Many resource-rich developing countries fail to realise the full development potential of their natural resources. This is especially acute in the case of oil, gas, and mineral resources. Evidence from many resource-rich countries shows their performance on human development indicators compares unfavourably to less-endowed countries. At the root of this underperformance—often referred to as the “resource curse”—is the failure by governments to properly address the institutional and policy challenges that come with natural resources. (IMF, 2010)
More than 50 countries depend on oil, gas and minerals as their most important sources of government and export revenues. Large-scale fisheries, forestry and leasing of agricultural lands are also becoming important sources of revenue. As the government is managing such resources in trust for the people, the people have a right to know what is being done with their natural wealth.
Mismanagement and corruption have many manifestations and can have dire consequences. Some countries negotiate poor terms with extractive companies, forsaking potential long-term benefits. Many countries do not collect resource revenues effectively. And even when resource revenues do end up in government coffers, they aren’t always spent in ways that benefit the public. (Revenue Watch, 2013).
Transparency and accountability are crucial in the governance of natural resources, from the decision to extract to the granting of concessions, the collection of revenues and the management of resource revenues. This can increase the efficiency of government policies, reduce opportunities for self-dealing and diversion of revenues for personal gain, raise the level of public trust and reduces the risk of social conflict. An informed and engaged public can hold the government to account, but will also help ensure that complex, large-scale projects meet government standards for environmental and social protection as well as revenue generation.
Public disclosure requirements can improve the quality of data the government gathers and maintains. This makes it easier for relevant bodies such as financial, energy and mining ministries, as well as environmental and regulatory agencies, to do their jobs. Reliable and frequent data can make it easier for governments to plan and manage their budgets and long-term development plans. Transparency also reduces the cost of capital.(Hameed, 2005)
NB: This topic relates to oil, gas, mining, forestry and fisheries as well as to the leasing of agricultural lands. However there are also separate sections dealing with specific issues in the forestry, fisheries and land sectors. This topic relates to oil, gas, mining, forestry and fisheries as well as to the leasing of agricultural lands. However there are also separate sections dealing with specific issues in the forestry, fisheries and land sectors. Other critical steps in support of extractive industry transparency and integrity are the enactment and implementation of Right to Information laws and the requirement that officials with a role in the oversight of the extractive sector disclose any conflicts of interest.
This topic has been developed by Revenue Watch Institute.
Examples in Practice
39 countries are implementing EITI
The Extractive Industries Transparency Initiative (EITI) is an international multi-stakeholder coalition of governments, companies, investors, civil society organisations, and partner organisations. Implementing country publish EITI Reports that disclose the revenues from extraction of the country’s natural resources. Companies report payments to government (taxes, royalties, etc) and the government reports what it has received. These two sets of figures are compiled and reconciled by an independent reconciler, chosen by the country, and published in the EITI Report.
Brazil publishes detailed information on resource revenues
Overall, Brazil has good levels of revenue and expenditure transparency, driven by two main factors: its legislation for disclosure of public data on government web pages, and the National Oil Company’s participation in the stock exchange. The National Petroleum Agency (ANP) provides sregularly publishes information on reserves, production volumes, prices, exports, investment, the names of companies operating in the country, production data by company, and disaggregated revenue streams such as production values, royalties, special taxes, bonuses, and acreage fees.
Bulgaria is developing a strategy for more effective management of natural resources
As part of its OGP Action Plan published in April 2012, Bulgaria committed to implementing new good practices in managing natural resources. Its planned activities were to:
- Develop a New National Strategy for the Mining Industry
- Develop a new Law on the Underground Resources incorporating the European and global practices of effective management of the underground resources.
- Develop a public information system with data about the location, group of mineral resources and their status and/or found deposits of underground resources, specialised maps and registries of exploration permits and concessions.
In order to enhance the transparency of managing mineral resources they aim to involve experts from the academic circles and NGOs in carrying out tender and competitive procedures for obtaining rights on the underground resources.
Canada has passed a law requiring oil, gas and mining companies to disclose their payments to governments
The Extractive Sector Transparency Measures Act, which became law in December 2014, requires oil, gas and mining companies to publicly disclose the payments they make to governments around the world. The rules apply to companies listed on Canadian stock exchanges as well as large privately held companies. The affected companies operate in more than 100 countries. While the law itself falls short of requiring project-level reporting, this information will be required by the legally enforceable administrative tools which will accompany the law.
Colombia announced that it would implement the EITI
The Government of Colombia announced at the 2012 Open Government Partnership (OGP) summit that it would implement the Extractive Industry Transparency Initiative Standard.
Colombia has a comprehensive legal framework for the extractive sector
Colombia has comprehensive legal framework and independent licensing process, earning it a satisfactory score of 75 on the Institutional & Legal Setting section of the Revenue Watch Index.
The National Hydrocarbons Agency (ANH) grants extractive rights following direct negotiations or open bidding. A 2003 hydrocarbons law replaced production-sharing agreements with a concession system in which companies pay the government taxes and royalties in exchange for extractive rights. The Customs and Tax Authority collects taxes while the ANH collects non-tax revenues and regulates the oil sector. Royalties go into a special account at the Finance Ministry and do not enter the national treasury.
Environmental and, in some cases, social impact assessments are required before projects begin. The results are published, but the consultation process does not always address the concerns of affected communities. Colombian law includes several provisions designed to improve public access to information, some of them specific to the extractive sector, but there is no equivalent of a Freedom of Information Act.
Congo (DRC) publishes all mining, oil and forestry contracts
In May 2011, the Congolese government passed a decree that all contracts relating to natural resources (oil, mining, forestry) should be made public within 60 days.
The government began systematically disclosing agreements in June 2012, however a few controversial contracts remain secret.
Environmental and social impact assessments are mandatory for extractive concessions in Australia
Australia’s Freedom of Information Act requires disclosure of information on the mineral sector, sector, and environmental and social impact assessments are mandatory before mineral rights can be awarded.
Environmental impact assessments are required for the extractive industry in Colombia
Environmental and, in some cases, social impact assessments are required before projects begin. The results are published, but the consultation process does not always address the concerns of affected communities.
Ghana is establishing Committee with civil society participation to oversee the petroleum sector
The Public Interest and Accountability Committee is established by law to monitor and evaluate compliance by the government in the use of petroleum revenues, to provide a platform for public debate on spending priorities and and an independent assessment on the management and use of revenues. The Committee is mandated to publish reports each year.
Ghana publishes information on receipts from petroleum companies on a quarterly basis
In 2011, Ghana passed the Petroleum Revenue Management Act, which requires the government to publish quarterly information on receipts from petroleum companies
Ghana’s Petroleum Revenue Management Act was developed with public consultation
Immediately following announcement of oil discoveries in 2007 the government of Ghana started to take steps to avoid the pitfalls of other petroleum-rich countries.
Public consultations took the form of regional ‘town hall’ meetings and a public survey. The timetable of the meetings was publicised in the newspapers and on the radio. Between 300-500 people attended each of the meetings and a number of written submissions were also received. Additional dialogues were organised by the World Bank, civil society platform, Council of Churches and UNIDO – including a consultation with children.
Key questions were who should collect and account for the revenues, how much should be spent in current budgets and how much saved for future generations, how should the natural resource fund be managed and how should it be safeguarded?
The law that was developed reflected public preferences, and required the publication of revenues and payments, mandating public access to information.
[Source: Natural Resource Charter]
Guinea discloses dozens of mining contracts on centralised government websites
The Government of the Republic of Guinea adopted a new mining code in 2011 decided to establish a clear and systematic approach to the review and, where appropriate, the renegotiation of mining titles and mining agreements in conditions that respect the normal rules of business.
IN 2013 the Guinean government launched a new online database containing all its existing mining contracts – 60 contract documents covering 18 mining projects.
The website was developed with the assistance of experts from Revenue Watch Institute, the World Bank Institute and Columbia University, who have been supporting the Guinean government in its contract review. The online materials include a searchable summary of contract terms, allowing non-expert readers to find key sections and to understand the obligations for companies and the government.
Guinea’s Technical Contract Review Committee published on its website more than 60 contract documents covering 18 mining projects. The government thus fulfilled a commitment of the mining code adopted in 2011. The online materials include a searchable summary of contract terms, allowing non-expert readers to find key sections and understand the obligations for companies and the government.
The government has said it will add online any amended contracts and all future contracts.
In Sierra Leone the law requires that oil contracts must be awarded through competitive auctions
Sierra Leone has a long history of mining as its major economic activity. The mining sector provides employment and livelihood to over 135,000 workers, the overwhelming majority of whom are engaged in artisanal, small-scale mining operations. Artisanal mining constitutes an estimated 84 percent of total diamond exports from Sierra Leone.Sierra Leone does not currently produce any petroleum, but there are offshore prospects.
The petroleum sector is regulated by the Petroleum Exploration and Production Act of 2001. Under this Act, Sierra Leone developed a model petroleum agreement which provides a 10 percent royalty, a 37.5 percent income tax rate and annual rental between $30 and $100 per sq. km. A revised Petroleum Exploration and Production Bill was submitted to parliament in July 2011 that included several clauses seeking to improve transparency, including a requirement that oil contracts be awarded only through competitive auctions, that contracts be published and that payments be disclosed in accordance with the terms and procedures of EITI.
Paragraph 39 of the Petroleum (Exploration and Production) Act form 2011 states that “A Minister may, following a transparent, fair and competitive process and on the advice of the Directorate, grant a petroleum licence to two or more applicants who offered the most favourable terms and conditions to the State.”
Liberia publishes information on bids and contracts
In Liberia the Land, Mines and Energy Ministry publishes information on the number of bids received, bidding requirements, and winning bids. Most mineral development agreements are published, and the Ministry is launching a Mineral Cadaster Information Management System.
Norway’s Statoil publishes all its revenues and payments by country
Norway’s Statoil is a partially state-owned company. It was one of the first major oil companies to start disclosing all revenues and payments in the countries in which it operates.It has supported the Extractive Industries Transparency Initiative (EITI ) since its inception in 2002/2003, and became a board member of the EITI in 2009.
Peru reports natural resource transfers to local government online
The Economic Transparency Portal is an open-access information platform which allows any user to have, in real time, comprehensive economic information from the Ministry of Economy and Finance (MEF). It includes regularly updated online reporting system of transfers to local governments.
Several countries use the ‘Flexicadastre’ system to create public mining portals
The Flexicadastre system designed by Spatial Dimension is one solution used to implement Mining Cadastre Systems to facilitate all aspects of the application, evaluation, granting and compliance monitoring of mineral rights and related permits.
As well as using the system to facilitate application and concession management a number of countries have also used the system to develop Public Mining Cadastre Portals which provide a spatial view into the mining cadastre data and are intended to improve stakeholder communications, reduce corruption and improve transparency.
Sierra Leone set up an online mineral concession registry
The Minerals Cadastre Administration System (MCAS), was set up in Sierra Leone in 2009. An
MCAS is a means for government to collect, organize, maintain and deliver data on mineral
resources in an integrated and effective way.It is a tool responsible for the administration of
There are two parts to the system:
- The database. A database of key information on mining licenses, including their status, location, fees paid/outstanding and ownership of exploration and extraction rights. Data is collected from across government entities, as well as a number of newly established rurally based offices. The licenses are mapped using Geographic Information Systems (GIS) technology, which allows users to view coordinates of concessions on a detailed map of Sierra Leone. The IT system organises and maintains the data by providing a real time check throughout the lifecycle of the licenses and automatically notifies users of outstanding payments, correspondence or status of license.
- The online public portal. As part of the MCAS, a Mining Repository was established in
2012 which publishes all the data on mining licenses on a web interface.
This interface is easily accessible online and delivers the information directly
These information systems were accompanied by a number of additional measures:
- A Mining Cadastre Office was established, acting as the focal point for all applications and license holders.
- A Data Sharing Agreement was signed in order to establish a clear mandate within government ministries and agencies to share information relevant to the MCAS.
- An inter-ministerial task force was created a and has set up joint inspection teams in order to use the reconciled data to collect outstanding revenue.
The Natural Resources Charter identifies three key success factors:
- Political support. The mandate for establishing a MCAS in the new Mining Act of 2009 as well as strong political backing was a vital condition for overcoming opposition to improved transparency from entrenched interests.
- Government cooperation. First, an official Data Sharing Agreement was signed by ministers, providing an official mandate for sharing financial and MCAS information. Second, an inter-ministerial Task Force of all reporting agencies of the MCAS was established and meets on a weekly basis.
- Donor/contractor support to train government staff. The continued backing of the donors has also been crucial due to a lack of institutional capacity. To this end the contractors which established the online system also had staff based within the Mining Cadastre Office to support change in administrative processes. Training has also been provided to government staff on how to use the IT based systems.
[Source: Natural Resource Charter]
South Africa set up an online portal for mining applications and information
The Department of Mineral Resources (DMR) launched the South African mineral resources administration (Samrad) online application system in order to streamline the application process and to make it transparent.Since 2011 all applications for prospecting rights, mining permits and mining rights have had to be submitted in electronic format on the department’s website. The site includes a list of all applications for rights in terms of the Mineral and Petroleum Resources Development Act (MPRDA). Users can browse the locality of the rights applied for, rights granted and available land for any mineral or minerals anywhere in South Africa, and make applications.
However there have been technical problems and weaknesses with some users having difficulties in gaining access and problems of double-granting of rights and lengthy processing times. The system does not provide details of when an applicant has been issued with an instruction to proceed with a public participation process, making its use to the public limited.
The Dodd-Frank Act in the US requires companies to report on how much they pay governments for access to oil, gas and minerals
In July 2010, the U.S. Congress passed Section 1504 of the Dodd-Frank Act, a measure requiring companies registered with the Securities and Exchange Commission (SEC) to publicly report how much they pay governments for access to oil, gas and minerals.
Dodd-Frank 1504 adds to existing stock listing requirements in the US by obliging all extractive companies to publish the payments they make to the US and foreign governments in the countries where they operate. This information is to be disclosed in an annual document to the US Securities and Exchange Commission.
All companies that are listed in the US and engage in the commercial development of oil, gas and other minerals (defined in Dodd-Frank 1504 as exploration, extraction, processing, export and other significant actions) will be covered. This includes eight of the ten largest mining companies and 29 of the 32 largest internationally active oil companies.
Companies that engage in the commercial development of oil, natural gas or minerals will have to report – The type and total amount of payments made for each project, and, – The type and total amounts of payments made to each government.
These payments cover report taxes, royalties, fees (including license fees), production entitlements and bonuses.
The EU requires extractive companies to publish their payments on a country-by-country and project-by-project basis
In July 2013 European Parliament approved the EU Transparency and Accounting Directives, which will oblige all extractive listed companies (and large non-listed) to publish their payments on a country-by-country and project-by-project basis. The European Commission Accounting Directive, introduces a new obligation for large extractive and logging companies to report the payments they make to governments. Reporting would also be carried out on a project basis, where payments have been attributed to specific projects.
The Directive introduces a new obligation for listed and large non-listed extractive and logging companies to report all material payments to governments broken down by country and by project, when these payments have been attributed to a specific project. Production entitlements, taxes, royalties, dividends, bonuses, licence fees and payments for infrastructure improvements must be reported.
The government of Peru has committed to strengthen extractive industry transparency
As part of its OGP Action Plan published in April 2012 Peru has committed to strengthen transparency and access to public information.
This includes an explicit commitment to improve mechanisms for access to information and transparency in environmental matters and in relation to extractive industries. The government committed to discuss an extractive industries transparency law and to consider expanding the scope of its EITI reconciliation reports to build an environment of trust among oil, gas and mining industry stakeholders.
The Northwestern Power Council in the USA developed a vision for power development, through widespread public consultation
The Northwest Power Planning Council in the USA began its most recent power plan review by asking for a public response to its characterisation of the major issues of concern to the region and also asking for suggestions of other topics. The council established a number of advisory committees, including committees on conservation resources, demand forecasting, generating resources and natural gas. Through public meetings with the advisory committees, the Council obtained the views of the Bonneville Power Administration, its customers, relevant public interest groups, the region’s ratepayers and other important participants in regional power policies. These included broad issues, such as the effects of climate change, capacity to meet loads, integrating renewable resources, power system interactions with the fish and wildlife programme etc.
The Council continued to release papers and draft forecasts for further public comment over the following two years that it engaged in the power planning process. These were more technical papers, including draft fuel price forecasts and draft demand and economic forecasts. Views from the public and advisory committees continued to be solicited through public meetings.
The Council then released a draft power plan for public review. It received 750 written comments over a 60-day period, and held public hearings in nine cities across the region, receiving the testimony of hundreds of interested individuals and representatives of organisations, utilities, businesses, public interest groups and government agencies. Transcripts of the public hearings and written comments received were published on the Council’s website. The final power plan included responses to comments received.
The Council followed the requirement of the Northwest Power Act to facilitate widespread public involvement in the preparation, adoption and implementation of the plan, and the Notice and Comment procedures in the Federal Administrative Procedures Act that require at least 30 days’ notice.
The United Kingdom has passed a law requiring all listed companies to disclose payments to governments on a project by project basis
A new UK law on transparency in extractive industries called the Reports on Payments to Governments Regulations 2014 came into force on 1 December 2014. Under the new regulations, large and EU-listed UK-registered oil, gas, mining and forestry companies must report their payments to governments worldwide on a country by country and project by project basis. The first reports are due to be published in 2016 and will cover payments made in 2015. Firms that fail to report fully, truthfully and accurately could face criminal prosecution. Through the passing of this law, the UK became the first EU member state to complete transposition of the Accounting Directive’s country-by-country reporting rules for the extractive industries.
Timor Leste publishes some minerals contracts
In Timor Leste, the government introduced a requirement in the Petroleum Act (2005) which requires all oil and gas contracts signed after the effective date to be publicly disclosed. As a result, the vast majority of Timor-Leste’s Production Sharing Contracts (PSCs) been published.
However, there is no formal mechanism to request these contracts from the government and as of January 2011, they could not be found on any government websites. The contracts can currently be found on the website of the La’o Hamutuk NGO.
Some contracts signed before 2006 have also been released by the operating partners, although several paragraphs have been censored. Where partners have have refused to publicly release these earlier contracts the government has not requested public disclosure.
Trinidad and Tobago’s Heritage and Stabilisation Fund publishes quarterly reports
Trinidad and Tobago created the Heritage and Stabilization Fund in 2007 to help insulate the economy from oil and gas price fluctuations. Law requires deposits be made to the fund when oil and gas revenues exceed expectations and allows for withdrawals when revenues fall short. The Finance Ministry presents audited quarterly reports to Parliament and publishes them. Officials involved in the fund’s management are required to disclose any financial interest in the sector.
Ukraine announced that it would implement the EITI
Ukraine announced in April 2012 that it would implement the EITI.
- Publish environmental and economic impact studies for all natural resource projects
- Create mechanisms for the public and legislators to engage in extractive concessioning
- Create a national strategy for the extractive sector, through an open and participative process
- Publish resource-related revenue transfers to sub-national governments
- Require state owned enterprises to publish comprehensive reports
- Publish comprehensive financial reports on natural resource funds