Posted February 1, 2017
The Congressional Review Act (CRA) was enacted so Congress could address flawed federal regulations like the Section 1504 disclosure rule promulgated by the Securities and Exchange Commission (SEC). Thankfully, lawmakers are wasting no time in using CRA to repeal this anti-competitive, harmful provision.
Under the banner of transparency, the SEC rule requires U.S. oil and natural gas companies to publicly release commercially sensitive information about foreign and domestic projects. This basically hands extensive data – and a competitive advantage – to foreign competitors that aren’t subject to SEC rules, a number of them state-owned entities that control 75 percent of the world’s oil reserves. The SEC calculates that total initial compliance with Section 1504 could cost between $239 million and $700 million, with annual ongoing costs of between $96 million and $591 million.
In addition, the rule runs counter to international reporting systems like the Extractive Industries Transparency Initiative (EITI), which our industry has participated in for decades. Indeed, industry supports sensible disclosure. But Section 1504 threatens U.S. companies’ global competitiveness and could risk the safety of American employees working overseas. The reality is that there are effective ways to achieve the intent of Section 1504 without harming U.S. industry and its workers.
Twice industry tried to work with the SEC to develop a reasonable regulation that wouldn’t have these negative impacts. The agency’s first rule was invalidated by a federal judge in a 2013 lawsuit filed by API. Unfortunately, the SEC’s revised rule repeats many of the errors that caused the first version to be struck down. ExxonMobil’s William F. Holbrook told the Washington Post:
“[T]he SEC largely ignored industry’s comments and published a notice of a final rule that … likely will adversely affect the ability of publicly traded companies to compete globally.”
So, time for Congress to take CRA action. API President and CEO Jack Gerard, in a letter to House leaders this week:
[T]he Section 1504 rule fails to strike the right balance between its intended disclosure requirement purposes and protecting the competitiveness of U.S.-publicly listed companies, hurting American workers and investors. … The CRA was established for rules such as this. Congress has the ability to review and reset the regulatory process when various agencies are not able to develop balanced rules. By passing the resolution to disapprove the Section 1504 rule, Congress can reclaim its authority, and in the process, protect American companies, workers, and investors.
Again, the objective should be to foster transparency without hindering U.S. competitiveness around the world. There are effective alternatives to Section 1504:
- Adopt an API model for issuer filings that reduces risks associated with forcing companies to disclose contract-level information.
- Put a compilation of payment information online instead of forcing public disclosure of payments made to the U.S. and foreign governmental entities.
- Exempt from disclosure information that would violate a host country’s laws and existing contracts, reveal commercially sensitive information or jeopardize the safety of the issuer’s workers.
The process to establish sensible regulations that increase transparency without sacrificing U.S. competitiveness starts with Congress, exercising review and repeal authority under the CRA. Gerard’s letter to the House:
The U.S. oil and natural gas industry has a long history of supporting transparency efforts in the countries where we operate. We have sought to work with local governments and populations to address concerns that may arise with our operations. Toward that end, we have found that direct engagement between the host country governments, our companies, and the local populations can help curtail the misuse of government resources that could otherwise stymie economic growth and development. Further, the Foreign Corrupt Practices Act expressly prohibits illicit payments by U.S. companies operating abroad. Finally, by working through programs such as the Extractive Industries Transparency Initiative, which provides mechanisms for independent verification of the reported payments with the host government receipts, the industry can continue to be productive in this area.
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.