Should we "shut down" EITI in Norway?

The Ministry of Petroleum and Energy is receptive to replacing the annual EITI reporting in Norway with other initiatives. Along with the oil sector and civil society they will arrive at a decision in November 2015 on what the road ahead will be for EITI in Norway.

Since 2007 Norway has been committed to uphold the international transparency standard EITI (Extractive Industries Transparency Initiative). In November 2015 the stakeholder group in EITI in Norway will decide whether Norway will continue to produce the EITI reports at the same level as is done currently, or whether we will discontinue EITI in its current form. The production of an annual EITI report has been a cornerstone in Norway´s EITI. The stakeholder group consists of representatives from the Ministry of Petroleum and Energy (MPE), the oil sector and the civil society.  

PWYP Norway is part of the stakeholder group and therefore wishes input on what our stance should be on a dismantling of the EITI reporting in Norway. The following is a bit of background so that you can familiarize yourself with the EITI-process in Norway, and some aspects which are relevant in order to establish viewpoints on the case. At the end of this case, there is a list of three questions that we wish to get answers to.

What is EITI and what is the stakeholder group?

An EITI process is a national process for transparency of the cash flow from natural resources. EITI is a transparency standard which requires that companies publish how much they pay authorities, and that authorities declare how much they receive. This information is then combined in an EITI report. As of today, Norway is considered "Compliant" with this transparency standard, which is based on a three party cooperation between state, companies and civil society.

The basis for EITI concerns large incomes the extracting industries generate through activities which stem from natural resources and which are owned by the state. This income should be used for development. The citizens of a country should have access to information in order to follow the cash flow. In many countries this is not happening because of lacking transparency and control of the cash flow. Money disappears along the way. The goal of EITI is to make visible reliable information concerning the revenue in a country. The focus of the EITI process thus far has been to uncover possible corruption by comparing what the companies pay in taxes with what the authorities receive in taxes.

The stakeholder group has the main responsibility of producing the EITI reports and consists of representatives from the private sector, authorities and civil society. Representatives from civil society organizations in EITI in Norway during 2014 - 2016 are PWYP Norway, Industri Energi, Transparency International Norge, WWF Norge, KFUK-KFUM Global og Fagforbundet. 

PWYP Norway has arranged several debates where EITI has been discussed.

What is it that EITI does not reveal?  What is the difference from extended country-by-country reporting?

EITI differs from PWYP Norway´s suggested law of extended country-by-country reporting (ECBCR). This suggestion requires that the companies report their cash flow in those countries in which they extract their resources, costs for all countries, and that they must declare this in their annual financial statement. Then it will be possible to see if the country has received the revenue to which it is entitled. 

The companies can utilize a whole toolbox of secrecy mechanisms in order to hide the cash flow before they ever become accountable for taxation. They can engage in tax evasion, well protected by secrecy.  PWYP Norway is therefore working for the establishment of laws for extended country-by-country reporting in all countries, including Norway. An extended country-by-country reporting will reveal how companies´ investments, production, income, costs, and taxes are distributed in the various countries. It will reveal unwanted tax adjustments.

In Norway we are well on our way to getting several of the demands for extended country-by-country reporting implemented, even though we currently have not yet fully reached our goal. Among other, ECBCR has been brought up in Parliament by AP (Labor party) and SV (Socialistic Left). At the same time as lobbying to push through ECBCR, PWYP Norway has been instrumental in pushing for Norway to accomplish as much as possible within EITI. PWYP Norway has made annual position notes in order to prioritize our wishes, and to keep EITI. This is primarily for the benefit of the international society, since Norway already has many good control mechanisms in place. But we have also not reached our goal in Norway yet.

The main objective of EITI is satisfied in Norway

EITI is primarily a process to hold authorities in a country responsible, and takes on a leading role, along with the companies and civil society, to ensure greater transparency in the oil and mining sector. EITI´s purpose is to show that the tax payments that the companies claim to have paid, have actually been received by the authorities. In Norway this has been implemented, and it works. The original main purpose of EITI in Norway is thus satisfied. One result is the cash flows that need to be illuminated are now part of the petroleum law.

That does not, however, mean that there is no use for EITI in Norway: There are still many parts of the management of natural resources that lack transparency. But PWYP Norway believes that EITI must have clear and explicit tasks to implement in Norway, and explicit goals about what has to be achieved. PWYP Norway does not wish to maintain a process where we produce the same report year after year, and not achieve anything further.

What does the Ministry of Petroleum and Energy (MPE) think?

MPE's representatives have stated that the result of EITI being in Norway is that we have proved that there is transparency concerning our requests. The annual controls of the cash flows have not revealed a single deviation in the six reports which have been produced thus far. MPE does not argue that the information should cease to be published, but to end the annual checks of the information. It is likely that will mean that the compilation of information which the accountancy firm Deloitte up until now has produced, will cease.

MPE has rejected the suggestions in the latest position paper from PWYP Norway, and stated that the suggestions are not relevant for the Norwegian EITI implementation, and that these subjects should take place in other arenas. MPE has not submitted their own suggestions concerning where there should be transparency.

The question now posed, is whether or not we have reached the point we hoped to achieve with EITI in Norway, and whether it is time to discontinue EITI in Norway. The stakeholder group has not reached a consensus on how to formulate an explicit ambition with Norway´s EITI.

PWYP Norway has grouped and differentiated their suggestions according to importance and necessity in a Norwegian context, and what might be important and necessary in an international context.  There is no exclusion of any theme. It is a prioritization of the area with existing time and resources: 

• EITI-information is published in a fact sheet which is published by the Ministry of Petroleum and Energy and the Norwegian Petroleum Directorate so that we can use the existing information systems. The fact sheet concerning Norwegian petroleum activity was published as a printed matter up until 2014 with updated information about Norwegian petroleum activity. norskpetroleum.no is the new fact sheet. On the website norskpetroleum.no interested readers can easily share, print out, or publish photos, graphics, and maps on social media. Data is synchronized daily with the Norwegian Petroleum Directorate ´s factual databases and links that give further information. 
• Ownership registry. One of the transparency initiatives which have been discussed in EITI is transparency about actual owner. This measure has simultaneously come as a request from EITI´s 49 member countries. In Norway there is already a process in this area which is currently handled by the Ministry of Trade, Industry. Read: Reporting on beneficial owners can become an EITI requirement.​
• Open datasets. This is something we implement, but not always consistently. PWYP Norway requires accessibility of information. Sierra Leone is a good example to follow on making information accessible​.

Read more about PWYP Norway´s priorities for 2015.

PWYP Norway therefore suggested in their statement of position, that EITI reporting in Norway can be concluded after five years with no deviations, and by Norwegian implementation of extended country-by-country reporting. This is not a new discussion. One possibility has always been whether there is a need for EITI in Norway. This is why the position paper has included this as one of the alternatives. EITI uses external validation teams to assess the reports and the process.

The question concerning "to discontinue EITI" has been labeled "to mainstream EITI."

"Mainstreaming" is a term used by EITI. It was used in board meetings in the international EITI-board in Brazzaville in April and in Bern in October. There the board recognized the importance of "mainstreaming" EITI into national systems.

This is a type of question which was brought up during the upstart of EITI. It means that transparency is an inherent good and should be the norm. Rather than having a special process (where the stakeholder group, authorities, and civil society along with an external compilation from Deloitte, should produce the information), existing systems in the country itself produces the information which is needed for an EITI implementation. That means that the report itself is dropped, including the external compilation, which in Norway is done by the accountancy firm Deloitte. One idea which has been discussed, is whether a self-evaluation should be produced by the stakeholder group. Civil societies in the South are preoccupied that the stakeholder group carries on, because they otherwise would not have forums where they can sit face-to-face with representatives from the companies and the authorities. 

If the board decides to agree to "mainstream" EITI, it can mean a dismantling of the requirement to carry out a comparison (reconciliation as it is called in English) of the numbers from the companies and authorities. Instead there would be a requirement to examine whether the control systems are adequate.

What is the actual meaning of "mainstreaming"?

Currently no official definition exists, but these four points recur:

1. Instead of reports ensure that there is open access to public systems.
2. There should be focus on developing digital solutions, which can be reached by technical as well as non-technical users. (Some prefer an Excel spreadsheet, others want facts, some would like a comprehensible drawing.  And some want the authorities to view this as their responsibility).
3. Sharing of data between institutions of authority and companies so that "the left hand knows what the right hand is doing."
4. The above points are obtained by building on existing systems rather than creating specially EITI tools.

While "mainstreaming" is a discussion, new requirements arise in parts of the international civil society which wants EITI to be a tool which expands to compel more information about the sustainability of oil, coal, and gas projects in a world threatened by climate change.

Read more about this requirement and the letter "Letter to Extractive Industries Transparency Initiative calling for climate transparency"

What are the results internationally of the EITI work here in Norway?

PWYP Norway asked Norway to import EITI already back in 2006. At that time, no other country was asking for it. In a few short years, Norway imported EITI as the first OECD country to do so. The international effect has been great because of Norway´s implementation, and not least, how Norway solved the task.

PWYP Norway´s work to get Norway to import EITI has had direct and concrete results:

• It has been of major importance for the introduction of EITI in various countries globally that central production countries like Norway also have introduced EITI. It was because of this that PWYP Norway demanded that Norway should introduce EITI. It was like the first PWYP coalition in the world in a rich OECD country. We have now implemented this in such a way that it is used as a positive example for other countries.
• It was not possible to hide behind the counter-argument that it was competitively sensitive. Norway got a number of inquiries from other countries that wanted to do the same. Many were surprised by how easy it was.
• Norway changed the petroleum law §10-18´s regulation on the duty to inform and to report payments of defined cash flows such as petroleum tax, CO2 fee, area fee, and NOx fee. This means that EITI is not "voluntary", but rather "obliged". It means that Norway, regardless of whether we have EITI or not, shall publish this information.
• Norway has now produced EITI reports since 2008, without deviations.
• PWYP Norway has contributed to raising the discussion surrounding EITI, the principles of transparency, and information that has come to light in several countries.
• PWYP Norway has through the production of knowledge, cooperation with the civil society from the South, and information work, explained what different transparency initiatives are capable of solving, and what they cannot solve. We have discussed, especially with the civil society in the South, which transparency requirements and transparency initiatives can be implemented in which countries, so that civil societies can make informed decisions in their continued work in different political and economic contexts.

The international effect has been huge. The level of ambition for the national effect has been very limited. 

Is EITI important here in Norway?

The level of ambition for EITI here in Norway has been realistic. There are already good systems in place in Norway. A good portion of information, among other about how much is paid in petroleum taxes, is openly displayed both from the Oil tax office and in documents from the government (budget documents etc.). In this regard, it might be necessary to carry out certain aspects of EITI in Norway to serve international purposes, which are unimportant in a Norwegian context. Other aspects might be both essential and necessary also in a Norwegian context as seen from a civil society perspective.

The Ministry of Petroleum and Energy considers that there is no inquiry for the information that EITI produces. PWYP Norway has also not experienced receiving questions from the public about the information EITI produces here in Norway. But, we experience getting inquiries from the international civil society, and also authorities.

Read which reports the EITI process in Norway has produced.

What are we experiencing of international inquiry in regards to EITI´s importance in the civil society currently?

• EITI is a forum where transparency can be discussed: In many countries in the South EITI is an important forum where civil society can discuss payments to authorities and follow up EITI requirements.
• Economic incentives to choose EITI as a transparency mechanism: Organizations in the South receive financial aid in order to work with EITI. That contributes to place the focus on EITI as a transparency mechanism.
• Implementation from above: The fact that some countries have established economic aid for those who want to "work with EITI" seems to have resulted in some civil society organizations that otherwise do not have any agenda with EITI, having wished to start working with EITI.
• In organizations in the South, there are differing opinions on whether authorities ought to adopt EITI or not. Some organizations experience that authorities adopt EITI and write that the organizations are part of that process, even when they are not.  (Example: Guatemala). At the same time, EITI is a process that many have skepticism for. (Example: EITI is viewed as "imperialistic" in Bolivia).
• Civil society has to "prove" the utility of EITI: The general space for civil society and freedom of speech is under pressure in many countries. Is EITI capable of easing this pressure? The EITI cooperation is primarily between authorities and the private sector, and not the civil society. The civil society demands to be the guarantor to emphasize the importance of transparency that EITI insists on.
• Financing related to a transparency initiative: We have seen examples where donor institutions have asked civil society to answer "why they don´t work more with EITI". They have also been informed of a wish to relate financial institutions to transparency initiatives in preference over others.
• There has been much inquiry for PWYP Norway´s experience, knowledge, and assessments in relation to EITI. PWYP Norway has shared this with many parties, and has laid forth the various possibilities in civil society that any given country has. PWYP Norway is careful not to push their opinions on a given country as to what they ought to choose. Norway is different than other countries. It is important that civil societies in other countries develop their own analyses with the background of gathering information and experiences which PWYP Norway can share. Political, technical, and qualifications challenges abound, and PWYP Norway has shared knowledge in both the TRACE program and in presentations. As a civil society in the North that has achieved the EITI process for several years without aberrations, Norway is viewed by many as "best practice", although we ourselves see challenges in our own implementation.
• There exists a demand for EITI which PWYP Norway cannot meet because we lack the financing. PWYP Norway does not have the sort of financing that allows for direct follow-up to this type of inquiry. For example, through the participation at the EITI conference where the purpose is to exchange experiences with other resource-rich countries and inspire debate concerning new transparency requirements and EITI´s future. As of today, the oil industry and MPE have greater access to resources that will cover such travel and can use the opportunity as a positive possibility for exposure for authorities and companies. So even though the initiative is a three-part cooperation, it is only the oil industry and authorities that have the actual finances to participate. Even though the initiative promotes civil society as a participant which will have a voice at the table, in fact civil society in the North are in effect shut out from participating. Despite the fact that we in the North have pushed for greater requirements, the financial aid only goes to civil societies in the South, who work on getting in place elementary transparency requirements, which are already covered in the North.

What is the position paper from PWYP Norway and what has the process behind been?

In 2014 PWYP Norway initiated a part of an already commenced strategic task to examine what PWYP Norway should prioritize within EITI in the coming years. On 12. March, 2014 PWYP Norway sent its position paper to MPE. The position paper supports the new EITI standards in the international strategy, and in addition it has been made relevant for the actual Norwegian context.

The position paper represents the position of civil society organizations which have enlisted in the stakeholder group in EITI, (Industri Energi, Transparency International Norge, Fagforbundet, and PWYP Norway) and were sent out on a consultation process among the organizations. The position paper can be viewed as a "wish list" for everything that has come up and been mentioned in the process, and the wish list was sorted into six main categories.

PWYP Norway has during the period gathered feedback and views concerning what we wish to prioritize within EITI, and why and how the various elements in EITI should be prioritized according to their relevance. PWYP Norway has sought feedback through conversations and inquiries.

The position paper was revised for 2015. To gather the necessary and relevant information from the organizations, and to gather views before the position paper was revised in 2015, PWYP Norway completed the process in three phases:

Phase 1: PWYP Norway has completed a questionnaire based on the position paper and sent it to the organizations. The purpose of the questionnaire was to ask which elements PWYP Norway should prioritize and why. And gathering necessary and relevant information and thoughts concerning an adjusted implementation in a Norwegian context. The questionnaire was based on the position paper from 2014. The questionnaire briefly informed on what PWYP Norway thinks it is important to prioritize within EITI, and what the reason is for the various elements. We also asked their views on what is important for the organizations and why, and how they would stress the importance of the elements, and of what importance you think PWYP Norway should prioritize this element, so that the arguments for and against are explicit. The questionnaire was sent out in February 2015.

Phase 2: It is not expedient to view EITI as a completely isolated process apart from other transparency processes, because these affect each other. Therefore the organizations discussed the prioritization and how the EITI process can affect other prioritized processes and work areas. The meeting was held February 13, 2015.

Phase 3: Based on the input and discussion, PWYP Norway completed the position paper for 2015.

The position paper for 2015 is viewed as a new unified position paper from the organizations tied to PWYP Norway and which priorities are desirable in the interest group in EITI. The position paper is thus to be viewed as a prioritizing, something that is necessary with limited resources, both human and economic. It should not be viewed as the exclusion of any topic. This will then be the prioritizing document. At the last annual meeting, it was discussed that it is not desirable to have a process every single year, so that the position paper is in effect until there is a need to adjust or revise, at which time it is replaced by a new position paper. (This is not to be viewed as a management document of all of PWYP Norway´s activities otherwise).

Final decision?

PWYP Norway must reach a decision in this case before the next meeting in the stakeholder group because at that point this case will be brought up. As of now, a date has not been set for the next meeting, but it is assumed that the Ministry of Petroleum and Energy will summon a meeting in November/December 2015.

If Norway is to discontinue EITI, there will be a need for a process where:

• The EITI board is involved.
• It is made explicitly clear that the reason that EITI will be discontinued is that the main purpose of it is achieved.
• It is made explicitly clear that the information that EITI was going to handle on the part of authority is transparent and accessible (should be specified including source in the latest EITI report).
• It is made explicitly clear that the information that EITI was going to handle on the part of companies is transparent and accessible through ECBCR (should be specified including source in the last EITI report).

These process elements are necessary to show the way to other countries that discontinuing EITI does not lead to discontinuing transparency, but that transparency continues on both the authority side and the company side when EITI work is discontinued.

Norway will also have a "validation" which started January 1, 2016.  But since it is the EITI secretariat which procures validation, the commitment is on the part of EITI.  EITI will present a calendar for this as soon as validation is procured.  Most likely this will take a few months.

We welcome your opinions

What do you think? We want to hear from you! Send us your thoughts and any concrete suggestions are welcome. Write to us at post@pwyp.no.

These are the three questions that we find it important to get answers to:

1. Should PWYP continue to push the stakeholder group for the elements in EITI´s position paper and as a result, ensure that EITI gets new roles in Norway? In other words, should PWYP Norway work towards EITI`s taking on new roles after the main objective has been satisfied?
2. Should Norway continue to produce EITI reports in the same manner until ECBCR is fully implemented? In other words, should PWYP Norway work to continue EITI´s existence until ECBCR is implemented in Norway? So that PWYP Norway shows that civil society can effectively contribute to reduced costs after having achieved ECBCR and then discontinued EITI?
3. Should Norway discontinue "mainstream" EITI already now and show the way to how EITI can be replaced with general transparency from authorities and companies?