The Trump administration has pulled out of a global deal to combat corruption in the fossil fuel industry, a move critics said could help oil companies keep hidden how much they pay in U.S. taxes.
The Department of the Interior announced the decision on Thursday in a letter to withdraw immediately from the Extractive Industries Transparency Initiative (EITI), which compels oil, gas and mining companies to disclose payments to governments worldwide.
The United Kingdom, Canada and many European Union nations already require such disclosures, and the 15-year-old initiative is credited with establishing the foundation for reform in countries such as Ghana and the Democratic Republic of Congo. But the U.S., which joined in 2014, only finalized rules calling for disclosures in July 2016, under the Dodd-Frank reform law passed during the Great Recession. In February, Trump signed a congressional resolution to repeal the Securities and Exchange Commission regulation, essentially leaving the U.S. without a tool to enforce EITI standards.
The rule would have required companies to file annual reports revealing how much they paid in taxes, royalties, licensing fees and other payments. Some firms, including BHP Billiton and Houston-based Kosmos Energy, voluntarily released tax data in recent years. The country’s top three oil companies ― Exxon Mobil Corp., Chevron Corporation and ConocoPhillips Co. ― did not.
“They want to continue operating in the murky and opaque world that Dodd-Frank was intended to change,” Daniel Kaufmann, an economist who studies corruption and serves on the global EITI board, told HuffPost by phone on Friday. “Even Russian companies are all disclosing. So the rest of the world, and the rest of the oil companies, have moved ahead.”
“The U.S. ones refuse to change their old habits of operating in opacity,” he added. “That’s means tax avoidance, obviously, and it raises the risk of more corrupt deals.”
The secrecy underscores the generous subsidies and tax credits afforded to the oil and gas industry. Nearly half of all untapped oil reserves in the U.S. would be unprofitable without subsidies, a study published last month in the journal Nature found. Exxon Mobil alone received $12.8 billion in subsidies and paid a tax rate of 13.6 percent over the past eight years, according to a report by the Institute on Taxation and Economic Policy. (The report did not calculate data for Chevron or ConocoPhillips.)
For comparison, nurses and appraisers earning on average $60,000 per year pay an individual tax rate of about 15 percent.
“If people see that Chevron and Exxon are making bank, making hand over fist extracting resources from the U.S. and not paying their fair share, people would have a problem with that,” Jana Morgan, director of the Publish What You Pay coalition that supports the EITI initiative, told HuffPost. “So they want to keep it secret.”
The move came the same day House Republicans introduced a tax bill that preserves generous subsidies and tax credits for fossil fuel companies, and eliminates incentives to buy electric vehicles or use renewable energy.
“We’re spending so much time in the U.S. focusing on the cost of health care and taking away money from Planned Parenthood and social welfare,” Morgan said. “We’re so focused on getting rid of those but we don’t want to get rid of corporate welfare.”
“The rest of the world, and the rest of the oil companies, have moved ahead.”
- Daniel Kaufmann, global EITI board member
In a statement to HuffPost, Chevron spokeswoman Melissa Ritchie said the company has been working to meet EITI standards. “Chevron spent a significant amount of time preparing and reconciling USEITI report data,” she said, “but not payments to the IRS, given the confidential nature of IRS data.” Exxon Mobil spokesman Scott Silvestri directed HuffPost to a January op-ed published in The Dallas Morning News that “focuses on our commitment to transparency initiatives.” ConocoPhillips did not return a call requesting comment on Friday.
The American Petroleum Institute, the industry group that lobbied the Trump administration and Republican lawmakers to overturn the SEC disclosure rule, said it would “continue working with the U.S. Department of Interior in reporting revenues and disbursements and with the U.S. State Department to drive global transparency.”
On a broader level, the decision to stop participating in the EITI echoes President Donald Trump’s withdrawal from the Paris climate accord. As with EITI, the administration stopped implementing policies to meet the pact’s standards before formally pulling out.
“The decision to pull out was of greater symbolic significance than anything else,” Matthew Stephenson, a Harvard Law School professor who writes a blog about corruption, told HuffPost by phone on Friday. “It indicated the U.S. no longer had an interest in working with, let alone leading, the international community on this issue.”