House passes resolution to revoke the SEC’s foreign payments rule

Feb. 2, 2017
The US House of Representatives approved legislation under the Congressional Review Act that would nullify a Securities and Exchange requirement for US oil and gas and other extractive industries to disclose payments to foreign governments.

The US House of Representatives approved legislation under the Congressional Review Act that would nullify a Securities and Exchange requirement for US oil and gas and other extractive industries to disclose payments to foreign governments.

H.J. Res. 41, which Rep. Bill Huizenga (R-Mich.) introduced on Jan. 31, cleared the House by 235 to 187 votes on Feb. 1, largely along party lines. "Last night's vote helps reset the regulatory process," Huizenga said the following day. US Sen. James M. Inhofe (R-Okla.) has introduced a similar CRA resolution in the US Senate.

An American Petroleum Institute official expressed approval of the House’s action. “Today’s House vote is a necessary step by Congress to establish sensible regulations that balance increasing transparency without diminishing our industry’s competitive advantage,” API Tax Policy Director Stephen Comstock said on Feb. 1. “The SEC’s rule requires disclosure for American companies but not foreign entities, fundamentally harming American workers and shareholders.”

The requirement also undermines global payment transparency efforts and is inconsistent with other major international reporting regimes, such as the Extractive Industries Transparency Initiative (EITI) and the European Union’s disclosure rules, he continued. The oil and gas industry strongly supports transparency and has been a leading advocate for greater transparency for decades through the EITI, Comstock said.

Isabel Munilla, senior policy advisor for extractive industries at Oxfam America, saw the House’s action differently. “Voting to rollback basic transparency rules provides zero benefit for the public but will instead allow corrupt elites continue to stuff their pockets with oil money and steal from their citizens,” she said on Feb. 1.

From 'leader' to 'laggard'

“The US has been at the forefront on the transparency issue, with more than 30 countries following in its footsteps to pass similar legislation. State-owned companies from Brazil, China, and Russia are all now required to disclose their payments. If the Senate follows suit in overturning this rule, the US will go from a leader into a laggard,” Munilla declared.

Comstock noted that a federal court vacated the SEC’s first rule implementing foreign government payment disclosures by domestic extractive industries under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act’s Sec. 1504 in response to a lawsuit brought by API and the Independent Petroleum Association of America (OGJ Online, July 2, 2013). The SEC decided not to appeal the court’s decision the following year (OGJ Online, Sept. 4, 2013).

It decided to rewrite the rule instead. API submitted a letter suggesting ways the federal securities regulator could do this that would support transparency without harming US companies’ ability to compete overseas or undermine US job growth (OGJ Online, Nov. 8, 2013).

The SEC announced that it would begin to prepare fresh extractive industry foreign payment disclosure requirements the following May, and proposed a new rule late in 2015 (OGJ Online, Nov. 11, 2015). It was adopted in June 2016. API said there still were major problems under the new requirements (OGJ Online, June 29, 2016).

Speakers at a recent Carnegie Institute for International Peace forum suggested that Mexico’s energy system reforms could help set a new transparency and accountability standard if they are implemented aggressively and executed well (OGJ Online, Jan. 25, 2017). “Transparency disclosures on their own are essential, but there also needs to be accountability. The rule of law also is essential,” observed Natural Resource Governance Institute (NRGI) Pres. Daniel Kaufmann.

Contact Nick Snow at [email protected].