The US Securities and Exchange Commission voted to adopt a requirement for US oil and gas and other extractive industries to report payments to foreign governments. The 2-1 vote adds a new provision, Section 13(q), to the 1934 Securities Act under Section 1504 of the 2010 Dodd-Frank Financial Reform Act.
The American Petroleum Institute strongly criticized the Aug. 22 action. "The rules will give foreign oil and natural gas companies access to confidential, proprietary information that they could use against US companies when competing for crucial energy resources around the globe," API Chief Economist John C. Felmy said. "State-owned foreign firms could plunder this information to help them determine the strategies and resource levels of their US rivals."
He continued, "Unfortunately, disclosure would not be a two-way street. State-owned foreign companies would have to reveal nothing and might even be favored for projects in host countries reluctant to have financial information disclosed."
Proponents argued that the provision, introduced as an amendment by US Sens. Richard G. Lugar (R-Ind.) and Benjamin L. Cardin (D-Mo.) when Congress was formulating the Dodd-Frank law, would help address the so-called "resource curse" in countries suffering from oil, gas, and mineral revenue corruption and mismanagement.
It would require 90% of the largest publicly traded international oil companies and many of the top international mining companies to disclose payments for each project and each country as part of their annual financial reports to the SEC, according to Oxfam America, an international relief and development organization which supported the provision.
"While we welcome the SEC's rules that will finally bring section 1504 into effect, the devil is in the details," said Ian Gary, senior policy manager with Oxfam America's oil, gas, and mining campaign. "We're in the process of thoroughly analyzing the rules to determine whether they adhere to the statutory requirements and congressional intent."
The requirement isn't necessary, Felmy contended, saying, "A better solution is the Extractive Industries Transparency Initiative approach, which requires that all oil and gas companies operating in a country disclose payments made to that government."