The People of America's Oil and Natural Gas Indusry

The U.S.-Mexico TBA and Fair Disclosure

Stephen Comstock

Stephen Comstock
Posted May 10, 2013

Two of the most strategic energy partners for the United States are undoubtedly Mexico and Canada. With the right policies toward our energy neighbors – approval of the Keystone XL pipeline and the U.S.–Mexico Hydrocarbon Transboundary Agreement (TBA) - we have the potential to be North American energy self-sufficient by 2030 and enhance our energy security.

Keystone XL has drawn a lot of headlines, and it is well known that the project is in the national interest. Less well known is the U.S.–Mexico TBA.

The U.S.–Mexico TBA will govern the treatment of resources in the Gulf of Mexico that are located near the maritime border with Mexico. Congress is currently reviewing the agreement and both the House and Senate have introduced implementing legislation.

Included in the House of Representatives’ version is a very important provision that exempts U.S. companies that enter into agreement under the authority of U.S–Mexico TBA from the disclosure requirements of Dodd-Frank Section 1504. Section 1504 as implemented by the SEC requires listed companies to report payments to foreign governments, subnational governments and the federal government.

The U.S.–Mexico TBA will provide the legal framework necessary for the joint production of oil and natural gas reserves with Mexico’s state-run oil company, Petroleos Mexicanos (PEMEX).  Since PEMEX is 100 percent state-owned, all payments from SEC-listed companies will be subject to the reporting requirements of Section 1504. This becomes problematic when contractual provisions or foreign laws prohibit disclosure, creating a competitive advantage for companies not subject to disclosure.

Section 1504 is anti-competitive and may even harm investors. As such, all efforts to minimize its impacts are welcomed, including the exemption in the U.S.–Mexico TBA. As API’s Surya Gunasekara and others explained recently in Forbes:

“This rule has nothing to do with investors and might actually harm investor interests by decreasing U.S. companies’ ability to compete with state owned companies from Russia, China, Venezuela and Iran.  Indeed, some companies have even disclosed to investors in their annual 10-K that Section 1504 presents a governmental risk which undermines international competitiveness.”

API has sued over the 1504 rules because they put U.S. companies at a competitive disadvantage. We will continue to advocate for transparency programs like the Extractive Industries Transparency Initiative that provide for a disclosure system that maintains a level, competitive playing field for U.S. companies. U.S. policy should be driving investment by U.S. companies, not the opposite.

Certainty is hugely important for U.S. companies making billion-dollar, long-term investments.  The Section 1504 exemption language in HR 1613 provides that certainty by ensuring companies will not have to violate their contractual obligations or foreign laws in order to comply with the SEC’s anti-competitive reporting requirement.


Stephen started with API over 8 years ago and currently manages tax and accounting policy issues for the organization. Prior to joining API, Stephen worked for 12 years in ExxonMobil’s Tax Department as a planner for their Upstream, Downstream and Chemical operations. He is currently Chair of the Energy and Environmental Taxes Committee of the American Bar Association’s Tax Section. Stephen received a BA from the University of Texas and a JD from the National Law Center at George Washington University.