US set to rescind payments rule in crude sector

Bloomberg

For years the oil industry has appealed to the executive branch and courts to de-fang a US rule forcing Exxon Mobil Corp., Chevron Corp. and other producers to disclose their payments to foreign governments.
Now, the Republican takeover in Washington is handling it for them. The House of Representatives is set to vote this week on killing a Securities and Exchange Commission edict that requires publication of overseas payments by oil, natural gas and mining companies. The industry says the rule, part of the 2010 Dodd-Frank act, gives global rivals a competitive edge. Backers say it will help keep payments to foreign nations in government coffers, not private pockets.
“To roll it back would be a complete abdication of US initiative and leadership on issues of corruption,” said Daniel Kaufmann, president of the Natural Resource Governance Institute, an international transparency watchdog.
The SEC rule, set to take effect next year, is one of a series of Obama administration regulations Republican lawmakers are trying to reverse using the Congressional Review Act, a law that allows Congress to undo regulations with a simple majority vote.
Congress also plans to vote this week to kill rules curbing methane venting and mountain-top mining. To do so, both chambers must pass a resolution disapproving the rules, which the president would then have to sign. While President Barack Obama would have reliably vetoed such resolutions, President Donald Trump is likely to sign it.
Trump argues that curbing regulations is key to unleashing investment by US companies. He pledged to rescind two existing regulations for each new one that’s issued.
“The SEC’s rule forces US companies to disclose proprietary information to its competitors while foreign entities do not. This can give some large industry players an advantage on future business projects,” the American Petroleum Institute, an industry group, said in a statement.
House Majority Leader Kevin McCarthy pledged in a Wall Street Journal op-ed, to “take the ax” to the SEC rule, which he characterized as “an unreasonable compliance burden.”
Transparency advocates dismiss that argument, pointing out that the European Union and UK already require such disclosures from some of Exxon’s biggest competitors. BP Plc, Total SA and Royal Dutch Shell are among those that annually report taxes, bonuses and other payments to foreign governments.
Because Exxon and Chevron aren’t listed on the European exchanges, they don’t have to comply with the EU disclosure rules. That may give them an edge over other oil majors who must report project-level payments, critics say.
In its 2015 disclosure to the UK, Rosneft reported $29.8 million in payments to the Russian Federation, Vietnam, Brazil and Norway. In the same year, BP reported $15.2 billion in payments to 23 countries, Total disclosed $16.7 billion to 44 countries, and Shell reported $21.8 billion to 24 countries.
The idea behind the measure is simple: If foreign oil companies disclose payments of $1 million to the government of Country X, then the lawmakers and citizens of Country X will know that $1 million should show up on the country’s budget. If less shows up, that means it has been diverted for private use. ExxonMobil and Chevron say they support financial transparency in the oil sector. Both are members of an advisory committee under the Interior Department that oversees a voluntary corporate financial disclosure program.
In comments to the SEC, the companies say they would support a version of the regulation that protected company-specific data. They argue that the current SEC rule would make available potentially valuable company information to state-owned competitors such as Saudi Aramco and Cnooc Ltd., neither of which are subject to the disclosure rules.
The American Petroleum Institute successfully challenged an earlier version of the rule in court, forcing the SEC to rewrite it. API asked the agency to consider a reporting model that detailed payments by resource type and production method — omitting company-specific data. But, the SEC didn’t adopt that approach.
“The SEC largely ignored industry’s comments,” said Exxon spokesman Bill Holbrook. While the final rule included exemptions for acquired companies and exploratory activities, it “remains based on the EU’s model and likely will adversely affect the ability of publicly-traded companies to compete globally,” he said. A Chevron spokesperson did not respond to a request for comment.