Posted February 10, 2012
On its face, a federal provision requiring oil and natural gas companies to be transparent about what they pay to foreign governments for energy projects in those countries -- licenses, taxes, royalties and other fees -- sounds like a good idea. And it is. The provision enacted in 2010 was designed to help people in resource-rich countries know what their governments are doing with those resources.
Unfortunately, good intentions don't always ensure fairness. With these disclosure requirements there are unintended consequences that could harm some U.S. oil and natural gas companies' ability to compete in the global market with larger, state-owned rivals. These include:
- Reporting rules that require public disclosure of detailed information about payments to foreign governments, potentially pertaining to every single well, raising the possibility that proprietary material could be handed to global competitors.
- The disclosure requirements only apply to companies listed with the U.S. Securities Exchange Commission, meaning a number of the biggest international oil and natural gas companies -- including foreign state-owned entities that control 78 percent of the world's proven reserves -- are exempted.
- Because the information is publicly available, competitors bidding on future oil and natural gas projects could access data about U.S.-listed companies with a few mouse clicks.
Of course, trying to deal with the obvious inequities of the disclosure law is perilous. Some activists are assigning bad motives to industry efforts to bring about common-sense fairness. The fact is U.S. oil and natural gas companies are working in a constructive manner to find a sensible path forward that meets the objective of the law, without harming the ability of U.S. companies to compete in the global marketplace.
ABOUT THE AUTHOR
Mark Green joins API after spending 16 years as national editorial writer in the Washington Bureau of The Oklahoman newspaper. In all, he has been a reporter and editor for more than 30 years, including six years as sports editor at The Washington Times. He lives in Occoquan, Virginia, with his wife Pamela. Mark graduated from the University of Oklahoma with a degree in journalism and earned a masters in journalism and public affairs at American University. He's currently working on a masters in history at George Mason University, where he also teaches as an adjunct professor in the Communication Department.