New Global Energy Royalties Index May Get Boost From SEC
A Revenue Watch Index released on Wednesday, which measures disclosure about oil industry payments in 41 countries, may soon have access to a vast amount of data about what publicly traded companies are paying for production rights.
According to a provision in the Dodd-Frank financial reform law, the Securities and Exchange Commission will issue regulations requiring energy and mining companies to annually disclose royalties, license fees, production entitlements, bonuses, taxes and other payments linked to commercial development. Companies must identify the business unit that made the payments, the government that received the payments, and the specific project, according to the law.
“The new U.S. law will greatly increase the volume and detail that is available about the payment stream because it will cover payments to governments in all countries where the affected companies operate,” says Karin Lissakers, director of Revenue Watch Institute, the developers of the new index. “It also requires project-by-project reporting, so there will be a significant increase in the overall disclosure of these payment streams, which will tell us a lot about what the countries are receiving.”
To create the new ranking, Revenue Watch and Transparency International compiled public statements and disclosures by 41 governments about the money received for oil, gas, and minerals production. Transparency is crucial, they argue, to prevent government corruption and encourage accountability in how energy and mining revenue is used to promote economic development.
Brazil ranked No. 1 in government openness about energy management, followed by Norway, Russia, Mexico, Chile, Colombia, Kazakhstan, Peru, Azerbaijan, and Ecuador, according to the index. The United States was No. 10; at or near the bottom of the index were some resource heavyweights including Turkmenistan, Equatorial Guinea, Kuwait, Ghana, and Saudi Arabia.
The new SEC regulations should be in place for all publicly traded companies by 2012. By law, the SEC must finalize the regulations by next July, but it faces considerable opposition from the energy industry. The energy industry has long resisted regulatory scrutiny, but is set to experience a new level of attention, in particular to recurring payments such as licensing and royalties.
A major way for energy companies to ensure workflow continuity, and to ease the strain of heightened regulatory compliance, is to automate key accounting functions. Chief among these are energy licensing contracts and energy royalty accounting. As stricter environmental regulations have forced energy producers to incorporate technological upgrades, so too will the increase in transparency and regulatory standards. The newest tool for energy producers in light of coming SEC requirements are likely going royalty software and rights management software systems.
