Extractive Industries Transparency (AU0003)

3. Extractive industries transparency

Commitment Text:

Australia will enhance disclosure of company payments and government revenues from the oil, gas and mining sectors.

We will do this by implementing the Extractive Industries Transparency Initiative (EITI) Standard (including working to enhance company disclosure of payments to governments for the sale of petroleum and minerals) and by continuing to support the application of EITI principles around the world.

[…]

Milestones:

1. Establish a Multi-Stakeholder Group (representing industry, non-government organisations and government) to oversee the implementation of the EITI Standard in Australia (including working to enhance company disclosure of payments to governments for the sale of petroleum and minerals)
2. Submit a formal application for EITI candidacy.
3. Produce Australia’s first EITI report.
4. Commence validation to become EITI compliant (at discretion of EITI Secretariat).

Responsible institution: Department of Industry, Innovation and Science

Supporting institution(s): For details see the national action plan.

Start date: September 2016 End date: Mid 2019

Editorial Note: This is a partial version of the commitment text. For the full commitment text, see the Australia National Action Plan available at https://www.opengovpartnership.org/wp-content/uploads/2001/01/Australia_NAP_2016-2018_0.pdf

Context and Objectives

This commitment seeks to increase the transparency of disclosure of company payments to government and government revenues from the oil, gas and mining sectors through meeting the standards for membership of the Extractive Industries Transparency Initiative (EITI).

The EITI standard includes requirements for implementing countries to establish a multi-stakeholder group and otherwise ensure companies and civil society groups are able to fully engage in the EITI process, including with monitoring and evaluation.[1] There has to be publicly available and comprehensive disclosure,[2] preferably through mainstreaming open data by default,[3] of:

• the legal and institutional framework, including allocation of contracts and licences.
• exploration and production information
• material taxes and revenues collected by government, and
• distribution, management and expenditure of revenues

Forms of social expenditure by companies and other contributions to the economy also have to be included. Membership of the EITI is then dependent on validation, or an assessment of a country’s progress against the EITI standards by the EITI Secretariat, overseen by the EITI Board.

Australia has no centralised system for disclosure of information relating to domestic extractive industries’ payments to government. The Commonwealth government currently publishes an annual report of tax information relating to large Australian and foreign-owned companies.[4] However, the information reported is limited to total and taxable incomes and tax payable as well as details of any petroleum resource rent tax (which applies to profits on petroleum extraction projects) payable. There are also reporting and disclosure requirements that apply at the state and territory level but they generally do not provide disaggregated data concerning individual mining companies or operations.[5] A number of companies in the extractives industry currently voluntarily provide information about payments to government.[6]

In 2011, a multi-stakeholder group, consisting of representatives from Commonwealth and State governments, industry and civil society, was formed to run a pilot program to consider whether Australia could comply with the EITI principles.[7] The multi-stakeholder group concluded that while there are a number of existing accountability measures in place relating to payments to government in the domestic extractives industry, these are not necessarily comprehensive and greater transparency and consistency of reporting is needed to ensure trust in the sector is maintained.[8] The pilot used a process involving a voluntary annual sampling of data. It recommended implementing this process, which it described as an adapted EITI model, as appropriate in the Australian context.

The pilot’s recommended model was considered consistent with the adapted implementation arrangements introduced for the significant amendments to the EITI Standard in 2013.[9] However, the standard was further amended in 2016 to include a requirement that all implementing parties, by 2020, publicly disclose beneficial ownership information.[10] There is also currently an inquiry into corporate tax avoidance and issues relating to the treatment of royalties, deductions and taxes by corporations involved in Australia’s offshore oil and gas industry which could also be relevant to Australia’s membership of the EITI. [11]

This commitment sets out specific milestones towards commencing validation by the EITI Secretariat in 2019. It therefore represents a highly specific commitment given the detailed requirements needing to be addressed in submitting a formal application, producing the first EITI report and being validated as EITI compliant.

EITI compliance will enhance access to information on governance and payments in the oil, gas and mining sectors. By establishing a multi-stakeholder group to oversee the implementation of the EITI standard the commitment will also increase participation of civil society groups. The ability to reconcile payments against receipts will also assist in testing the reliability of the regulatory framework and exposing potential corruption or mismanagement by public officials.

Although civil society groups interviewed in preparing this report were highly supportive of Australia’s implementation of the EITI standard, they considered the potential impact to be moderate given the yet unresolved issues with implementation. Jessie Cato, from Publish What You Pay (PWYP) Australia, for example, highlighted the limited nature of the pilot and its definition of materiality of payments (which excluded various loans and grants, tax credits and allowances[12]), and the need to resolve a number of issues including which forms of social expenditure will be included. The voluntary nature of the disclosure requirements under the standard and the focus on domestic payments also limited the potential benefits from EITI implementation. PWYP Australia, and Transparency International (TI) Australia, both members of the pilot multi-stakeholder group, have advocated for a mandatory disclosure reporting requirement that legally required extractives companies listed on the Australian Securities Exchange to make public their payments to government in every country in which they operate.[13] This would bring Australia in line with other countries, including the UK and Canada, that have introduced such a mandatory disclosure requirement and to which several Australian companies, including BHP Billiton and Rio Tinto, are already subject.[14]

Completion

Milestone 3.1: This milestone was fully completed. The Department of Industry, Innovation and Science has re-established the multi-stakeholder group, which has met twice (on 23 November 2016 and 6 April 2017).[15] However, no information is publicly available relating to the membership of the group, its agenda or decisions to date. In an interview with the Department of Industry, Innovation and Science in preparation for this report, as confirmed in interviews with PWYP Australia[16] and TI Australia[17], who are members of the multi-stakeholder group, indicate that the multi-stakeholder group was established on the same basis as the pilot, with representation from government (including some State representatives), the extractive industry and civil society, with each sector then responsible for determining who will represent it in the group.

Milestone 3.2: The interviews with the Department indicated that this milestone has not been started as the Department has not submitted an application for EITI Candidacy as required.[18] This is due to a comprehensive review being undertaken by the Department of the 2016 amendments to the EITI standard against the model adopted in the pilot.[19] Turnover of staff has also delayed further progress. Decisions relating to beneficial ownership transparency are also subject to policy positions being developed by Treasury (see Commitment 2 above).

PWYP and TI Australia indicated that they have had difficulty in getting further information about progress. They were also concerned about the lack of high-level ministerial support for the initiative, and the lack of clear resources that have been allocated towards achieving the commitments objectives.[20]

Milestones 3.3 and 3.4: Because these milestones are dependent on submission of an application for EITI membership they have also not been started.

The lack of transparency relating to progress of this commitment has meant that no early results are available.

Next Steps

The delay in progressing this commitment may require this commitment to be taken forward into the next action plan with a revised timetable for implementation. Further details about progress, both through more regular reporting to the multi-stakeholder group established under this commitment and to the public through publication of agenda and minutes of multi-stakeholder meetings and status updates, should be provided.

The next action plan could also include an evaluation of the costs and benefits of establishing a mandatory disclosure regime for Australian Companies involved in the extractives industry overseas, including an investigation of the impact of mandatory disclosure regimes adopted in other countries