in Ethiopia, because of this bill. We can wait for years for changes, but as long as the current government is there I can’t foresee any tangible change. This decision [by EITI] is not going to be productive.”

The law in question is known as the Charities and Societies Proclamation (CSP). Ethiopia’s first comprehensive legislation to regulate the registration of civil society groups, the law places onerous restrictions on groups that receive more than 10 percent of their funding from foreign sources.

It also forbids organisations from engaging in a range of activities central to ensuring public oversight over the government and its officials. The United Nations has warned that the law has “devastating” ramifications for the ability of Ethiopians to effectively form and operate civil society organisations.

Such concerns are particularly relevant for EITI, which, since its founding in 2003, has offered a unique platform for cooperation between the extractives industry, government and civil society. Importantly, each of these elements is to receive equal voice within the EITI system, with the immediate aim of sector-specific transparency meant to translate into broader strengthening of good governance.

Thus, if the civil society component isn’t able to function effectively, the entire process would cease to function. That, anyway, was EITI’s own concern in 2010, when it rejected Ethiopia’s application – the first time the board had ever taken such an action.

The EITI “board concluded that Ethiopia’s [CSP] would prevent civil society groups from being sufficiently independent and meaningfully participate in the process,” Anthony Richter, a member of the EITI board, stated in 2010. “The board decided, in effect, not to admit Ethiopia ‘until the [CSP] is no longer in place’.”

The EITI board made another high-visibility decision on Wednesday, voting to accept the candidature application of the United States (as well as that of Papua New Guinea). Yet if EITI has gone back on its own rules, critics say, the standard’s important overall potential will have been weakened.

“Before this decision, EITI was a prominent global initiative, considered to be one of the leading efforts to increase transparency and give citizens a chance to have a voice in important matters in their countries,” Lisa Misol, a senior business and human rights researcher at Human Rights Watch (HRW), a watchdog group, told IPS.

“Now I think all governments need to ask themselves what’s the value of being part of an initiative that allows in a country that doesn’t allow its citizens to make any use of this transparency. Unfortunately, EITI has sacrificed its credibility and irreparably harmed its own reputation.”

Neutered criteria

EITI currently lists 26 countries as compliant with its standards, and another 18 countries, including Ethiopia and the United States, as candidates. In total, 35 countries have produced formal EITI reports over the past decade.

Yet the decision to move forward with and approve Ethiopia’s application during this week’s EITI meeting reportedly led to deep divisions in the group’s board. While the EITI secretariat did not respond to a query from IPS, it has been quick to note that acceptance of Ethiopia’s application to become a candidate country means that the Ethiopian government now has three years to come into full compliance with EITI’s standards.

“Some opposed this decision, but it should be remembered that becoming a candidate does not mean that any country has met the EITI Standard,” Clare Short, the EITI chair, said in a statement after the board’s meeting.

“In the case of Ethiopia, the decision shows that the Board was convinced by the government’s commitment to the EITI’s principles. Membership of the EITI will mean that all stakeholders, including civil society, will have a better platform to hold the government and the companies to account and ensure the better management of the burgeoning sector.”

For its part, the Ethiopian government states that it has already set up a national steering committee made up of government, industry and civil society representatives, and has begun a series of trainings on the EITI standards. Its most recent application, from October, also deals directly with concerns over the CSP.

“In our view, the proclamation is not meant to restrict the operation of the civil society,” an introductory letter, presumably written by Minister of Mines Sinknesh Ejigu, states, “rather to create conducive environment for their activities as well as ensure transparency and accountability, establish a legal framework for their operation.”

Yet critics are pushing back strongly against the suggestion that EITI will now have more leverage to effect positive change in Ethiopia.

“The simple fact is that the EITI process won’t be able to advance any improvements unless civil society is at the table and has a voice,” HRW’s Misol says.

“It’s shocking to me that the board of an initiative that values civic participation has just endorsed Ethiopia as a candidate when there is no ability to have a functioning civil society in that country. The moment of leverage was before joining Ethiopia to join the club – not once it’s in. In effect, EITI has now neutered its own civil society criteria.”

Ethiopia will now be required to submit its first formal report to EITI by March 2016.

The steppes of central Mongolia, the part of the country where exploration for oil shale is taking place. Credit: Michelle Tolson/IPS

By Michelle Tolson
TOV PROVINCE, Mongolia , Oct 10 2013 (IPS)

Mongolia, 90 percent dependent on fuel imports from Russia and vulnerable to price hikes, is seeking to develop its oil shale deposits of at least 800 billion tons.

The country recently signed a five-year agreement with U.S. company Genie Energy to explore oil shale “in situ”.

Oil shale is essentially oil trapped in solid form within rock. Shale oil, also known as kerogen, is produced by pyrolysis, hydrogenation, or thermal dissolution, by contrast with shale gas, which is extracted by hydraulic fracturing or fracking.

Jason Bane, communications director of Western Resources Advocates, an environmental group based in the U.S. state of Colorado, explained that while the United States has some of the largest shale oil reserves in the world, they are not commercially viable yet.

“In Estonia they burn oil shale for energy like you would burn coal, which is not overly complicated. But squeezing kerogen [a fossilised material in shale that yields oil upon heating] out of a rock is a different idea entirely. Small amounts of fuel have been produced at various points, but a commercial process is only theoretical,” he told IPS.

“If it were possible, oil shale production would be incredibly harmful to the environment, through air pollution and intensive water use,” he added.

Experts say Mongolia is especially vulnerable to climate change. This landlocked Central Asian country is already experiencing water shortages in the Gobi desert, shrinking rivers and lakes, and desertification.

Richard Heinberg, senior fellow at the Post Carbon Institute, told IPS that “Most efforts to turn this type of resource into a liquid fuel have failed financially. It has a lower energy density than coal and worse environmental impacts. This would be a disaster for Mongolia.”

However, Jeremy Boak, director of the Centre for Oil Shale Technology and Research (COSTAR) at the Colorado School of Mines, challenges this. According to him, the technology is being rapidly developed and holds commercial promise. “The opposition is citing data that is decades old,” he told IPS.

“[Environmental groups] commonly cite a [U.S.] Government Accountability Office report that simply reviewed all historic data, and concluded that the average [water] use would be five barrels of water per barrel of oil, with the possibility of numbers up to 12.”

Boak said while experimental, the technology is not untested. “Shell has experience in Colorado. Water use is now about one barrel of water for one barrel produced,” referring to unconventional energy expert Harold Vinegar, a chief scientist at Genie Energy, who previously worked with Shell.

Vinegar had conducted pilot testing on oil shale technology but retired after Shell stopped the research. Then he joined Genie.

“One cannot equate potential environmental impacts with certain environmental catastrophe, as some groups have tended to do,” Boak said.

Geoscientist David Hughes with the Post Carbon Institute is aware of Vinegar’s work in Shell.

“The heating of shale underground to extract the oil lasts up to three or four years,” he told IPS. “The freeze wall [developed while Vinegar was signed on with Shell] is to prevent groundwater from invading the heating process. Shell shut down the process but declared the freeze wall to be a success. There will have to be a lot of pilot testing—we’re talking years and years.”

Perhaps because the process is still being tested, transparency has been lacking. Sukhgerel Dugersuren, director of Oyu Tolgoi Watch, a Mongolian environmental NGO, didn’t know about the agreement with Genie until Canadian anti-tar sands and shale activist Macdonald Stainsby contacted her shortly after the announcement.

Sukhgerel set a meeting for local environmental groups to get some oversight started. “Only one person I contacted personally came,” she told IPS. “But that was still useful as she represents the professionals who do the EIAs [environmental impact assessments]. I am very hopeful that she will spread the news to evaluation companies.”

Sukhgerel and Stainsby also learned another company, MAK from Mongolia, is working on oil shale projects near the Gobi desert.

Stainsby told IPS “I was not able, nor was Sukhgerel, to determine where the Genie plant would be located; this was not advertised – the government did not list either site [MAK or Genie] nor did it give coordinates.”

They eventually learned Genie was exploring in the Tov province near Ulaanbaatar after parliament released the information in late spring. Only one foreign media outlet reported Genie had licenses in the Tov province, near the Tuul River

Pastoralists upstream from the Tuul in the next province, close to where it merges with the Orkhon River, told IPS about Genie’s presence. Dashdavaa, a herder in her sixties, said “Four or five new families came here because they had to move from Genie’s work. There is not enough grass now and water for all these families here.”

Her neighbour Tsetseghkorol, a woman who has lived 40 years along the river, said they don’t know much about Genie’s project, just that they are looking for oil and possibly want to build a plant.

IPS contacted the Ministry of Environment and Green Development several times to obtain more information, but received no reply.

Mongolia is part of the Extractive Industries Transparency Initiative (EITI), which publishes information on licenses, taxes and royalties paid to governments. When contacted, a spokesperson said they did not have information on the Mongolia-Genie agreement yet.

IPS also contacted Genie’s headquarters in the U.S. several times by phone and email, but did not receive an official reply.

Mongolia is keen on investment. Although it is one of the world’s fastest-growing economies, foreign direct investment this year is 42 percent down from last year. Minister of Mining D. Gankhuyag has said he looks to oil shale as a welcome new investment opportunity.

“The Mongolian government has always tried to find a balance between economic development, and conservation of the environment and culture of which they are justifiably proud,” said Rebecca Watters, director of the Mongolian Wolverine Project, which studies the impact climate change has had on the shrinking habitat of the endangered species.

“The timelines involved in thinking about climate impacts are much longer than the timelines involved in a 50-year mine development, but I hope that they give consideration to these issues all the same,” she told IPS.

Oil rigs and pumps. Credit: Bigstock

By Carey L. Biron
WASHINGTON, Jul 2 2013 (IPS)

A federal judge here on Tuesday struck down a key new regulatory provision that would require large U.S.-listed extractives companies to disclose payments made to foreign governments, a rule that rights groups had long pushed as a way to cut down on corruption in developing countries.

The judgement is being seen as technical, however, and could allow government regulators to tweak and re-issue the rule.

The ruling is seen as a major victory for the American Petroleum Institute (API), a lobby group that sued the U.S. government following the rule’s adoption, last August, on several grounds, including that it would force businesses to divulge proprietary secrets, impose significant costs and infringe on their Constitutionally mandated right to free speech.

“The court has vacated the SEC’s requirement that U.S. companies report competitive information that can be used against them by global competitors,” Harry Ng, API vice president and general counsel, said in a statement.

“U.S. companies are leading the way to increase transparency, but the rule would have jeopardised transparency efforts already underway by making American firms less competitive against state-owned oil companies.”

Ng points out that several major companies under the API umbrella are engaged in the Extractives Industry Transparency Initiative (EITI), a set of standards currently being implemented in around three-dozen countries. Yet the U.S. Congress had felt that the EITI standards were not strong enough (they have since been tightened), and thus mandated the SEC to come up with the extractives payment rule.

The rule is known as Section 1504, part of financial industry overhaul legislation known as the Dodd-Frank Act, signed into law in 2010. As finally adopted in August, Section 1504 requires that all oil, gas and mining companies listed on U.S. stock exchanges engage in annual, public reporting of any payments over 100,000 dollars made to foreign governments.

The rule would apply to around 1,100 companies, and disclosures would have been required starting next year.

Passage of Section 1504 was seen as an important victory by pro-transparency activists and development groups, who suggest that such transparency can crack down on rampant corruption and help to lift the “resource curse” in some resource-rich, governance-poor developing countries, particularly in Africa.

“Needless to say we are incredibly disappointed with this decision, particularly given that the United States has been a leader on this issue through the passage of Section 1504,” Jana Morgan, a Washington campaigner with Global Witness, an advocacy group, told IPS.

“We are now seeing similar initiatives in the European Union and Canada, with transparency in resource payments becoming the new paradigm and the new standard for best business practices.”

Senator Ben Cardin, who co-authored Section 1504, similarly expressed concerns over the potential broader effects of Tuesday’s court decision.

“The U.S. has been at the forefront of the transparency fight, and this decision will delay implementation of vital transparency rules,” Cardin said in a statement.

“Congress was clear in the letter and the spirit of the law that this information should be in the public domain. It’s unfortunate that the court believes that company disclosures to the SEC should remain hidden.”

‘Substantial errors’

The court’s decision revolves around the SEC’s interpretations of the law originally handed down by Congress. In this context, the judge ruled that the SEC had overreached the Congressional mandate in two important ways.

First, the commission’s rule required that company reports on this issue be made public, rather than publishing only, say, summaries of the reports. API-aligned companies had stated in court that changing this element would have cleared up most of their concerns over Section 1504.

Second, the rule did not offer any exemption for companies operating in countries where national laws disallow any such disclosure – Angola, Cameroon, China and Qatar are the four at issue in this case, though this is disputed by transparency advocates.

“The record of comments to the SEC shows clearly that no one has yet correctly identified a single country where Section 1504 disclosures would come into conflict with local laws,” Heather Lowe, director of government affairs with Global Financial Integrity (GFI), a Washington watchdog group, said in a statement on Tuesday. GFI has estimated that illicit financial flows cost developing countries a trillion dollars a year.

Yet companies say Section 1504’s lack of an exemption for national rules would force them to pull out of certain countries, resulting in massive economic costs.

U.S. District Court Judge John D. Bates noted these two points constituted “substantial errors … the commission misread the statute to mandate public disclosure of the reports, and its decision to deny any exemption was, given the limited explanation provided, arbitrary and capricious.”

Because Bates had already struck down the rule based on these two points, he did not offer a decision on the remaining arguments, including the issue of constitutionality. The decision now sends the issue back to the SEC to refashion a new rule, unless the commission moves to appeal the judgement to a higher court.

Contacted by IPS, John Nestor, an SEC spokesperson, said only that the agency is reviewing the decision.

Towards re-enactment?

While rights groups here and internationally are expressing disappointment over the decision, they are noting that the judgement leaves intact significant components at the heart of Section 1504.

“We strongly disagree with the court findings, but that said, the court hasn’t precluded the possibility that the rules will be re-enacted in the same form but with a stronger justification,” Gavin Hayman, the London-based director of campaigns for Global Witness, told IPS.

“Further, we note that nothing in the decision blocks the SEC from requiring public reporting or allows for exemptions from reporting. The oil industry has never been able to clearly show the existence of host country prohibitions against payment disclosure.”

Similar points were made Tuesday by the Washington office of Oxfam America, a humanitarian group that filed a court brief in support of the SEC in this case.

“Nothing in the decision says that the SEC may not require public reporting or deny exemptions – it just says that the SEC needs to use its discretion and provide a fuller analysis,” Ian Gary, Oxfam’s senior policy manager, said in a statement to IPS.

“We disagree with the court’s analysis of the SEC’s justification for not providing reporting exemptions. Despite the court’s conclusions, the SEC balanced the potential costs and benefits of granting exemptions.”

Gary also noted the court’s refusal to rule on the API’s free speech-related argument, but suggested that the judge “did recognise that the Supreme Court has upheld public disclosure requirements as an appropriate approach to regulation.”

Over the past decade, EITI is said to have facilitated reporting on nearly a trillion dollars in revenues from natural resources. Credit: Bigstock

By Carey L. Biron
WASHINGTON, May 23 2013 (IPS)

Development groups and corruption watchdogs are applauding landmark new standards adopted Wednesday by an international initiative focused on ensuring greater transparency among oil and mining companies operating particularly in developing countries.

Yet some civil society advocates are also warning that the new standards, agreed ahead of a board meeting of the Extractive Industries Transparency Initiative (EITI) being held Thursday and Friday in Sydney, don’t go far enough.

“The EITI needs to keep its bite,” Corinna Gilfillan, an EITI board member and director of the U.S. office of Global Witness, an advocacy group, said following the unveiling of the new standards. “It needs to apply and build on its new rules and be prepared to be a driver rather than a follower of governance reform to avoid diminishing relevance.”

EITI has been in place since 2002, created out of civil society discussions over how resource-rich developing countries can escape the “resource curse” – ensuring that income from their extractives industries is used for public-sector funding rather than risk being siphoned off by corrupt government officials or cronies. Over the past decade, the initiative is said to have facilitated reporting on nearly a trillion dollars in revenues from natural resources.

EITI includes governments, the private sector and civil society, currently covering 39 countries and requiring those members to engage in public reporting of revenues from within their extractives sectors. While most of those members are in Africa, on Wednesday the heads of France and the United Kingdom agreed to become members, following a similar pledge made by the United States in 2011.

Other Western countries engaged with EITI in some respect include Norway, where the EITI secretariat is housed, and Australia. When the U.K. hosts the Group of Eight (G8) rich countries next month, transparency is slated to be a central focus.

While there has been much optimism about the aim and provenance of EITI, recent years have offered increasing evidence that its requirements have not been strong enough. According to a 2011 internal evaluation, compliance with EITI requirements was not necessarily “bring[ing] about fundamental changes” in line with the initiative’s principles.

Evidence of this failure can be seen in the Democratic Republic of Congo.

Although an EITI member, Congo’s government “was able to sell in secret five major mining assets to anonymous shell companies,” according to research by Global Witness. “As a result, the DRC may lose out on around 1.36 billion dollars, twice the country’s health and education budgets.”

In mid-April, the EITI board temporarily suspended Congo, citing a failure to ensure “full disclosure and assurance of the reliability of the figures”. Yet the growing evidence of the EITI standards’ potential ineffectiveness also led to the push for the new rules unveiled Wednesday.

“The new EITI Standard will address a number of the recommendations made [by civil society], including requiring more transparency of state-owned companies and natural resource funds,” Jonas Moberg, head of the EITI international secretariat, told IPS ahead of the Sydney conference.

The standards will now impose significant new reporting requirements on EITI member countries, requiring regular project-to-project details, covering extraction licenses, how those licenses were awarded, and companies involved in the sector. State oil companies, too, will now need to disclose how much product they’re selling.

“The EITI has finally recognised that, when it comes to complex industries, merely disclosing payments is not enough,” Daniel Kaufmann, president of the Revenue Watch Institute, a U.S. watchdog group, said Wednesday. “The new Standard could make EITI more effective in addressing the vast governance challenges facing resource-rich countries.”

Safeguarding relevance

The extractives industry can have a “tremendous impact – good or ill” on a country’s development, Robert F. Cekuta, a U.S. State Department official, said at the EITI conference Wednesday.

“Mismanagement of these resources, as we have seen too many times, can impede economic growth, reduce opportunities for trade and investment, divert critically needed funding from social services and other government activities, and contribute to instability and conflict,” he noted.

“At the same time … proper, sound management of the sector means revenues generated from oil, gas and mining can fuel a country’s economic growth, producing jobs and fostering responsible investments in infrastructure, health, education, and other high-impact sectors, as well as appropriate savings.”

While Cekuta expressed his government’s strong support for the new rules, the U.S. has already passed legislation – known as Section 1504 of the financial regulatory Dodd-Frank Act – that would impose stronger standards on U.S.-listed extractives companies than the new EITI rules would require. The European Union is expected to put in place a similar law next month.

For this reason, some proponents of greater transparency have expressed concern that EITI is losing its pioneering role.

“The EITI’s influence rests on its being seen as a totemic reformers club which governments and companies want to be part of,” Global Witness said following the announcement of the new standards. “This attraction will fade if the initiative is seen to be merely playing catch-up with more dynamic reforms taking place elsewhere.”

The group points in particular to a rollback on civil society calls to require that extractives contracts be publicly disclosed, an obligation that the new standards would merely encourage rather than mandate. Likewise, the new standards will only require that full company ownership information is publicised by 2016.

Global Witness and others are also pushing EITI to ensure that the new reams of data are as user-friendly as possible, in order to encourage collation and analysis by public watchdogs.

Two-tongued interests

Meanwhile, an interesting disconnect has cropped up between events in Sydney and Washington. On the one hand, several of the world’s largest oil companies – including ExxonMobil, Shell and Chevron – sit on the EITI board and are thus inferred to be in agreement with the newly revised transparency rules.

On the other hand, these companies are currently part of a lawsuit here attempting to dismantle Section 1504 of the Dodd-Frank Act, the legislation on which the new EITI standards are mostly closely based.

“Protection of the law is essential for investors to asses a company’s risk and for communities in resource-rich countries to hold governments to account,” Ian Gary, senior policy manager of Oxfam America’s oil, gas and mining programme, said from Sydney.

“This lawsuit is wholly incompatible with the industry’s transparency commitments and support of payment disclosure through [EITI]. It is unacceptable that oil companies should receive reputation benefits by supporting a transparency initiative while at the same time fighting a landmark payment disclosure law in U.S. courts.”

An open pit copper mine. Credit: Bigstock

By Carey L. Biron
WASHINGTON, May 16 2013 (IPS)

Trillions of dollars a year are being produced through extractive industries, but just a tiny percentage of this money is impacting on the lives of poor communities in developing countries, according to a first-of-its-kind study released Wednesday.

The revenues being produced by exploiting natural resources in developing countries already massively outweigh development-focused foreign aid flows. But according to new research from the Revenue Watch Institute, a global watchdog group, there is a startling correlation between economic dependency on natural resources and low human development indicators."Clearly, 2.6 trillion dollars has major transformative potential." -- Daniel Kaufmann of the Revenue Watch Institute

“The 58 countries [studied] produce 85 percent of the world’s petroleum, 90 percent of diamonds and 80 percent of copper. Profits from their extractive sector totaled more than $2.6 trillion in 2010,” according to Revenue Watch’s new Resource Governance Index, unveiled here Wednesday.

“Revenues from natural resources dwarf international aid: In 2011, oil revenues for Nigeria alone were 60 percent higher than total international aid to all of sub-Saharan Africa. The future of these countries depends on how well they manage their oil, gas and minerals.”

Of those 58 countries, more than 80 percent have reportedly failed to put in place satisfactory standards for openness in these sectors – and half haven’t even taken basic steps in this regard.

Revenue Watch analysts say the findings constitute a “striking governance deficit”. While such problems have been widely known on an anecdotal basis, this is the first time these issues have been systematically disaggregated and compared.

“The index is a real wake-up call about how far we still have to go in managing public resources effectively and for the betterment of poor populations around the world,” Warren Krafchik, director of the International Budget Partnership, a Washington-based project that works to strengthen civil society involvement in public budgeting, told IPS.

“Particularly now after the global financial crisis, this data shines a big spotlight on how, while resources can still be transferred from the Global North to the South, the fact is that the South is sitting on really substantial resources of its own. The challenge is how to use those effectively.”

The new data highlight a real opportunity to do something “fundamental” about global poverty, Krafchik notes.

“It’s really not the amount of public resources that’s available that’s the primary obstacle to overcoming extreme poverty,” he says. “The issue is how those resources are managed and distributed.”

Similarly, several analysts are suggesting the data could influence discussion on the new international development agenda following the expiration of the Millennium Development Goals (MDGs) in 2015.

“We’re talking about real money here – foreign aid can be used as leverage, but the domestic resources issue is absolutely key,” Daniel Kaufmann, president of the Revenue Watch Institute, told a Washington audience Wednesday.

“Clearly, 2.6 trillion dollars has major transformative potential in terms of translating these natural resources riches into human capital. Further, oil-rich states are three times less likely to democratise than are the non-oil-rich, so this matters from a political standpoint, too. This is the development challenge of the decade.”

No resource curse

In terms of extractives governance, particular problems appear to be concentrated in northern and southern Africa and the Middle East. Latin America, on the other hand, is seen as generally doing better, with Brazil, Mexico, Chile, Colombia and Trinidad & Tobago all ranked in the top 10.

The index is topped by developed countries, with Norway, the United States (though only regarding its extractives work in the Gulf of Mexico) and the United Kingdom the only countries rated satisfactory on all indicators. Australia and Canada (though only its sector in Alberta) are also in the top 10.

However, the governance findings are more complex, and more interesting, than a simple breakdown of poor versus rich countries. Kaufman says the data rejects “the tired notion of the deterministic ‘resource curse’”.

“The silver lining here is that there’s variation – a number of countries have satisfactory performance, and those are in diverse contexts, including in emerging economies,” he notes.

“Among those that perform poorly are some very rich countries, particularly in the Gulf. Just being rich isn’t necessarily an indication that a country is performing well, and being a developing country isn’t a rationale for doing poorly.”

While many are suggesting that the new index will provide an important tool for identifying country-level problems, debate remains over how to rectify these issues. While political will in affected countries will clearly be a paramount factor, potential roles for the international community are less clear.

According to numbers offered at a panel discussion here on Wednesday, foreign assistance won’t necessarily offer significant leverage towards greater compliance.

“Of the 46 countries with below satisfactory levels on this index, just six have external assistance levels greater than five percent of gross domestic product, and only three are higher than 15 percent,” George Ingram, a senior fellow at the Brooking Institution, a think tank here, said, suggesting this route of influence is a “dead end”.

“However, that money can be used to enhance the performance of government capability … For instance, on taxation, there is a new movement of acknowledging that we need to help developing countries develop their capacity to develop their own revenues.”

Over the past decade, international discussion on natural resources governance has coalesced around a set of standards known as the Extractive Industries Transparency Initiative (EITI). According to the EITI website, 21 countries are currently considered compliant with the initiative, while another 16 are pending candidates.

Yet EITI is still codifying its standards, and several EITI-compliant countries fared poorly on the new Governance Index. Advocates are particularly calling for the inclusion of contracts in the EITI transparency requirements, and several such major reforms will be discussed next week at an EITI board meeting in Australia.

Revenue Watch and others say the most potent role in ensuring government accountability in this regard will fall to national-level civil society.

“Control over resources traditionally meant power, and the incentives for politicians to give that up are really low,” Carlos Pascual, a U.S. State Department official, said Wednesday.

“You have to create different incentive structures, and changing that equation will have to strengthen the role of civil society and the political processes by which pressures can be brought on politicians to link their ability to stay in government with how they manage the resource base. We’re at the very beginning right now on thinking about what the best models may be … but at least we’re starting to have that discussion.”

Artisanal miner panning for gold in Choluteca, Honduras. Credit: Thelma Mejía/IPS

By Thelma Mejía
TEGUCIGALPA, Mar 19 2013 (IPS)

The Honduran government’s announcement of its plans to join the Extractive Industries Transparency Initiative (EITI) has raised expectations as well as doubts, particularly due to the speed with which it aims to complete a process that has taken several years in other countries of the region.

The EITI is a coalition of governments, companies, civil society groups, investors and international organisations that promotes better governance in countries rich in natural resources, through the publication and verification of tax payments made by the companies and of government revenues from oil, gas and minerals.

Honduras is not yet an official EITI candidate country, as Guatemala and Trinidad and Tobago have been since 2011, much less a fully fledged EITI compliant country, a status attained by Peru in 2012 after a process that began in 2004.

These are the only nations in Latin America and the Caribbean that currently form part of this initiative which now encompasses 35 countries, half of them in Africa.

Honduras does not even appear on the EITI website among the countries that intend to implement the initiative. Nonetheless, its government has announced that it plans to complete the initial stage of adhesion to the EITI in a year and a half.

“Nobody could be opposed to transparency, but we have been rather taken aback by how these plans for adhesion have come about, without any consultation with the sectors involved, such as the communities where mining activities are carried out,” activist Pedro Landa of the National Coalition of Environmental Networks of Honduras commented to Tierramérica.

Landa said that his organisation will announce a public position in the coming weeks, “because transparency and accountability are essential, and we feel that up until now, the EITI process has not been sufficiently transparent.”

When the Honduran Congress passed a new mining law in January, a generic article referring to the EITI was included at the last minute. “This came as a surprise, because no one knew the country was even trying to join the initiative,” said Landa.

The Coalition, which includes more than 40 community-based environmental groups, played a prominent role in the debate over the new law, whose draft text was submitted for consultations with different stakeholder sectors for over a year.

When it enters into force, the new law will bring an end to a six-year moratorium on the issuing of mining permits, in place since the Supreme Court of Justice declared 11 articles of the previous law to be unconstitutional.

According to congressional deputy Donaldo Reyes Avelar of the ruling National Party, the novelty of the newly passed legislation lies in the fact that communities will directly participate in deciding whether or not mining projects will be given the green light. It also raises the royalties paid by mining companies from one to two percent, he told Tierramérica.

But the Coalition withdrew from the final stage of consultations because the draft text “is not clear on community participation in decisions regarding the authorisation of mining activities, and the mechanisms for transparency and accountability are not defined,” stressed Landa.

In fact, some 400 protestors took part in a 10-day march this month from the northern community of La Barca to the Congress building in Tegucigalpa to demonstrate their opposition to the new legislation.

Francisca Valle, from the western department of Santa Bárbara, was one of the participants in the “Dignity and Sovereignty Step by Step” march. She called for “greater transparency in terms of the scope of the law, where we were not taken into account.”

Her fellow marchers included representatives of indigenous, women’s and religious organisations.

“During these days of walking, staying overnight in community centres, we have received incredible support from the people. The government consulted on the law with its own ‘activists’ in the municipalities it controls, but the grassroots communities, the people, are angry, because they were not taken into account,” Jesuit priest Ismael Moreno told Tierramérica.

The protestors called for a 90-day period for changes to be incorporated into the draft legislation, based on wide social participation, and for President Porfirio Lobo to veto the bill approved by Congress. But when the marchers reached Tegucigalpa, “they told us we were too late,” said Moreno.

Lobo is expected to pass the law in the coming weeks.

“The problem is that neither the government nor the members of congress are properly reading the country, and when a mining company comes in to set up operations, for example in Santa Bárbara, where people are angry, instead of being a solution, this law will be a source of conflict and violence,” warned Moreno.

When they arrived in Tegucigalpa, the marchers also learned about the government’s plans to join EITI.

But Omar Rivera, executive director of the Civil Society Group, made up by a number of non-governmental organisations, has been closely monitoring the EITI process.

The main challenge, he said, is to strengthen the institutions in charge of controlling mining activity, in terms of taxation as well as the environmental impacts and potential violation of the rights of communities where mining operations take place.

“At present, the state and municipal government institutions responsible for enforcing the legislation related to the mining industry are insignificant, with poor technical capacities and no political power,” said Rivera.

The government has other expectations with regard to the EITI.

Roberto Herrera Cáceres, the high representative and national coordinator for the EITI in Honduras, told Tierramérica that one of the goals is to make the rules for exploration and exploitation in the extractive industries more transparent, with the assistance of the World Bank.

Vice President María Antonieta Guillén reported that the government has complied with all of the requirements to join the initiative, including the creation of a consultative board with participation by the academic, business and civil society sectors.

The objective is for everyone to know how much is paid in taxes and what these resources are invested in. “We want to lay the foundations for genuine transparency in this sector,” the vice president stated at a local press conference.

* This story was originally published by Latin American newspapers that are part of the Tierramérica network.