Lift the veil on tens of billions in payments from oil companies to governments

Tutu Alicante was studying in the United States when her sister, who was suffering from an ectopic pregnancy, was rushed to her home hospital in Equatorial Guinea. It was 1996, a year after Mobil had discovered oil off the coast of the country. When he arrived at the hospital, Alicante explained recently, there was no electricity and no doctor. His sister bled to death.

In 2014, Alicante said, his father was rushed to the same hospital and found similar conditions, and he also died. For 18 years, the Mobil oil field had brought economic growth to Equatorial Guinea, but that wealth had failed to transform the lives of many of the country’s poor, Alicante said.

Alicante is the executive director of EG Justice, a US-based non-profit organization focused on corruption in Equatorial Guinea, and told this story during a recent webinar that highlighted new securities filings from oil companies and American miners. The reports to the US Securities and Exchange Commission are 14 years in the making and, for the first time, reveal payments made by extractive companies to governments around the world, including the US federal government.

The disclosures detail tens of billions of dollars in taxes, royalties and other payments last year from ExxonMobil, Chevron and other corporations. A primary goal was to discourage or uncover the corruption and unfair deals that have helped explain why oil, gas and minerals have often brought wealth to elites and economic growth to poor countries, while failing to substantially raise the standard of living of many citizens.

“For many of the people listening today, the issues we’re discussing here could be in the billions of dollars or in the numbers,” Alacant said. “For most people in my country, the issues we’re here to discuss are matters of life and death: who lives a fancy life with Lamborghinis and Ferraris and private jets,” he added, “and who dies of an avoidable death.”

For the first time, Equatoguineans can see exactly how much ExxonMobil paid their government, for example: $189.2 million last year split between two ministries and the national oil company. That was a relatively small sum for Exxon, which reported paying $32 billion to 28 countries.

Chevron recorded $16.6 billion in payments to 17 countries.

The disclosure rule applies to oil, gas and mining companies that file annual reports with the SEC. Some foreign corporations that are also listed on foreign stock exchanges, such as Shell, have already been subject to similar disclosure rules in other countries.

The reports are intended to help civil society groups and citizens match company payments with data reported by their governments or in individual contracts. Discrepancies will raise a flag for possible corruption.

One of the most surprising revelations, however, has been the discrepancy in taxes paid in different countries, said Aubrey Menard, Oxfam America’s senior natural resource justice policy advisor.

“What’s telling in the U.S. is that we’re probably getting a bad deal,” Menard said in an interview. The United States is the largest source of oil and gas for Exxon and Chevron, he noted, “and yet they are paying far more in taxes to other countries.”

Exxon, for example, produced about a third of its oil and 30 percent of its gas in the United States last year, more than in any other jurisdiction. However, the company reported paying almost five times more in taxes in the UAE: $5.6 billion. When you include all types of payments, Exxon reported paying five more countries than the US federal government.

Chevron reported paying more to two countries and a similar amount to Angola than to the US federal government, despite roughly half of its oil and gas production coming from the country.

Exxon declined to comment for this article, but posted a lengthy disclaimer along with its disclosure, saying, “The narrow focus of this report makes it difficult to draw meaningful comparisons of payments across countries.” The statement says Exxon paid more than $10 billion in taxes and duties, about one-fifth of its global total, to the United States; the disclosures do not require companies to report payments to state and local governments.

Exxon added: “Payments to different governments vary due to factors such as resource type, timing of project initiation, whether payments are controlled by ExxonMobil or third parties, and whether third parties or partners are considered government entities.”

Chevron said in a statement that cross-country comparisons “are difficult” because US state taxes were not included and because royalty structures differ between jurisdictions. In most countries, for example, oil and gas are publicly owned. In the United States, minerals are privately owned unless they are on public land, meaning most of the copyright goes to private citizens rather than the government.

Zorka Milin, policy director of the Coalition for Financial Accountability and Corporate Transparency, an alliance of advocacy groups, said the oil industry fought against more detailed disclosure of state and local payments that could have improved comparisons. Beyond that, he said, companies could have made these additional disclosures voluntarily.

“Nothing stops them,” Milin said. “This is a minimum standard.”

Even without perfect comparisons between countries, Milin said, the tax data could inform a conversation about why payments in the United States are relatively low. The information will be especially valuable as Congress debates whether to extend or replace the corporate tax cuts enacted in 2017 and coming next year.

The Biden administration has proposed reforming and repealing fossil fuel tax breaks that it says could raise $110 billion over a decade.

Milin said he thought it was those tax disclosures, more than anything else, that prompted oil companies to oppose the rules.

“They feel ashamed,” he said, “and they should feel ashamed.”

“In many of these communities, the negative costs of these projects are very palpable.”

— Zorka Milin, Coalition for Financial Responsibility and Corporate Transparency

While the U.S. might be getting relatively less in taxes from oil companies, advocates say many other nations are getting bad deals, too.

“A large percentage of concessions that companies get are predatory,” Simon Taylor, co-founder and director of the advocacy group Global Witness, said during the webinar. “They involve atrocious tax conditions that basically amount to making them profitable for businesses just because they’re a rip off for the state in question.”

Taylor said the revelations could be particularly instructive in light of global commitments to phase out fossil fuels. Rising production costs and pressure to transition to renewable energy are expected to reduce oil industry profits. The revelations could highlight whether governments are making less favorable deals for their citizens.

The reports, filed last month, were required by an amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, which ordered the SEC to implement a new rule. The commission’s first attempt was overturned in 2013 in a legal challenge brought by the American Petroleum Institute and other business groups. The SEC then wrote a new rule, but that was repealed with the Congressional Review Act after Donald Trump was elected. The signing was one of Trump’s first acts as president.

The final rules lack some elements that advocates had requested and that were included in previous versions. Perhaps most importantly, Milin said, companies are not required to report payments at the contract level, but can group all projects within a state or province.

“In many of these communities, the negative costs of these projects are very palpable,” Milin said. The revelations were intended to show communities exactly how much was flowing into the government linked to these projects.

Even without that detail, Milin argued that the revelations can serve as an example to people who are trying to push policies that oppose the oil industry.

“This is kind of an instructive story of how powerful big oil interests didn’t want this reform to happen, and they threw everything at it, and they won some things but they didn’t carry the day,” Milin said. “I think it’s a hopeful thing.”