[House Hearing, 110 Congress] [From the U.S. Government Publishing Office] 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 U.S. GOVERNMENT PRINTING OFFICE 44-189 PDF WASHINGTON DC: 2008 --------------------------------------------------------------------- For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866)512-1800 DC area (202)512-1800 Fax: (202) 512-2250 Mail Stop SSOP, Washington, DC 20402-0001 HOUSE COMMITTEE ON FINANCIAL SERVICES BARNEY FRANK, Massachusetts, Chairman PAUL E. KANJORSKI, Pennsylvania SPENCER BACHUS, Alabama MAXINE WATERS, California DEBORAH PRYCE, Ohio CAROLYN B. MALONEY, New York MICHAEL N. CASTLE, Delaware LUIS V. GUTIERREZ, Illinois PETER T. KING, New York NYDIA M. VELAZQUEZ, New York EDWARD R. ROYCE, California MELVIN L. WATT, North Carolina FRANK D. LUCAS, Oklahoma GARY L. ACKERMAN, New York RON PAUL, Texas BRAD SHERMAN, California STEVEN C. LaTOURETTE, Ohio GREGORY W. MEEKS, New York DONALD A. MANZULLO, Illinois DENNIS MOORE, Kansas WALTER B. JONES, Jr., North MICHAEL E. CAPUANO, Massachusetts Carolina RUBEN HINOJOSA, Texas JUDY BIGGERT, Illinois WM. LACY CLAY, Missouri CHRISTOPHER SHAYS, Connecticut CAROLYN McCARTHY, New York GARY G. MILLER, California JOE BACA, California SHELLEY MOORE CAPITO, West STEPHEN F. LYNCH, Massachusetts Virginia BRAD MILLER, North Carolina TOM FEENEY, Florida DAVID SCOTT, Georgia JEB HENSARLING, Texas AL GREEN, Texas SCOTT GARRETT, New Jersey EMANUEL CLEAVER, Missouri GINNY BROWN-WAITE, Florida MELISSA L. BEAN, Illinois J. GRESHAM BARRETT, South Carolina GWEN MOORE, Wisconsin, JIM GERLACH, Pennsylvania LINCOLN DAVIS, Tennessee STEVAN PEARCE, New Mexico PAUL W. HODES, New Hampshire RANDY NEUGEBAUER, Texas KEITH ELLISON, Minnesota TOM PRICE, Georgia RON KLEIN, Florida GEOFF DAVIS, Kentucky TIM MAHONEY, Florida PATRICK T. McHENRY, North Carolina CHARLES WILSON, Ohio JOHN CAMPBELL, California ED PERLMUTTER, Colorado ADAM PUTNAM, Florida CHRISTOPHER S. MURPHY, Connecticut MICHELE BACHMANN, Minnesota JOE DONNELLY, Indiana PETER J. ROSKAM, Illinois ROBERT WEXLER, Florida KENNY MARCHANT, Texas JIM MARSHALL, Georgia THADDEUS G. McCOTTER, Michigan DAN BOREN, Oklahoma KEVIN McCARTHY, California BILL FOSTER, Illinois DEAN HELLER, Nevada ANDRE CARSON, Indiana Jeanne M. Roslanowick, Staff Director and Chief Counsel 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 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. 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. 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 disclose 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 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 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 so-called 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 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 non- EITI 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 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 example, 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 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 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. 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 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. Transparency 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 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. 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. 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 company? 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 accurate? 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-- 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 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. 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.] A P P E N D I X June 26, 2008 [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]