On a mild afternoon in early December, aides working for Democratic Sens. Ben Cardin, Patrick Leahy, Edward Markey, and Carl Levin made the short walk from their offices to the Securities and Exchange Commission. They wanted to discuss how and when officials there would implement an obscure but controversial Dodd-Frank provision (supported by their bosses) that pits the world's most powerful oil companies against human-rights groups and advocates such as George Soros and Bono. The timing was fortuitous: Just days earlier, the SEC had released a 2014 agenda that made no mention of the regulation, and the aides wanted to know why.
The rule would force oil, gas, and mining companies to disclose their payments (for extraction rights and everything else) to foreign governments, as a way to weaken the "resource curse"—the corruption, poverty, and conflict endemic to resources-rich nations like Nigeria and Angola. The senators argue that accountability can help, and their aides pressed to have the rule finalized quickly and with teeth, say sources familiar with the meeting. Oil industry's representatives, backed by the U.S. Chamber of Commerce, say an aggressive order could be a recipe for disaster. What petro state would give an American company the right to drill when it could award the concession to some other nation (read: China and Russia) and account for the revenue, or not, in whatever way it wants?
The rule, the brainchild of Cardin and former GOP Sen. Richard Lugar, requires businesses listed on U.S. stock exchanges to file SEC disclosures that tally payments—royalties, taxes, production licenses—to governments for oil-and-gas or mining projects in their countries. Its proponents say it equips residents of those nations to push their leaders to turn revenue into public benefits. It also aids investors. Its inclusion in Dodd-Frank over oil-industry objections was a huge victory for "transparency" advocates such as Oxfam America, Global Witness, and the Publish What You Pay coalition. They scored again when the SEC, after a long delay, said in August 2012 that it would not keep the filings under lock and key or provide exemptions from the mandate, as industry lobbyists had wanted.
Then the American Petroleum Institute, the U.S. chamber, and other business groups filed suit, and the tide began to turn. In July, a federal District Court judge appointed by President George W. Bush tossed out the regulation, writing that the SEC didn't need to make company filings public, and failed to justify why it wouldn't exempt projects in countries that bar payment disclosures.
The SEC declined to appeal. Now it is rewriting the rule, and the Senate aides weren't the only ones who wanted to know how. In recent letters and meetings, representatives of oil companies, human-rights groups, and other parties have besieged SEC staff, trying to shape the revision. The corner of the SEC's website that lists the meetings and letters has become a must-read for those tracking the measure. Jana Morgan, the national coordinator for Publish What You Pay's U.S. branch, says it's her home page.
A tough-minded rule may require a shove from elsewhere in the Obama administration—the White House, or even the State or Treasury departments, all of which support resource accountability—says Neil Brown, a former Lugar aide who helped write this part of the law. In a speech before the United Nations in 2011, President Obama praised resource "transparency," and the U.S. is formally joining a multilateral program called the Extractive Industries Transparency Initiative, which brings together governments, industry, and civil-society groups. "The administration needs to step up its own engagement in terms of support for the rule, in terms of wanting it quickly and wanting it to be strong," says Brown, now a fellow at the German Marshall Fund of the United States. "The president says it is a priority. Why doesn't he just say it's a priority to the people writing the rules?"
Industry officials, to be sure, say they, too, are pro-transparency and point to their support of EITI. But the original SEC rule went too far, they complain, arguing it would create a competitive disadvantage by forcing companies to disclose commercially sensitive information. They also say the rule would jeopardize tens of billions of dollars of investments in nations that bar the disclosure. And they may have a friend in SEC Chairwoman Mary Jo White, who used an October speech to question efforts to "effectuate social policy or political change" through disclosure mandates.
Now the American Petroleum Institute, the oil industry's biggest trade and lobbying group, wants the SEC to keep individual companies' filings to the agency out of the public's hands, arguing instead for a "compilation" that doesn't name specific companies but reveals the types, amounts, and government recipients of the money. That would still benefit oil-state citizens. "The real value is, what is the flow and to whom?" says Stephen Comstock, API's director of tax and accounting policy. His clients also want a waiver from the rule if a foreign government bars the disclosure, as do Qatar and Angola, according to the group.
Lawmakers backing the rule say the oil lobbyists overstate the risks. Keeping filings under wraps defeats the law's purpose, and allowing exemptions would incentivize more governments to outlaw disclosure—what some call a "tyrant's veto." They want the original, aggressive version of the rule, just with better language to legally justify the disputed provisions. The SEC "did not promise that this gets done quickly," says the source familiar with the meeting. Cardin, who says he'll take his case directly to SEC commissioners, isn't worried. Yes, "there is certainly a powerful interest against what we are trying to do," he says. "What we have on our side," he adds, "is the law."
This article appears in the December 14, 2013 edition of National Journal Magazine as Thrilling Sideshow.