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H.R. 6066, THE EXTRACTIVE INDUSTRIES 

TRANSPARENCY DISCLOSURE ACT 

HEARING 

BEFORE THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

JUNE 26, 2008 

Printed for the use of the Committee on Financial Services 

Serial No. 110–124 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

BARNEY FRANK, Massachusetts, Chairman 

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

GWEN MOORE, Wisconsin, 

LINCOLN DAVIS, Tennessee 

PAUL W. HODES, New Hampshire 

KEITH ELLISON, Minnesota 

RON KLEIN, Florida 

TIM MAHONEY, Florida 

CHARLES WILSON, Ohio 

ED PERLMUTTER, Colorado 

CHRISTOPHER S. MURPHY, Connecticut 

JOE DONNELLY, Indiana 

ROBERT WEXLER, Florida 

JIM MARSHALL, Georgia 

DAN BOREN, Oklahoma 

BILL FOSTER, Illinois 

ANDRE ́ CARSON, Indiana 

SPENCER BACHUS, Alabama 

DEBORAH PRYCE, Ohio 

MICHAEL N. CASTLE, Delaware 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

STEVEN C. LATOURETTE, Ohio 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JUDY BIGGERT, Illinois 

CHRISTOPHER SHAYS, Connecticut 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

TOM FEENEY, Florida 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

GINNY BROWN-WAITE, Florida 

J. GRESHAM BARRETT, South Carolina 

JIM GERLACH, Pennsylvania 

STEVAN PEARCE, New Mexico 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

GEOFF DAVIS, Kentucky 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

ADAM PUTNAM, Florida 

MICHELE BACHMANN, Minnesota 

PETER J. ROSKAM, Illinois 

KENNY MARCHANT, Texas 

THADDEUS G. McCOTTER, Michigan 

KEVIN McCARTHY, California 

DEAN HELLER, Nevada 

JEANNE M. ROSLANOWICK, Staff Director and Chief Counsel 

(III) 

C O N T E N T S 

Page 

Hearing held on: 

June 26, 2008 .................................................................................................... 1 

Appendix: 

June 26, 2008 .................................................................................................... 23 

WITNESSES 

THURSDAY, JUNE 26, 2008 

Detheridge, Alan, Former Vice President for External Affairs, Royal Dutch 

Shell Group ........................................................................................................... 11 

Jenkins, Robert, Chairman, F&C Asset Management ......................................... 9 

Lissakers, Karin, Director, Revenue Watch Institute .......................................... 6 

Stevelman, Faith, Professor of Law, New York Law School ................................ 8 

APPENDIX 

Prepared statements: 

Carson, Hon. Andre .......................................................................................... 24 

Waters, Hon. Maxine ........................................................................................ 25 

Detheridge, Alan ............................................................................................... 27 

Jenkins, Robert ................................................................................................. 29 

Lissakers, Karin ............................................................................................... 35 

Stevelman, Faith .............................................................................................. 44 

(1) 

H.R. 6066, THE EXTRACTIVE INDUSTRIES 

TRANSPARENCY DISCLOSURE ACT 

Thursday, June 26, 2008 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The committee met, pursuant to notice, at 10:08 a.m., in room 

2128, Rayburn House Office Building, Hon. Barney Frank [chairman of the committee] presiding. 

Members present: Representatives Frank, Waters, Gutierrez, 

Sherman, Moore of Kansas, Scott, Green, Cleaver, Moore of Wisconsin, Carson; Paul, Roskam, and Heller. 

The CHAIRMAN. The hearing today is on a very important issue: 

the impact that the presence of valuable resources has in poorer 

countries. Obviously, the question of mineral resources and others 

is particularly important right now because of the pricing impact. 

But this is a very important aspect of it, and we have the paradoxical situation where the discovery of wealth that should be very 

helpful to the people of particular countries has often had a somewhat negative effect. 

As I was saying this morning, for people who think this was 

purely about value or ethics, the question of the corruption that 

sadly sometimes accompanies the ability to get at a resource can 

have very important implications. There are a lot of arguments 

about what is causing the price of oil to be so much higher than 

we would like, but everybody agrees that the problems in Nigeria 

are an important part of this. 

So if anyone wants to see what the broader implications on a 

global basis can be for everybody, they can look in Nigeria, because 

it is clear the dispute over how much money is being paid and 

where it is going and how it is being distributed for oil in Nigeria 

contribute greatly to the turmoil that is one of the upward pressures on price. And it also was an argument to me about why people in industry ought to be supported. 

I know many are an involuntary transaction and I believe it is 

often the case that the dissatisfaction that exists in various countries is based on a few of the things worse than they are. That is, 

I think it is not a case where if these things were made public, people would learn all these terrible things, exclusively. In some cases, 

if people trusted us, it would not be as bad as they think. But it 

seems to me that it is in everybody’s interest to do this. And, as 

I said, the Nigeria situation, I think, is an example of why this has 

broader implications. 

2 

We in this committee have reached a consensus on a couple of 

bills: one on the funding for the International Development Association; and another one on the question of debt relief. We talk 

about conditionality. And we generally had a bipartisan agreement 

that the international institution shouldn’t be dictating specific economic policy choices, but that it is reasonable, indeed necessary, to 

dictate or to make as a condition certain procedural issues such as 

openness and democracy. 

I really believe that what we are talking about today is part of 

that set of concerns. We aren’t telling anybody how to spend the 

money. We aren’t telling anybody in this legislation how much 

money they should or shouldn’t pay. We are saying that the processes of democracy in these countries, and, even if we are not quite 

a democracy, openness, are very important. And so it is in line with 

this sort of procedural conditionality. 

We have rejected substantive conditionality, but we have argued 

for the procedural conditionality and that is what is here today. I 

look forward to the testimony. And, particularly, I would say there 

was the one issue that we would have to address, which is, and we 

will be told, we have heard about the problems with unilateral disarmament, I guess. It is a part of unilateral disclosure, and does 

that put American companies at a disadvantage vis-a-vis others? 

It is one of the things we have to address: Are there governments 

so interested in concealing from their own people that they would 

reject American companies if they were to be subjected to this rule? 

To take others would be less scrupulous, and that is a legitimate 

concern that will have to be addressed if we are to be able to go 

forward here. 

With this, I will now recognize the ranking member of the Subcommittee on Domestic and International Monetary Policy, Trade, 

and Technology, the gentleman from Texas. 

Dr. PAUL. Thank you, Mr. Chairman. You know, when we deal 

with problems like we are talking about today, and trying to solve 

them through more regulation, I am always concerned about what 

might happen because too often there are unintended consequences. If we regulate personal behavior to improve people’s 

lifestyles, there is always an attack on their personal liberties and 

unintended consequences. 

When we deal in economics, the same thing occurs, so the intentions are always good, whether it is dealing with personal behavior 

or economic behavior. I understand the concerns that are expressed 

here. And I think we can all agree that greater transparency regarding the deal between companies listed on American stock exchanges and foreign governments regarding giving those companies 

rights to extract that country’s natural resources are a good thing. 

However, there are legitimate questions about the legislation, 

H.R. 6066 is the proper way to achieve this goal and the legislation 

may well have consequences that were intended. This is what happened with Sarbanes-Oxley. Everybody was very excited about Sarbanes-Oxley and there were a total of three of us who voted against 

it, and it was the fear of what happened with Enron. And yet 

Enron was taken care of by the market as well as fraud laws, and 

it was settled. We didn’t need more regulation. So this idea that 

we just have to have more regulation doesn’t solve these problems. 

3 

One thing that happened after Sarbanes-Oxley, there was 

delisting from American capital markets which continues, and that 

really doesn’t help us. I think delisting from capital markets puts 

pressure on a dollar, pressure on a dollar. It is another reason why 

they need more dollars to buy euros, and why oil prices go up, and 

why gasoline is up, one of the reasons, as well as the problem in 

Nigeria. 

In addition, since many of the extractive industries are authoritarian governments, I doubt simply requiring transparency will result in the type of political reform of those countries desired by the 

supporters of this legislation. It won’t solve that problem. 

Probably a much more effective way of dealing with that subject 

is to break the resources curse, at least in the oil nations, by making or encouraging more competition by expending our domestic 

production encouraging greater development of alternative fuels 

and even nuclear power, plus ending those foreign policies that 

prompt these regimes up, which is frequently the case too. 

We always help the people, send over food, programs which end 

up as weapons in these authoritarian regimes. It has happened numerous times, and I think this approach lends itself to 

misallocating resources and ending up having unintended consequences, but I look forward to the testimony today, and I yield 

back. 

The CHAIRMAN. The gentleman from California. 

Mr. SHERMAN. Thank you, Mr. Chairman. And thank you for 

having this hearing. With good governance, exploitation of natural 

resources can generate large revenues to foster growth and reduce 

poverty in some of the world’s poorest countries. Right now, we 

have two problems: one is corruption; and the other is a lack of information and suspicion of corruption. 

Even where there is no corruption, suspicion itself is corrosive. 

But, apparently, in many places, there is corruption. For example, 

the Democratic Republic of the Congo claims to have received a 

mere $86,000 in mineral royalties, despite having 80 percent of the 

world’s colton, which is used in cell phones and DVD players, etc. 

We see poverty in Africa’s largest oil producer; poverty in Sierra 

Leone in spite of large exports of diamonds. Now, maybe there isn’t 

corruption in Nigeria and Sierra Leone, but the people of those 

countries certainly don’t have access to all the information to allay 

their suspicions, suspicions that I think are probably grounded. 

The extractive industry’s transparency initiative announced that 

the world summit for sustainable development in Johannesburg offers a real way to deal with this. The Bush Administration announced its support in June of 2004. Last year, we were able to 

pass through the House the Overseas Private Investment Corporation Reauthorization Act, through the subcommittee that I chair, 

on the Foreign Affairs Committee. This bill passed overwhelmingly, 

and on a bipartisan basis, both committees and the House, and 

passed in substantially the same form through the relevant Senate 

committee. 

It is, I believe the first piece of legislation to get that far that 

requires that those who benefit from a government program, in this 

case OPIC, adhere to EITI principles. It makes perfect sense to require that those who seek capital in our capital markets and disVerDate Aug 31 2005 15:21 Sep 09, 2008 Jkt 044189 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 K:\DOCS\44189.TXT TERRIE
4 

close what’s relevant to shareholders, will also disclose what is relevant to the citizens of those countries from which they extract 

natural resources. 

That information may also be relevant to shareholders who may 

decide how to invest, based in part on whether they think the regimes getting money from the corporation are regimes from which 

they think a company they own stock in should be getting money. 

So this bill will help investors, which is the primary purpose of the 

SEC. It will help the countries receiving this money through a reduction in suspicion and a reduction in corruption. 

Finally, and perhaps most important to my constituents, is that 

the corruption and the suspicion of corruption is undermining oil 

production around the world. One need only look at the Niger River 

Delta in Nigeria. There should be a lot more oil production there. 

If we could go to the people of that region and say, this is the 

amount of money your government is getting, and here your government will account to you for how that money was being spent— 

if we could allay the suspicions—if we could reduce the corruption, 

we might very well see peace in that region of Nigeria and in many 

other places. 

And we might see an increase in the production of oil and some 

of the other commodities whose world price endangers our economy. So this is important for American consumers, for the residents of our individual districts, as well as the effort to eliminate 

poverty in the countries that are blessed with these natural resources. 

I yield back. 

The CHAIRMAN. The gentleman from Georgia. 

Mr. SCOTT. Thank you, Mr. Chairman. 

I want to thank you and the ranking member for holding this 

hearing. This is a very important hearing, because we are dealing 

with precious natural resources being extracted from the ground, 

which means you’re not going to be replenished. And as we move 

on into the future, they are going to become scarcer and scarcer, 

and the need becomes greater and greater. 

And, of course, what is even more troubling is the fact that so 

many of these scarce vital resources are coming from very troubled 

nations, developing nations, where we do have an unfortunate 

amount of corruption and civil wars. 

So this is a very important, timely, and fascinating issue. Our 

bill, H.R. 6066, serves as an important tool. It offers initiatives in 

order to build more stable economies and address security issues 

that are very important around the world. Just as an example, 

take the continent of Africa. What could be more startling in the 

opposites? There we have a continent that is just overwhelmingly 

rich in oil and gas and diamonds, all of these resources. One need 

only view the film ‘‘Blood Diamond’’ to see a more realistic picture 

of why this bill is so important and why this whole effort is so important. And at the same time that Africa has this abundance, it 

probably has the most ravaging situations of poverty and hunger 

than any other place in the world. So it is very, very important 

that we ensure prudent management of resources, that we promote 

accountability and openness, and that we allow vital information to 

be put in the hands of the citizens. I am very interested, and I 

5 

would be very interested for the committee to know the progress 

that the extractive industries transparency initiative is making towards reforms, especially in improving transparency and payment 

and management of the country’s resources, because it is one thing 

to enact an initiative, but it is yet another thing to follow through 

with the implementation, and, it is my understanding that neither 

a single candidate country nor a potential candidate has fully implemented EITI. 

I would be very interested to hear your comments on that, and 

with many conflicts as a result of a country’s extractive industry, 

as I mentioned before, we also have, as my good friend from California, Mr. Sherman mentioned, look into the corruption, the level 

of corruption behind a country’s extractive industries and how we 

might be able to remedy that; and, again, that turning into a crisis 

where poverty increases and social investments are put by the wayside, funds that are put there, misappropriated, and misused. 

Greater accountability for large revenues coming from these industries, working to generate economic growth from these revenues 

in reducing poverty, are all important aspects of the EITI that we 

should focus on. So I look forward to this distinguished panel, your 

thoughts and your opinions on this important legislation and on 

what is happening around the world in some of these developing 

countries and how we can move forward. 

This is a very, very critical, critical issue. Unfortunately or fortunately, depending on which way you look at it, so much of the resources that the world needs today, unfortunately or fortunately, is 

coming from some of these most troubled regions where today’s discussion is most topical, and, so, I am looking forward to a very, 

very important hearing, a very informative one. 

Thank you, Mr. Chairman. I yield back. 

The CHAIRMAN. The gentleman from Missouri. 

Mr. CLEAVER. Thank you, Mr. Chairman. 

I appreciate the opportunity to have an exchange and to come to 

our panel today. I am just in the beginning stages of a new book 

called, ‘‘Banana Republic.’’ It is very interesting, and while the banana industry is not an extracted industry, I think the parallels 

are very similar. I didn’t know, for example, that bananas are not 

indigenous to South America. They were brought in and exploitive 

corporations actually put governments in place to help the banana 

industry. And so they became known as ‘‘banana republics.’’ 

And essentially major corporations, some are still in existence, I 

won’t call their names now, just came in and kind of ripped off the 

people in that country, planting these vast banana plantations all 

over South America. And that same kind of thing is happening 

here with extracted industries. I was very, very interested in and 

conversant with the panel that appeared here back in October. 

It was, I think, a very interesting meeting because we found out, 

I think, that to some degree exploitation and exploration are parallel in resource-rich countries like Nigeria and like Tanzania 

where I have family members. And when you look at the enormous 

wealth generated in those countries, and the enormous poverty 

that exists in those countries, something seems to have gone awry. 

A worse deal that we end up seeing in many of these countries 

is greater armed conflict, mass murder, corruption, and weakened 

6 

economic development. And my concern is the devastating impact 

of these conflicts and the resulting chronic underinvestment and 

the national economies and the health and education investments 

of the citizens of those countries. I think the United States can be 

better than we have been. We can become a shining light. 

I do have one disagreement with the legislation. The legislation 

does not put in place criminal or civil penalties. I am concerned 

that corporations may not think twice about ignoring this Act, if in 

fact it is put in place. I agree with everything in the legislation, 

except that part of it. I am having some difficulty with that, but 

I would like to have an exchange with you about it. 

I yield back the balance of my time, Mr. Chairman. Thank you. 

The CHAIRMAN. Without any further opening statements being 

requested, we will proceed with the testimony. 

I will explain in advance that in about 15 minutes, I have to 

leave the hearing. The chairman of the Subcommittee on Domestic 

and International Monetary Policy, Trade, and Technology, Mr. 

Gutierrez, will preside from then on. But let’s begin with a returning witness here, Karin Lissakers, who is the director of the Revenue Watch Institute. 

Ms. Lissakers. 

STATEMENT OF KARIN LISSAKERS, DIRECTOR, REVENUE 

WATCH INSTITUTE 

Ms. LISSAKERS. Thank you very much. Mr. Chairman, and members of the committee, last October, when you explored the socalled resource curse phenomenon and the paradox of plenty and 

its implications for both resource-rich countries and for the United 

States and other consuming countries, you, Mr. Chairman, asked 

the question. You said, what can the United States do to encourage 

policies that would help make extractive resources a positive rather 

than a negative for resource-rich countries. 

I believe that this bill provides a strong answer. There are two 

reasons. First, secrecy is a big part of the problem in these countries. The lack of public insight and public oversight over the natural resources creates huge opportunities for misappropriation and 

increases the risk of conflict over control over these highly valuable 

resources. 

The disclosure of extractor payments that will be mandated by 

this bill will give citizens in producing countries a very powerful 

tool with which to hold their own governments accountable for how 

the money is managed. We already have seen that when people 

know how much money is coming in from extractive resources, they 

begin to demand to know where the money is going. And this is the 

first step to changing the country’s policies for the better. 

The second reason I think this law is excellent is that it is fully 

consistent with what companies and countries are already beginning to do. The law will in fact codify what is becoming widely accepted best practice disclosure in extractive industries. For the last 

6 years, companies like BP, Shell, Exxon, Chevron, Petrobras, Rio 

Tinto, and Anglo American, have joined with governments, investors, and civil society to develop a voluntary disclosure process. 

The so-called extractive industry’s transparency initiative, 

EITI—23 countries are now implementing EITI, which requires the 

7 

dual disclosure and reconciliation of company payments and government receipts from the extractive sector. 

Similarly, along the same lines, the World Bank’s investment 

arm now requires each company participating within an oil, gas, or 

mining project to publish the company’s payments to the government in question, broken down by type of payment. The OPIC bill 

still pending before Congress includes similar language. And, sometimes, companies just go ahead on their own, particularly where 

political or social tensions run high. 

Conoco-Philips regularly reports its payments in Timor-Leste. BP 

decided to publish its payments in Azerbaijan in relation to a controversial pipeline. When Bolivia threatened to expropriate gas 

properties, Petrobras went out of its way to tell investors how 

much it was paying in taxes to Bolivia. 

Mining giant Newmont publishes its government payments 

around the world, as does Talisman Energy, which works in nonEITI countries like Algeria, Colombia, Malaysia, and Vietnam. And 

Lukoil, one of the biggest taxpayers in Russia, makes a point to 

regularly publish what it pays at home. 

As we know, the Russian government has been using charges of 

underpayment of taxes to pressure oil and gas ventures to make 

concessions and yield more control to the state or state-related interests. It appears that many companies believe that disclosure improves their public standing and builds trust and better relations 

in the countries where they had vital, billion-dollar, long-term investments. 

H.R. 6066 will bring 27 of the 30 major international oil and gas 

companies, plus the major international mining companies, under 

one disclosure standard. With such broad coverage, it is hard to believe that American companies would be put at a competitive disadvantage if they comply with the law. Indeed, I believe that once 

the law is passed, the companies that won’t be reporting their payments will stand out like a sore thumb. 

There is limited risk of the law creating a conflict with confidentiality provisions in EI contracts, as these clauses typically, specifically exempt disclosure to stock exchanges or offer a general exemption for compliance with law. Columbia University Law School 

has done an exhaustive examination of extractive contracts and 

these are their findings. 

Further, this aggregation of payments for major types mirrors 

the reporting companies are already doing under EITI and in some 

countries, and in IFC-linked investments, and this is vital to 

achieving the transparency objectives of H.R. 6066. Investors will 

have better insight into the company’s risks. 

The companies will have great reputational protection, and most 

importantly, citizens will be able to differentiate the payment 

streams that are collected by different agencies and their governments and this break-out will give them greater powers of demanding accountability of their government. 

Mr. Chairman, international lending agencies aid donors, investors, and the extractive industry majors have all recognized the 

value of transparency of payments and revenues as a means to promote better government stability and development in resource-rich 

8 

countries. This bill is not a full cure for the resource curse. Neither 

is EITI, but together they will make a very significant advance. 

Today’s commodity boon should by all rights produce a development windfall for resource-rich countries. Passage of H.R. 6066 into 

law will make that much more likely. Thank you, Mr. Chairman. 

I would like to submit my full remarks for the record. 

[The prepared statement of Ms. Lissakers can be found on page 

35 of the appendix.] 

The CHAIRMAN. Yes, without objection, all of the remarks and the 

supporting material of the witnesses will be made a part of the 

record. 

Next, we will hear from Professor Faith Stevelman from the New 

York Law School. 

STATEMENT OF FAITH STEVELMAN, PROFESSOR OF LAW, NEW 

YORK LAW SCHOOL 

Ms. STEVELMAN. Thank you, Chairman Frank, and members of 

the committee. I have now spent 15 years teaching and writing 

about corporate and securities law and my remarks reflect my interest in and appreciation for Congress’ role in protecting U.S. investors and building strong U.S. capital and securities markets. In 

my view, this bill advances both of these important goals, while it 

would also produce broader social and anti-corruption benefits for 

resource-rich developing countries. 

First, the bill fits neatly into the broader, crucially important 

work already done by Congress in enacting the Federal securities 

laws’ reporting requirements and overseeing the SEC’s implementation of them. The bill is effectively an industry-specific, more precise application of already existing but more general disclosure 

mandates operating in the Federal securities laws, for example, 

risk factor analysis, management’s and discussion and analysis, 

and standards of qualitative materiality acknowledged by the SEC. 

The bill would enhance shareholder protections in covered firms. It 

would foster shareholders’ ability to make more informed judgments about their firm’s business practices, the scope and costs of 

the natural resource rights their firms have purchased, and the potential legal and financial risks these firms face. On this basis, 

shareholders could analyze their best interests in terms of holding, 

buying, or selling securities in international extractive enterprises. 

The bill would benefit covered companies by fostering confidence 

that such companies are doing business internationally in ways 

that respect free-market principles and build long-term corporate 

wealth. In particular, extractive enterprises that are conducting 

business in a fair, professional manner should derive a benefit from 

the bill’s reporting requirements. Companies that are conducting 

legitimate market-based negotiations with host nations and are 

paying fair prices for the resource rights and contracts they receive 

and are committed to honest recordkeeping are building corporate 

wealth. Hence, they should benefit from the bill’s mandatory disclosure requirement, which would make this more apparent. 

Extractive enterprises that are doing the right thing in these respects will develop a record and reputation for honesty and fair 

dealings, which is in itself a commercially valuable asset. Such a 

positive record and reputation would be a meaningful asset, for exVerDate Aug 31 2005 15:21 Sep 09, 2008 Jkt 044189 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 K:\DOCS\44189.TXT TERRIE
9 

ample, if the firm were subject to unfair criticism from foreign governments or citizens. 

Also, enhanced transparency regarding business practices can 

help companies fend off intrusive conduct-based regulations. This 

leads me to point out that apart from disclosure, this bill does not 

create any conduct-based requirements for this industry. Nor does 

it make any conduct unlawful that is presently lawful. 

Also, companies can capture full value for reporting that they 

have dealt fairly and paid fair value for their natural resource 

rights only if such disclosures are backed by legal mandates. In 

this sense, this bill complements voluntary disclosure, but would 

make such disclosures more beneficial for companies. 

Furthermore, companies should be able to obtain these benefits 

from increased transparency at little administrative cost, because 

they should already have this information readily at hand, assuming they are well-run. Moreover, in companies where the bill’s reporting requirements did indeed flesh out problematic business 

practices, shareholders would be able to agitate for change early 

on, before the risks accumulated to the point of endangering their 

own and their company’s financial welfare. 

In addition, the bill’s required disclosures should help executives 

in these extractive enterprises be maximally diligent and attentive 

to their fiduciary duties, because it is only human nature that we 

more diligently attend to what we must account for publicly. This 

is another way that the bill would help build corporate value in 

this industry. 

Finally, the bill would contribute to enhancing the efficient functioning of the U.S. securities market in this sector of industry. That 

is, investing is most attractive, so that investment capital is more 

available at a better cost of capital, and markets more liquid and 

less volatile, where investors have confidence that they are being 

kept fully informed. This is consistent with the bill’s objective of allowing investors in international extractive enterprises to see more 

information about their firm’s transactions and payments, its 

claims to natural resource rights and assets, and hence the soundness of its executives’ business judgment. 

Furthermore, with respect to reducing market volatility in this 

sector of the securities markets, especially because other forces are 

putting pressure on securities prices in this area and adding uncertainty, there is a strong motive for Congress to support greater 

transparency regarding the legitimacy of these extractive businesses’ claims to fair dealings with foreign governments and the 

credibility of their having durable claims on natural resource 

rights. 

Thank you very much. 

[The prepared statement of Professor Stevelman can be found on 

page 44 of the appendix.] 

The CHAIRMAN. Next, Mr. Robert Jenkins, who is chairman of 

the F&C Asset Management. 

STATEMENT OF ROBERT JENKINS, CHAIRMAN, F&C ASSET 

MANAGEMENT 

Mr. JENKINS. Thank you. You have my background in the written statement. I am addressing you primarily today in my capacity 

10 

as an investment professional and chairman of a major investment 

management group. 

Mr. Chairman, I have four key points to make today: Number 

one, that the investment management industry welcomes transparency; number two, that the transparency approach enshrined in 

the EITI remains our ultimate goal; number three, I believe that 

this particular bill will increase transparency in a very important 

area; and number four, that this bill is therefore both in the spirit 

of and complementary to the broader goals of the EITI. 

Mr. Chairman, before investing, every professional weighs or 

should weigh his potential risk versus his potential reward. The 

greater the uncertainty of the risk, the greater the reward required. Information and transparency shape this calculation. The 

more transparent the information, the easier it is to quantify the 

downside and the more understandable the downside, the more 

confident one can be in pursuing the upside; and thus can transparency breed confidence, confidence reputation, and reputation at 

lower cost of capital. This is true for individual companies, but it 

also and equally true for nations, to which investors might wish to 

direct capital. 

Now it happens that the extractive industries operate in some of 

the world’s riskier places. Transparency at the company and country level can lower the risk, stimulate investment flows, and expand investment opportunities more generally. And this is precisely why many of the world’s leading investors support the EITI. 

Disclosure of what is paid together with transparency in what is 

received promises a payoff of a different kind. Political accountability and resource rich, but often the standard of living poor nations. 

The view is that these two pillars plus civil society monitoring 

hold the key to reduced corruption, increased political stability, and 

ultimately greater national prosperity. 

This in turn translates into less risk for a company’s foreign operations, and more and better risk return opportunities for investors. This is the ultimate goal. 

The bill targets only one side of the equation, but it is a side that 

is extremely well worth targeting. Pitched at the level of the company, the bill will help investors better understand and get greater 

comfort with key details of the industry. 

But perhaps more importantly, the bill should reduce the operational and political risks run locally by the extraction industries. 

Detailed transparency in reporting will give host nation critics little room for accusations of non-payment of tax and less room generally for claims of wrongdoing. Disclosure of payments to the authorities should therefore help to shift the public spotlight away 

from the company and onto the host government. 

Now some will no doubt label this initiative as unnecessary interference, interference in company matters and interference in the 

affairs of other nations. As a full-time capitalist and a part-time 

lobbyist, I can certainly sympathize. I rarely endorse, much less 

ask for, additional rules. 

But increased transparency is a positive, and on this all parties 

can agree. A number of competitors already embrace its essence, 

and what harm then in raising to a global standard what is for 

11 

many already industry as practiced? In the arena of corruption, 

real and implied, volunteerism does not always do the trick. 

As for the charge of international interference, this is a tough 

one. It can certainly be misconstrued as such. It is an accusation 

that will have little substance, but it is one which you can be sure 

will be made. 

In summary, the investment world benefits from transparency. 

We seek transparency wherever possible, not out of moral goodness, but in hard-nosed pursuit of better risk-adjusted returns. The 

riskier the arena, the greater the craving for transparency. Extractive industries operate in risky arenas. And though the bill does 

not and cannot achieve all of the aims of the EITI, it is complementary to it, and should prove supportive of it. 

As an investment professional and industry spokesman, I therefore view the bill as a very positive step. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Jenkins can be found on page 29 

of the appendix.] 

Mr. GUTIERREZ. [presiding] Thank you. 

Next, we have Mr. Alan Detheridge, former vice president for external affairs, Royal Dutch Shell Group. 

STATEMENT OF ALAN DETHERIDGE, FORMER VICE PRESIDENT FOR EXTERNAL AFFAIRS, ROYAL DUTCH SHELL 

GROUP 

Mr. DETHERIDGE. Thank you, Mr. Chairman, and members of the 

committee, for the opportunity to speak in support of this bill. I retired from Shell about a year ago and now work on a voluntary 

basis with the not-for-profit organizations. 

During my time at Shell, I was, along with a small group of industry and NGO colleagues, one of the instigators and early supporters of the Extractive Industries Transparency Initiative. And it 

is that background that I bring to this hearing. I speak, of course, 

only in a personal capacity and don’t claim to represent my former 

employer or the industry. 

I support this bill because I believe that transparency of payments made by companies to host governments is in the companies’ 

own best interests. Too often companies are exclusively blamed for 

the lack of economic and social development in many parts of the 

world where they work. What is often not known by citizens of 

those countries is the significant sums of money paid by companies 

to host governments in the form of taxes, royalties, and signature 

bonuses. 

For example, in Nigeria some 95 percent of the revenues from 

on-shore oil after costs go to the Federal Government. Making 

those revenues transparent, as Nigeria now does under its EITI 

initiative, helps put the accountability for development where it belongs and that, in my opinion, is in the long-term best interest of 

both companies and the citizens of oil-producing countries. 

Having said that, let me comment on three arguments that I understand are being made against this bill. The first is that the proposed bill would undo the good work being done by the Extractive 

Industry’s Transparency Initiative and that it would lead to that 

initiative’s demise. 

12 

Personally, as one of the instigators of EITI, I do not believe that 

to be the case. Otherwise, I wouldn’t be testifying here today. 

EITI is a country-led and owned initiative, and it does lead to 

worthwhile discussion between in-country stakeholders on extractive industry revenues, not least the use to which those revenues 

are put. 

In my view, this bill is compatible with EITI’s in-country approach. But more importantly, having raised the matter with Peter 

Eigen, the chairman of EITI’s international board, he told me that 

EITI was following this bill with interest. He went on to say that 

he welcomes efforts to improve resource revenue transparency that 

are consistent with the goals of EITI, and that he also welcomes 

any legislation that reinforces these efforts. And if necessary, Dr. 

Eigen will be happy to issue a statement to that effect. 

A second argument against the bill is that companies would need 

to make significant accounting and reporting modifications in order 

to disclosure the required information. In other words, it would cost 

too much. I don’t disagree that some disclosure cost would be incurred by companies. But I don’t see how companies that support 

EITI, which includes, of course, all the major U.S. and European 

oil and mining companies, can reasonably claim that these costs 

would be prohibitive. 

In supporting EITI, companies implicitly accepted that they were 

prepared to assume the costs of disclosure wherever and whenever 

the initiative was implemented. Since this bill’s requirements are 

in line with those called for by EITI, it is difficult for me, at least, 

to see how it places an undue and indeed unforeseen burden on 

companies. 

The final argument that I would like to begin to address is that 

of U.S. competitiveness, which some believe would be adversely affected. Those against the bill contend that many of the largest global competitors would not be subject to this bill, and that these entities could benefit from the disclosure of payments to host governments by their U.S. competitors. 

Firstly, I think it’s worth making the point that this proposed bill 

would in fact apply to a very high percentage of those companies 

listed on stock exchanges around the world. According to figures 

from ‘‘Publish What You Pay,’’ 90 percent of the top 30 companies 

buy reserves of oil and gas. 

Secondly, this bill mandates only the disclosure of payments 

made to governments, and not more commercially sensitive information, such as costs, profits, or contracts. I don’t believe that 

there is a competitive disadvantage in disclosing payments to governments. 

But even if there is, should this outweigh the benefit of legislators and citizens of a country having access to that information? 

Mr. Chairman, in my view, it should not. 

Thank you very much for the opportunity to testify. 

[The prepared statement of Mr. Detheridge can be found on page 

27 of the appendix.] 

Mr. GUTIERREZ. Thank you very much, Mr. Detheridge. 

The Congresswoman from Los Angeles, Congresswoman Waters? 

Ms. WATERS. Thank you very much, Mr. Chairman, for being 

here today and for providing the leadership, along with Chairman 

13 

Frank, so that we can learn more about extractive industries and 

try and get more transparency in this Act that we are putting together. There is so much that we don’t understand about what 

really is taking place in many of the countries who are very rich 

in minerals and other kinds of resources, yet they are so very, very 

poor. 

And the people are suffering so much. It is hard to understand 

as you look at some of the African countries, Liberia for example, 

that is endowed with the wealth of diamonds. And you would think 

that these diamonds would be a blessing for Liberia’s impoverished 

people. Instead, they fueled a civil war which lasted 14 years and 

took the lives of 270,000 liberians. Seventy-five percent of Liberia’s 

population lives on less than $1 per day, and Liberia owes $3.7 billion to foreign countries and multilateral financial institutions. 

So all of this is very hard to understand, and we hope that as 

we move on with transparency, we can better understand this. 

I would like to ask a question of Mr. Alan Detheridge, is it? 

Mr. DETHERIDGE. That’s right. 

Ms. WATERS. You know and understand how Shell, for example, 

works with these African countries and how the payments are 

made, how the contracts are put together, etc. My number one 

question is: When you are in countries where you have dictators or 

very corrupt leaders who obviously are taking the money, the proceeds, the profits, and they are cutting deals, not on behalf of the 

people, but instead, the money is going in their pockets. How do 

you work with this? What do you say and what do you do? 

Mr. DETHERIDGE. Thank you very much for the question. In 

truth, I’m tempted to say, ‘‘Well, I no longer work for Shell, so I 

shouldn’t answer that question.’’ But let me nevertheless try to do 

so. 

Let me take the example of Nigeria, which as you know for many 

years was ruled by corrupt dictators. In fact, I think that’s the reason why my former company was so very supportive of the Extractive Industries Transparency Initiative, and why, along with a 

number of other people, they lobbied the then-Nigerian government 

of President Obasanjo to undertake that initiative in Nigeria. 

Our thought, Shell’s thought at the time, was that making payments to governments transparent was a very necessary part of reforming Nigeria. It wasn’t the only thing that needed to be done, 

but it was something that was definitely required. 

Nigeria did indeed implement the Extractive Industries Transparency Initiative, and it hasn’t solved all of Nigeria’s problems, 

that is true. But what it has done is make it very apparent as to 

who is getting what money, because Nigeria publishes not only 

what the federal government receives, it publishes what state governments receive, and what each local government area receives. 

That has led in Nigeria to a lot of questioning of local elected 

representatives from people saying, ‘‘Look, you get all this money, 

and I don’t see the results of that in my back yard.’’ That’s a very 

healthy debate. It’s also a debate, I should say, that has led to 

three state governments being put on trial and some of them going 

to prison for stealing money. 

So the answer to your question, I think it is difficult for companies to deal with countries that are repressive and corrupt. TransVerDate Aug 31 2005 15:21 Sep 09, 2008 Jkt 044189 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 K:\DOCS\44189.TXT TERRIE
14 

parency is a help in that respect. This bill promotes transparency, 

and that is why I am supportive of it. Thank you. 

Ms. WATERS. Thank you very much. I suppose, Mr. Chairman, a 

lot more could be raised about this, but, you know, we don’t have 

the time to talk about it much, and your past companies’ relationship with Abacha and what occurred in Nigeria. 

But Angola is another prime example of a country that is very, 

very rich, and a country that was at war for a long time. And I 

guess while I think that transparency is very, very necessary, there 

are some other things that I think we need to do. But I’m going 

to yield back the balance of my time, so that the chairman can get 

to some other people, and perhaps we will have another round and 

I can ask another question. 

Thank you. 

Mr. GUTIERREZ. I will be here for it. 

Mr. Cleaver, for 5 minutes. 

Mr. CLEAVER. Thank you, Mr. Chairman. 

Ms. Stevelman, I was reading in your prepared remarks on page 

7, I thought we were closing in as really good friends with regard 

to when you began to address the enforcement mechanisms. If 

there is no penalty provision, why should corporations comply? 

Ms. STEVELMAN. Thank you for that question. I think I may have 

overstated that there is no punitive provision. I meant to emphasize that this would not create a basis for private investor litigation, because I know that there is significant popular sentiment 

against private investor suits. 

I also do agree with you that it would be the exception for there 

to be highly aggressive enforcement by the SEC. What usually happens is that the SEC allows companies a little bit of time to adjust 

to these new disclosure provisions. It puts out some interpretive releases, it brings an injunctive action where it slaps a company on 

the wrist. Maybe another one of those. Then the penalties start to 

escalate gradually. 

The initial fine in Federal court that it might win would be consistent with that small $50,000 amount, but if a company was 

found to be culpable of repeat violations, or if subsequent companies made the same mistakes that had already come to light in an 

earlier enforcement action, at that point the penalties do rise significantly. 

So for example, there is a famous case of MD&A non-reporting 

by the Caterpillar Company, where I believe the result was just a 

civil injunction, a slap on the wrist that says, ‘‘Don’t do this again.’’ 

But a year later, there was an MD&A enforcement action—I forget 

the company—but the fine at that point went up to $1 million. So 

there is the possibility for a gradual escalation in civil monetary 

fines that would be brought by the SEC and awarded as a result 

of process in the Federal courts. 

Mr. CLEAVER. Thank you. 

Mr. Detheridge, as a former executive with Shell, in listening to 

Ms. Stevelman’s comments, do you believe that major corporations 

would comply to the law in an attempt to escape a private cause 

of action? 

Mr. DETHERIDGE. Thank you for the question, Mr. Cleaver. My 

personal belief is that certainly 40 U.S. companies would comply 

15 

with this legislation, and all European companies would comply 

with this legislation. And I think other companies would do so as 

well, because the reputational damage that would fall out from not 

complying with this legislation would far outweigh any advantage 

I think that would be gained by them. Companies list on stock exchanges to raise capital. And not complying with the regulations 

imposed by those exchanges is a very serious matter, which I’m 

sure—Mr. Jenkins could comment on this—would be looked at very 

seriously by the investing community. 

Mr. CLEAVER. Of course, a company out of China is not going to 

be publicly traded; in all likelihood, you’re right; publicly-traded 

companies here in the United States and London, in the EU, they 

would. But if you look at what’s going on right now in Darfur, 

where China is deeply involved in an extractive industry, we can’t 

even count on China to try to discourage the genocide that’s taking 

place there. 

It’s a little frustrating to me, because I just simply do not believe 

that we would have worldwide compliance. And in the case of the 

Sudan, China is the 800-pound gorilla, in that China is the industry in that country. 

I don’t know what the answer is. You know, we need a professor 

in law like Ms. Stevelman, to come up with the solution. 

Ms. STEVELMAN. Can I make one remark relevant to what you 

said? 

Mr. GUTIERREZ. Briefly, if you please. 

Ms. STEVELMAN. There are pieces of these Chinese enterprises 

that are listed, and Darfur would be accessible to U.S. law enforcement. 

Mr. CLEAVER. Yes. 

Mr. GUTIERREZ. I’m going to try to get everyone in. Apparently, 

there’s a vote coming up, and so, we will see if we can get one 

round, and then I will be happy to come back for a second one. 

Congresswoman Moore? 

Ms. MOORE OF WISCONSIN. Thank you so much, Mr. Chairman. 

I guess I would like to start with Mr. Detheridge. This bill obviously is a great first step in transparency. The voluntary Extractive 

Industries Transparency Initiative has been partially implemented 

by 23 countries already. I guess there are countries prospectively 

and currently that would like us to go a little bit further, and I 

want your comments on that. That there be some—and since you 

brought up this up, Mr. Detheridge—some mandatory revenue disclosure. And because it’s one thing to say, ‘‘This is how much we 

have paid a government,’’ but we still don’t know what the volume 

of the extraction was or the mass of the extraction was, what profits were involved. You know, we need some contract transparency. 

So I guess I would like to hear your comments on more contract 

transparency. 

Mr. DETHERIDGE. As I said earlier, I can only speak in a personal 

capacity. In answer to your question about transparency of contracts, that is actually something that I fully believe in. I think 

contracts, that the parliaments, legislators should have access to 

those contracts. It is something that I personally support. As you 

can imagine, that is not a universally held opinion within the oil 

industry. 

16 

Ms. MOORE OF WISCONSIN. Mr. Jenkins? Ms. Stevelman? Others? 

Ms. Lissakers? 

Ms. LISSAKERS. Yes. Certainly the Revenue Watch Institute and 

the civil society groups that we work with, both internationally and 

especially in the producing countries, are very strongly in favor of 

contract transparency. In almost every country in question, the resources that we are discussing are public assets. They are not private property. They are public assets by law in most countries. And 

therefore, contracts between the state and an operating company 

should be made public. That would greatly enhance the accountability aspects as well as help to ensure that the country itself is 

getting a good deal from the extractive sector, a fair deal from the 

industry. 

A number of countries have changed their approach and are now 

submitting large extractive concessions to their own parliaments 

for review before the contracts are consummated, and that of 

course makes them public. We think that is a very healthy, strong 

move in increasing accountability. 

Ms. MOORE OF WISCONSIN. Thank you. You know, the chairman 

has heard the cry about regulation and, you know, many observers 

or critics have said that there are already many onerous reporting 

requirements, as in Sarbanes-Oxley. Can you please just reassure 

us or explain how this EITD Act would not risk exacerbating this 

difference. In other words, the U.S.-listed companies, there 

wouldn’t be an incentive for them to de-list because of these provisions. 

Yes? 

Mr. DETHERIDGE. I don’t think that companies can reasonably 

say that these reporting requirements are onerous. And the reason 

I say that is simply because most of the major oil and gas companies—certainly all of the major U.S. companies and all of the major 

European companies—supportive the Extractive Industries Transparency Initiative. 

And the Extractive Industries Transparency Initiative is very 

much—or I should say this bill—is very much in line with the reporting requirements of EITI. 

Now in supporting EITI, companies implicitly have accepted that 

they will bear the costs of making those numbers available wherever and whenever the initiative is implemented, hopefully worldwide. 

And so I don’t see how they can reasonably claim that, you know, 

this is too costly; they have already implicitly admitted that they 

are prepared to bear those costs. I mean this information is, of 

course, known to the companies. It is in their books. 

Now I don’t doubt that there is going to be some additional cost 

in extracting that information from the books; they will probably 

need to have it vetted in each country by external auditors just to 

make absolutely certain that they are putting forward the right 

numbers. 

But as I say, I don’t think it can be reasonably claimed to be a 

prohibitive cost; so the argument on cost, to me personally, doesn’t 

stand up. 

Ms. MOORE OF WISCONSIN. That is great information for the 

record. I yield back. 

17 

Mr. GUTIERREZ. Thank you very much. Thank you. 

My colleague from Illinois, Congressman Roskam, for 5 minutes. 

Mr. ROSKAM. Thank you, Mr. Chairman. 

Mr. Detheridge, you mentioned in your opening that it is in the 

company’s best interest to make these disclosures. If that is the 

case, why don’t they all do it? 

[Laughter] 

Mr. DETHERIDGE. You will have to ask them. I— 

Mr. ROSKAM. I mean, you can appreciate the nature of the question. It’s one thing for somebody who was previously employed to 

say, ‘‘This was a great idea and I have had this revelation since 

I have left the company.’’ Do you know what I mean? Or—and I’m 

not criticizing you personally—but my question is, you said that it 

is in the company’s best interest to do it. 

Mr. DETHERIDGE. Yes. 

Mr. ROSKAM. Why don’t they? 

Mr. DETHERIDGE. Let me explain why I think that. And that is 

not a revelation I had when I left. 

Mr. ROSKAM. I understand that; you mentioned that. 

Mr. DETHERIDGE. But it is one that came to me when I was 

working for the company, which led to me helping to instigate and 

support the Extractive Industries Transparency Initiative. 

Let me just explain for a second why I think it’s good for companies. And it’s not just an argument that it shifts the blame for the 

lack of development to where it belongs, you know, to the governments and away from the companies; it’s also that the oil and gas 

business is a very long-term business. You make an investment 

this year; you’re not going to get a payback from that investment 

for several years to come, possibly 7 years, possibly 10 years. 

The places where you want to work are places where people are 

happy, healthy, there is a thriving economy, and they have jobs. 

Too often, that is not the case. 

Mr. ROSKAM. Let me, just because time is short, let me redirect 

your question. My question is: Why don’t they do it, if it is a good 

idea and good for them? What are the arguments that you have 

heard? What is the reluctance when you are advocating this, and 

their eyes began to glaze over. What was behind the glaze? 

Mr. DETHERIDGE. I think part of the reason behind the glaze is 

by putting more information into the public domain, more questions will be asked by investors, querying why, you know, you’re investing in this particular country, by non-governmental organizations, possibly by people like yourselves. So more information leads 

to more questions, and there is a natural reluctance against that. 

That has been, in sum, the argument that I have heard. 

Mr. ROSKAM. Thank you. Mr. Jenkins? 

Mr. JENKINS. Thank you. 

If I may just turn it around, do you think that— 

Mr. ROSKAM. Oh, no, I’m not in the question-answering business. 

Let’s just make that clear. 

Mr. JENKINS. Right. Well, would companies have wholeheartedly 

volunteered to disclose their executive compensation, had there not 

been outside pressure to do so? Is there any company today that 

would say that disclosing such information is bad for that comVerDate Aug 31 2005 15:21 Sep 09, 2008 Jkt 044189 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 K:\DOCS\44189.TXT TERRIE
18 

pany? And I think you have in that a parallel with this particular 

problem. 

There are companies of great stature who already fully disclose. 

Numont Mining is not a lightweight. They are not stupid, they generate a good shareholder return, and they believe that they are at 

no competitive disadvantage in disclosing. 

There are many companies who simply don’t want to give away 

information that they don’t have to. 

Mr. ROSKAM. Fair enough. 

Let me ask a question for the whole panel—Mr. Detheridge kind 

of touched on this a little bit—and that is, could you speak to the 

challenge that is out there? Limited resources worldwide. Let’s say 

you have a nefarious head of a country who controls the natural 

resources in that country, but makes a decision, and he says, 

‘‘Look, if I do business with this company that’s listed, this information is going to be disclosed. If I do business with the Chinese, 

if I do business with one of these other entities, I’m not going to 

have to disclose this; therefore, I’m going to do business with the 

non-disclosing entity.’’ How does this bill drive towards the 

unlocking of resources worldwide at a time when we need to do 

that more and more? Can you speak to that challenge, anybody? 

Yes, ma’am? 

Ms. LISSAKERS. Let’s take Angola. Congresswoman Waters mentioned Angola. And it goes to both your first question and then this 

one. In Angola, British Petroleum proposed unilaterally to disclose 

its payments to the government, and the government then threatened to kick them out, so BP withdrew and became an active supporter of EITI. And Angola has not signed on to the EITI. 

On the other hand, the Norwegian State Oil Company, StatOil— 

Mr. ROSKAM. Can I just stop you there? And we will get back to 

that. One, did anybody come in the intervening period of time and 

take the place of BP in Angola? 

Ms. LISSAKERS. No, they were not kicked out. They did not disclose the payments, and they remained, their contract remained. 

Mr. ROSKAM. Oh, I see. I misunderstood. 

Ms. LISSAKERS. Angola is one of the few countries where the production sharing agreements stipulate that an approved disclosure 

could be grounds for termination. However, StatOil, the Norwegian 

oil company, is also operating in Angola, and has been for a long 

time. They publish their payments to the state of Angola, because 

they are required by Norwegian law to do so, and the Angolan authorities have not said ‘‘boo’’ about it. They haven’t protested, they 

haven’t pushed them to get out. They have not interfered with 

their business. 

So the existence of law provides protection for the companies 

that want to operate transparently and properly. 

Mr. GUTIERREZ. The time of the gentleman has expired. 

I’m going to return for a second run to the gentlelady from California, Congresswoman Waters. 

Ms. WATERS. Thank you very much. This transparency issue is 

very important and it is somewhat complicated. And as we just 

heard testimony that said some do, some don’t—in the case of Angola the threat was not followed up on—I’m wondering what actions could be taken to make certain that the disclosures are accuVerDate Aug 31 2005 15:21 Sep 09, 2008 Jkt 044189 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 K:\DOCS\44189.TXT TERRIE
19 

rate? How could SEC and law enforcement determine if they’re not 

accurate? 

Because as I believe that the oil companies in particular that are 

operating in many of these so-called third-world countries don’t just 

have transparency and contracts that are above-board. I think 

they’re paying underneath the table to the leadership of those 

countries. And I don’t think that’s ever going to be disclosed. Am 

I wrong? Am I too suspicious? Am I too distrusting? I’d like anybody to respond to that. How can we make sure it’s accurate? 

Ms. STEVELMAN. I would like to say something about that. I 

think that is where this bill fits in nicely with certain other securities laws and other criminal laws. I think that is where you get a 

really good yield from Sarbanes-Oxley, where Congress has worked 

hard to make sure that companies that access the U.S. capital markets are subject to stringent internal controls. And before that, in 

the Foreign Corrupt Practices Act of 1977, prohibiting bribery and 

requiring companies to maintain books and records that are accurate and systematic. These things need to be audited, if these companies are going to access the securities markets. Where auditing 

failures come to light, there is tremendously bad publicity. There 

is the potential of criminal enforcement. 

And so while I believe that there would be soft enforcement at 

the beginning with respect to this law, there is the opportunity for 

much harder enforcement under other laws, for example, the Foreign Corrupt Practices Act, where under-the-table payments were 

discovered. 

Ms. WATERS. Also, many of these governments do not disclose to 

their people how the money that they’re receiving is being allocated 

or being spent. Is there ever any conversation from the oil companies, for example, with the government about their government 

processes? Now I know it’s probably unreasonable to ask our companies to try and enforce good government on the countries that 

they are doing business with. 

But I’m wondering if there’s any kind of conversation that takes 

place about that, because as was indicated here, by Mr. Detheridge, 

many of the people in the people in those countries believe that the 

oil companies are in bed with the corrupt dictators, that they’re not 

paying the amount of money they should be paying, that they support that government’s attempt to protect the oil fields for the companies with their military or paramilitary. 

So what kind of discussion goes on? I know you’re not with them 

any more, Mr. Detheridge, and perhaps we’re putting too much attention on you. But what we really want to know is what goes on 

behind the scenes? 

Mr. DETHERIDGE. You’re asking some very good questions. Such 

conversations, of course, are very delicate. But let me just give you 

one example which comes back again to Nigeria, and I do that because I’m familiar with the case. And indeed, in discussions with 

the Nigerian federal government about implementing EITI, which 

I have to say President Obasanjo was very enthusiastic about, as 

was his finance minister. 

Ms. WATERS. Then why did he have so much disruption of the 

pipelines? I know him too, and I think he certainly was better than 

Abacha— 

20 

Mr. DETHERIDGE. Sure— 

Ms. WATERS. And you know, but why was there so much disruption? 

Mr. DETHERIDGE. Well— 

Ms. WATERS. To the point where people lost their lives? 

Mr. DETHERIDGE. Let me get to that point, if I may. 

Ms. WATERS. Okay. 

Mr. DETHERIDGE. And there was a conversation about: Well, 

look, if we just publish the numbers at the federal level, that is 

very helpful, it is very good, it is a step in the right direction; but 

wouldn’t it be much better if you published how much money went 

to the state and the local level? And that indeed is done; as I said 

before, it has led to some state governors and others being arrested 

on corruption charges. 

Now, it’s a reasonable question to ask, well, since this is all now 

in the public domain: Why haven’t things changed more quickly in 

the Niger Delta? And my answer to that is that things take time. 

You cannot expect a citizenry in a country that, as you say, has 

been ruled by dictators, is unused to holding its public officials to 

account for the money which they have spent. 

You can’t expect that to change overnight. I’ve been following 

Niger for a number of years now, and I can tell you things are beginning to change in Nigeria. I mean before it was unheard of that 

state governors would be arrested and put in jail. That is happening now. 

It’s going to take time, and in my view, this bill is a step in the 

right direction. It enables those kind of conversations to take place. 

Thank you. 

Ms. WATERS. Thank you. 

Ms. LISSAKERS. Could I just add something? 

Mr. GUTIERREZ. Sure. 

Ms. LISSAKERS. We are working now actively in the Niger Delta 

with a very large coalition of NGOs based in the Niger Delta, and 

with a governor in one of the big oil-producing states. In the most 

recent election, every single person who ran for governor in the oil 

states in the Niger Delta campaigned on transparency because they 

were feeling pressure from the grass roots. 

And the governor we are working with—remains to be seen—has 

committed to implement what he is calling the Bayelsa State 

Transparency Initiative, in cooperation with the civil society activists and trying to get at least eight local government authorities to 

cooperate as well. 

The fact is that between the capital and the governors and the 

local government authorities, all of the oil money disappears. And 

virtually nothing hits the ground. The schools, health clinics, roads, 

water, or anything else. And the only way you’re going to change 

that is work down at that level where the public services should 

be delivered, and that’s what’s beginning to happen now, and it’s 

beginning to happen, it started with Minister Ngozi’s decision to 

publish every month in the newspapers the amount of money that 

was being transferred to the states and to the local government authorities. 

And the civil societies we worked with said, ‘‘You know, we used 

to say the companies aren’t paying enough. Abuja isn’t paying 

21 

enough.’’ And now when we saw the numbers, we said, ‘‘My God, 

there’s a lot of money coming into our regions. Why aren’t we seeing any public services?’’ 

And that’s what is the beginning of real change that changes 

people’s lives. But information was the first opening. 

Mr. GUTIERREZ. If any of the panelists would like to comment, 

there’s an argument made that mandatory revenue disclosures 

would force companies to breech their contracts if they included 

nondisclosure provisions. Would anybody like to comment on that? 

Ms. LISSAKERS. I’m happy to. This has been a big issue in the 

transparency issue debate. And the Revenue Watch Institute commissioned a study from the Columbia University Law School, 

which has access to a very large database of oil and mining contracts. They have now reviewed more than 100 major contracts, 

specifically looking at the confidentiality requirements. And the 

standard clauses in these contracts, which say that information 

may not be released without the permission of the counterparty— 

those clauses typically either explicitly exempt disclosures required 

by stock exchanges, or give a broad exemption for ‘‘compliance with 

law.’’ In other words, this bill would in no way put U.S.-listed companies in conflict with their contractual obligations as far as we 

have been able to determine. 

Mr. GUTIERREZ. I would like to thank the panel. It seems to me 

that we should continue to work on this legislation, Congresswoman Waters. I think it has great public benefit, not only for us 

here, but around the world. 

And we work here a lot on transparency, because we think transparency just leads to better consumers. It allows them to make decisions. And it allows companies to change. Because once the public 

knows, they move their assets around, or they buy—you know, they 

buy differently, and they acquire goods from different places, once 

there is transparency. 

So I think transparency—especially as I’ve learned that let me 

see if I want to overthrow a dictatorship, it’s pretty good for me to 

know what assets the dictatorship has, so that I can say what I 

would do differently. And thereby not allow the dictatorship maybe 

to put the onus on the company that’s extracting, but on me that’s 

already receiving the money. Not that we shouldn’t—there are 

some good politicians out there who probably do both, but they 

wouldn’t be blinded on the one side by saying the company—because you know, I do kind of come from, it’s the company. Some 

of us come from that point of view. But maybe they could have another point of view, and then they could say what they do better 

with the resources, or whether or not they made a good deal. I 

mean, because as we get transparency, maybe they’re not paying 

enough for the barrel of oil or for the ton of magnesium. And it 

would be interesting to see how much money the same company 

would be paying different countries for the same natural resource. 

I mean all of that knowledge is going to allow countries to develop their natural resources and to be more competitive, as they 

take those natural resources. 

So I think it’s something we should sit down and talk some more 

about with our colleagues. I am happy that the chairman has proposed this legislation. 

22 

And Congresswoman, would you like to close? 

Ms. WATERS. Yes. If the gentleman would yield? 

Mr. GUTIERREZ. Sure. 

Ms. WATERS. Just for a minute. 

As you said, we have always looked with a jaundiced eye at the 

companies, and we have always wanted more scrutiny on the companies, and felt that perhaps they were exploiting, they were not 

paying enough, that they were in bed with the dictators, and they 

didn’t really care about the people. And I think as you said and as 

I’m saying, we’re willing to look closer at the governments also. 

Mr. GUTIERREZ. Sure. 

Ms. WATERS. And not only do we want transparency from the 

companies and what they’re paying, we need to find ways to leverage whatever power or relationships we have to get more transparency from the governments about how they spend their money. 

I worked on debt relief for Nigeria, and I kept asking myself, ‘‘Why 

am I working on debt relief for Nigeria?’’ They are rich in all this 

oil, and these resources. And so I’m convinced that I cannot 

credibly continue to talk about how poor these countries are, when 

they are so very rich. And we are not doing enough to put the pressure on the leadership of those governments. So I want to get them 

both, the companies and the governments. 

Mr. GUTIERREZ. Well, I think this will help us all. 

I thank all of the panelists so much for their time and their energy and their enthusiasm for this issue. Thank you so much. 

This hearing is adjourned. 

[Whereupon, at 11:30 a.m., the hearing was adjourned.] 

(23) 

A P P E N D I X 

June 26, 2008 

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