The People of America's Oil and Natural Gas Indusry

Regulatory Overreach Denied

Mark Green

Mark Green
Posted July 3, 2013

Now that a federal court has stopped implementation of a new rule that would’ve required U.S. oil and natural gas companies to publicly release commercially sensitive information about foreign and domestic projects, discussion should turn to transparency tools that won’t hurt U.S. companies’ global competitiveness and potentially cause job losses.

The decision by the U.S. District Court for the District of Columbia halts implementation of the Securities and Exchange Commission’s controversial Section 1504 within the Dodd-Frank Act. Under the provision, publicly traded U.S. energy companies would have to reveal extensive data about how much they pay in licenses, taxes, royalties and other fees to foreign governments – essentially giving foreign competitors that aren’t subject to SEC rules a big advantage in the bidding process for energy contracts. The court ruling should clear the way for effective transparency that doesn’t put U.S. companies behind the 8-ball. Harry Ng, API vice president and general counsel:

“Today’s decision is a win for American jobs, for our economy and for international transparency. U.S. companies are leading the way to increase transparency, but the rule would have jeopardized transparency efforts already underway by making American firms less competitive against state-owned oil companies.” 

U.S. District Judge John Bates said the SEC misread the Dodd-Frank law to mandate public disclosure of financial reports under Section 1504. Bates said the SEC also erred in denying that there could be exemptions to the rule in cases involving foreign governments that bar disclosure. From Bates’ opinion:

Faced with these powerful indicia that Congress left the public availability of reports unspecified, the Commission offers no persuasive arguments that the statute unambiguously requires public disclosure of the full reports … as discussed earlier, the Exchange Act never defines a “report” as something publicly filed, and leaves room for confidential treatment of reports filed under the Act. …  The Commission made another serious error that independently invalidates the Rule. The denial of any exemption for countries that prohibit payment disclosure was arbitrary and capricious.

Karen Harbert, president and CEO of the U.S. Chamber of Commerce’s Institute for 21st Century Energy, which joined API and other groups in challenging Section 1504 in court:

“The SEC’s ‘extraction rule’ would have placed American oil and natural gas companies at a huge disadvantage around the world by forcing them to turn over their playbooks for how they bid and compete against foreign, state owned companies. In addition, compliance with the SEC rule would violate the law in several countries in which U.S. firms do business.”

With the ruling stopping essentially what was a regulatory overreach, attention should turn to measures that won’t harm U.S. businesses.  We can have transparency without ceding the global marketplace to rivals, many of them large, state-owned entities. Our industry is for fair disclosure and is working with civil society groups to implement the Extractive Industries Transparency Initiative, which would promote transparency without putting U.S. companies at a competitive disadvantage. That’s where future focus should be.

ABOUT THE AUTHOR

Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Mark also was a reporter, copy editor and sports editor. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela live in Occoquan, Va., where they enjoy their four grandchildren.