The SEC has promised a federal judge in Boston that it will complete the rule by mid-2016, but then it could easily be litigated again in the way that most major regulations end up in court. Industry groups have been targeting the rule for years, arguing it will put U.S.-based oil producers at a competitive disadvantage when competing abroad against state-controlled Russian and Chinese companies that aren’t bound by the SEC mandate.
Battle Lines Quickly Form Again
API, the oil-and-gas industry’s most powerful lobbying group, said the new proposal is damaging.
“Not only could the rule hurt the millions of Americans who own shares in oil and natural-gas companies, it could also cost jobs and damage America’s energy security by making it more difficult for U.S. firms to gain access to resources abroad,” said Stephen Comstock, the group’s director of tax and accounting policy.
The rule requires companies to pony up information about payments related to specific energy and mining projects—money for taxes, royalties, and more. For years it has been a priority for human rights groups like Oxfam, the Natural Resource Governance Institute, and the umbrella Publish What You Pay coalition.
Activists were largely pleased with the new proposal. It doesn’t include several provisions that oil companies such as Exxon and Shell and trade groups have been seeking in years of lobbying the SEC. Disclosure, the rule notes, “enables citizens in resource-rich countries to hold their governments accountable for the wealth generated by those resources.”
So, like the earlier version, it doesn’t include industry-sought provisions that allow project-by-project payment information to remain under wraps at the SEC, or an exemption that would bar disclosure to the SEC if a country where projects are located bars such transparency.
Whether any countries at all currently bar such disclosure is a matter of dispute, although an API spokesman said it’s the case in China and Qatar.
Either way, advocates fear that allowing exemptions from public disclosure if it’s barred in countries where projects are located would amount to a “tyrant’s veto,” giving a petro-state ruler incentives to impose policies that effectively nullify the SEC mandate.
A Major Change, and New Worries for Activists
The new proposal does, however, include a provision that allows companies to ask the SEC for exemptions on a “case by case” basis “where confidential treatment may be warranted based upon the specific facts and circumstances.”
The SEC is inviting comment on questions such as: “Should the rules provide an exemption from public disclosure for existing or future agreements that contain confidentiality provisions?” and on cases in which disclosure is barred in a country, or where it might jeopardize employees’ safety, or disclose “competitively sensitive information.”