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Transparency cookies are in the oven

Lebanon takes nascent steps toward clean oil and gas sector

by Jeremy Arbid

The tools to monitor Lebanon’s hoped for oil and gas sector are nearly on the workbench. In January, the government committed itself to joining a global transparency initiative, and in March, a draft law promoting the future sector’s transparency was finally shown to the public. Taken together, they could help Lebanon build a clean oil and gas industry.

But, the draft law is no longer being billed as an anti-corruption bill. Instead, the law, under preparation for at least the past two years, is now being touted as legislation to support transparency in the petroleum sector. The name change can be likened to a marketing tool – the word corruption was in the law’s title, it would suggest that there is a battle to wage, and that the sector is already dirty. Pitched differently, as promoting transparency, represents a glass-half full approach – it both sounds prettier and presents a better image.

The law has passed through several drafts in the last couple of years, which Executive covered in its 2015 and 2016 special reports on oil and gas. In late March, it was  released to the public and is now ready for Parliament to debate and vote on.

Earlier this year, Lebanon committed to joining the Extractive Industries Transparency Initiative (EITI). The EITI is a voluntary global transparency initiative led by governments, companies and civil society, and is a tool to facilitate the disclosure of information. Its standards include releasing such information as: the allocation of rights, production data, revenue transfers to local jurisdictions, the industry’s social impact, and revenue management. It promotes transparency by encouraging the government, the companies awarded exploration licenses, and civil society to share information and decide what additional data should be published.

The draft law goes hand-in-hand with EITI by codifying its current standards. The law would mandate that signed contracts, the terms of the licenses, beneficial ownership, as well as payments from companies to the government should all be published.

“Every single item found in the EITI is there; it is a very good reflection,” says Diana Kaissy of the Publish What You Pay NGO on the merits of the draft law. The main distinction between the proposed legislation and the EITI is that the latter involves for civil society. “That’s the big advantage of the EITI. But the EITI is tied to political will, so even if that disappears we could fall back on the law,” Kaissy tells Executive.

If the release of so much data were mandated by the draft law, the EITI could then be used to collect other information, such as data on environmental prudence and protection, social impact and corporate social responsibility. Were the law ratified, Kaissy says, “We can really go wild and be very creative in the EITI report.”

It is not clear whether Parliament will vote on the law before the government signs its first exploration contracts in November. And, to be truly effective the law would require auxiliary legislation. The bill points to a yet unlegislated anti-corruption commission as the arbitrator when compliance comes into question or infractions occur. Walid Nasr, the Lebanese Petroleum Administration’s point man for strategic planning, downplayed the lack of that body in the near-term. “Many of the provisions of the [draft] law are related to publishing information and don’t require any other party,” Nasr tells Executive, adding that much of what is written in the draft law is already integrated in oil and gas regulations. But, if there were infractions, like bribes, or non-compliance by the government or companies in providing or publishing data, then the anti-corruption commission would definitely matter.

As for the EITI, Nasr says the government has already committed to joining and is waiting to sign contracts later this year to learn which companies will be participating in the transparency initiative. Civil society will join the government and companies, but faces a long road of preparation to choose its representatives and demonstrate their capacity and credibility for enforcing oil and gas transparency. “This is something civil society needs to work on to have really strong representation and an active role,” Nasr says.

The EITI is coming, but it will be up to civil society to force the government to stick to its promises of transparency.  The onus is on civil society to figure out how it will bring together non-profits that have competing interests. The government will move forward regardless, with or without the EITI and the draft law. Civil society must be an active partner in the former and must lobby Parliament to ratify the latter.

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Jeremy Arbid

Jeremy is Executive's former economics and policy editor.

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