A refusal by U.S. oil companies including Exxon Mobil Corp. (NYSE: XOM) and Chevron Corp. (NYSE: CVX) to disclose their U.S. tax payments is undermining the international effort to fight corruption in natural resources industries worldwide, according to transparency campaign groups.
The chairman of the Extractive Industries Transparency Initiative (EITI), whose participants include 51 governments and most major western companies, said it was “disappointing” that the largest U.S. oil groups “did not provide the leadership expected from them,” in the latest sign that the 15-year-old initiative is under strain.
The Trump administration withdrew the U.S. from the initiative in November, even though it said at the time it continued to “value the EITI as a critical tool to promote transparency, increase competitiveness, and combat corruption around the world.”
Participants in the EITI commit to disclosing how much companies are paying, and governments are receiving, for natural resources developments, on the grounds that increased visibility of the flows of money will reduce opportunities for corruption and improve accountability.
Both Exxon Mobil and Chevron have disclosed their tax payments to other countries around the world but, like most other U.S. companies, have chosen not to reveal their corporate tax payments to the United States.
Several of the non-governmental organizations that are also involved in the initiative, including the Project on Government Oversight (POGO) and Oxfam, complained the EITI’s work was being damaged because Exxon Mobil and Chevron had refused to follow “this most basic aspect of compliance” with its standards, even though the companies are represented on its board.
Danielle Brian of the POGO said that if the companies were allowed to continue to keep their U.S. taxes under wraps, without any adverse consequences, “that’s the beginning of the end of the legitimacy of the EITI.”
The issue will be debated at a board meeting of the EITI on June 28. In a statement responding to the complaints last week, Fredrik Reinfeldt, the chairman of the initiative, said Exxon Mobil and Chevron’s position was “disappointing,” but he recommended that they should not be removed from the board or face other punishment.
Zorka Milin of Global Witness said U.S. companies set an example for others. “The U.S. has always been a leader in anti-corruption and transparency policies, and it is sad to see some of that starting to unwind now,” she said.
Exxon Mobil said corporate tax returns “contain complex, proprietary and competitive information that nearly all companies choose to keep confidential”, and the U.S. Internal Revenue Service (IRS) had been explicit in telling the EITI that “corporate tax reporting in the U.S. would be strictly voluntary.”
The company said some members of the EITI were trying to undermine the initiative “by attempting to remove other committed members who [hold] differing views of how to advance global transparency objectives.”
Chevron said it had a longstanding commitment to promoting revenue transparency and disclosed other payments in the U.S. such as its permit fees, but its tax payments were “confidential.”
Established in 2003, the EITI has 51-member countries, including large resource-holders such as Kazakhstan, Nigeria and the Democratic Republic of Congo, as well as the U.K., Norway and Germany.
Oil companies have been vocal supporters of the EITI, and BP Plc (NYSE: BP), Royal Dutch Shell Plc (NYSE: RDS.A), Total SA (NYSE: TOT) and Equinor ASA (NYSE: EQNR) are also represented on its board. Exxon Mobil and Chevron also backed the initiative from the beginning. Exxon Mobil said in 2008 that revenue transparency and accountability were “critically important.”
Campaign groups have suggested the reason the U.S. companies will not disclose their payments to the IRS is because they are paying so little or receiving rebates. Shell and BP have disclosed their tax payments to the U.S., and in 2016, a difficult year for the oil industry, Shell E&P received a rebate of $239 million, while BP America received $16.6 million.
Jana Morgan of the International Corporate Accountability Roundtable said: “Why is the U.S. the only country where Exxon and Chevron won’t disclose this information? . . . They don’t want U.S. citizens to know if we are getting a good deal or not.”
Recommended Reading
Brett: Oil M&A Outlook is Strong, Even With Bifurcation in Valuations
2024-04-18 - Valuations across major basins are experiencing a very divergent bifurcation as value rushes back toward high-quality undeveloped properties.
Marketed: Team Operating Gulf Coast Opportunity
2024-03-19 - Team Operating LLC has retained PetroDivest Advisors for the sale of certain oil and gas leasehold and related assets spanning multiple counties in Texas, Louisiana and Mississippi.
Marketed: Williston, Powder River Basins 247 Well Package
2024-03-11 - A private seller has retained EnergyNet for the sale of a Williston and Powder River basins 247 well package in Sheridan, Montana, Burke and McKenzie counties, North Dakota and Campbell County, Wyoming.
Marketed: Anadarko Minerals Woodford Shale Opportunity
2024-02-26 - Anadarko Minerals has retained EnergyNet for the sale of a Woodford Shale opportunity in Blaine County, Oklahoma.
Marketed: Anschutz Exploration Six Asset Package in Wyoming
2024-02-26 - Anschutz Exploration Corp. has retained EnergyNet for the sale of six AFE asset packages in Campbell County, Wyoming.