The EITI seeks to promote greater public awareness about the legal and regulatory frameworks that apply to the extractive industries. These laws and regulations establish the institutional responsibilities of the State in managing the sector, establish rules on license allocation and contracts, and establish detailed requirements for extractive companies. EITI Reports provide an overview of these arrangements, and links to additional information. Many EITI countries are complementing license and contractual information with further information on the beneficial owners of the companies that operate in the sector. A beneficial owner with respect to a company means the natural person(s) who directly or indirectly ultimately owns or controls the corporate entity. More information on beneficial ownership is available here.
Governments provide a legal and regulatory framework for companies to operate in their extractive sectors. These macro frameworks outline the measures companies must be aware of when they operate in that county.
What the EITI Standard says on legal and regulatory framework
The EITI requires that implementing countries must disclose a description of the legal framework and fiscal regime governing the extractive sector (Requirement 2.1). This should include a summary description of the fiscal regime, with the level of fiscal devolution, an overview of laws and regulations, and information on the roles and responsibilities of the relevant government agencies (Requirement 2.1).
The majority of resource-rich countries have established systems for allocating licenses to explore and exploit oil, gas and minerals. In most countries, these bidding and license allocation procedures are defined in publicly available legislation and regulations that set out how and on what conditions companies are granted rights. In other countries, these procedures are ad hoc, are being revised, or are simply not clearly articulated. Disclosing information about license allocation systems enables citizens to access essential information about how the country’s natural resources are being developed. Where disclosure reveals deficiencies in the licensing system, stakeholders can use this information to press for reforms to ensure more transparent and efficient licensing systems, which in turn, will tend to enhance the investment climate and the potential for developing the extractive industries.
What the EITI Standard says on license allocation
The EITI requires that implementing countries disclose information about license awards and transfers that take place during the accounting period covered in the EITI Report (requirement 2.2). This information should include a description of the process for awarding licenses, the criteria used, and deviations from the legal framework and policies on license allocations. Countries may also include additional information on the licensing process, such as commentary on the efficiency and effectiveness of these systems. Further information is available in the guidance note here.
Most countries with extractive sectors have registry databases to help them manage their extractive industry licensing systems. Publication of license registers and related information on extractive rights enable citizens to see which companies have been awarded rights to exploit their natural resources. Keeping an accurate registry system is also essential to encourage investment, to optimise the sector’s contribution to the country, to clarify property rights, and to avoid conflicts over the ownership and location of tenements.
EITI Standard - license registers
The EITI requires that implementing countries maintain up-to-date and comprehensive license registers (Requirement 2.3). Requirement 2.3(b) lists the information that must be included. Requirement 2.3(c) notes that “where [this] information … is already publicly available, it is sufficient to include a reference or link in the EITI Report”. This note provides guidance to multi-stakeholder groups on how to address these issues as part of the EITI implementation process. Further information is available in the guidance note here.
Some EITI implementing countries, like Mongolia and Togo, already include disclosure of all extractive industries’ permits in their EITI Reports. In many implementing countries, this information is available from government agencies or online databases. These databases vary from simple Excel spreadsheets to sophisticated, online systems including a GIS interface for plotting the coordinates of the tenements, geological data, and other information regarding the licensing system.
The Norwegian Petroleum Directorate's fact maps are closely integrated with the their fact pages, and they are updated on a daily basis. The fact maps contain information about wellbores, surveys, fields and discoveries, production licenses, agreement-based areas, permanent facilities and more.
Contracts, licenses and associated agreements establish many of the commitments between government and companies in the extractive industries. In some cases, the terms of these contracts and licences may be standard and complemented by taxation regimes. In other cases, these contracts, licenses and agreements include detailed terms for how resource owners and companies agree to share risk and reward over the life of long-term resource extraction projects. Fiscal terms will address how costs and profits are shared between the parties and how taxes, royalties and other extraction related fees are to be calculated and paid. Some 880 contracts signed in 35 EITI implementing countries around the world over the period 1958 to 2016, are now public documents.
What the EITI Standard says on contract transparency
The EITI Standard requires that the EITI Report documents the government’s policy on disclosure of contracts and licenses that govern the exploration and exploitation of oil, gas and minerals (requirement 2.4.b). The EITI Standard also encourages implementing countries to disclose contracts and agreements that establish the terms for the exploitation of oil, gas and minerals (requirement 2.4.b).
Image: Contract disclosure by mineral type. Based on data from resourcecontracts.org