Why Oil Companies Are Asking for More Regulation

The corporate logo of Shell, a Dutch petroleum company, is seen under a midafternoon sky in Kuala Lumpur on March 31, 2008. Malaysia's conservative Islamic party PAS on March 31 urged Muslims worldwide to launch a commercial boycott of Dutch products to protest against a film deemed insulting to Islam. 
National Journal
Ben Geman
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Ben Geman
May 5, 2014, 11:58 a.m.

Ex­xon and Shell want glob­al gov­ern­ment. Or the equi­val­ent. At least when it comes to reg­u­la­tions that will force the oil gi­ants to dis­close pay­ments to for­eign gov­ern­ments for do­ing busi­ness in their coun­tries.

In a new let­ter to the Se­cur­it­ies and Ex­change Com­mis­sion, Ex­xon and Shell urge the SEC to hurry up and is­sue the con­tro­ver­sial rules on in­dustry pay­ment dis­clos­ure.

Why? So that loom­ing European dis­clos­ure man­dates can be synced — the let­ter uses the term “equi­val­ency” — with the U.S. re­quire­ments. The United King­dom, the let­ter notes, is “mov­ing quickly” to be­come the first European Uni­on state to im­ple­ment E.U. trans­par­ency rules.

If the U.S. com­mits to act­ing this year, there’s enough time to in­flu­ence the U.K and hence the over­all E.U ap­proach, Ex­xon and Shell ar­gue in the let­ter, not­ing the be­ne­fits of a “co­ordin­ated and har­mon­ized glob­al trans­par­ency re­gime.”

Con­versely, “no one be­ne­fits” if mul­tina­tion­al com­pan­ies must file sep­ar­ate kinds of dis­clos­ure re­ports in sep­ar­ate places.

“An ideal solu­tion to the is­sue might be that com­pli­ance with the re­port­ing rules in one coun­try would be deemed to sat­is­fy the re­port­ing re­quire­ments in an­oth­er coun­try not­with­stand­ing vari­ations in de­tail,” adds the May 1 let­ter to SEC com­mis­sion­ers, which sur­faced on the SEC’s web­site a few days ago.

Ex­xon and Shell have in­terests at stake that go far bey­ond the eso­ter­ic de­tails of dis­clos­ure pa­per­work. They’re part of a ma­jor, years-long oil-in­dustry cam­paign to give the sec­tor lots of lee­way and keep spe­cif­ic com­pan­ies’ SEC dis­clos­ure fil­ings out of pub­lic view.

The in­dustry warns that an overly pre­script­ive rule that also makes de­tailed pay­ment in­form­a­tion pub­lic will hobble West­ern oil com­pan­ies com­pet­ing world­wide against state-con­trolled Rus­si­an and Chinese firms that aren’t bound by the man­dates.

Last sum­mer, a fed­er­al judge threw out an earli­er ver­sion of the SEC rule that oil and busi­ness groups had chal­lenged.

The oil in­dustry has long op­posed the dis­clos­ure man­date, and now at least hopes to en­sure that the SEC’s on­go­ing re­write pro­duces a less ag­gress­ive rule.

The U.S. rules will force SEC-lis­ted oil, nat­ur­al gas, and min­ing com­pan­ies to dis­close pay­ments to gov­ern­ments in na­tions where they have pro­jects, such as money for pro­duc­tion li­censes, taxes, roy­al­ties, and more.

The rule is aimed at chip­ping away at the “re­source curse” of cor­rup­tion, con­flict, and poverty in en­ergy-rich na­tions in Africa and else­where. Hu­man-rights groups say the oil in­dustry is seek­ing ex­emp­tions that would ef­fect­ively gut the reg­u­la­tion, which is re­quired un­der the 2010 Dodd-Frank fin­an­cial law.

Ex­xon and Shell — both world­wide op­er­at­ors — are ask­ing the SEC to pub­lish draft rules ASAP, or at least be­fore year’s end. A com­mit­ment to act this year could con­vince the U.K. to push back its im­ple­ment­a­tion to April 2015, thereby provid­ing “suf­fi­cient time” to col­lab­or­ate be­fore any E.U. states com­plete their rules, the let­ter states.

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