Oil industry group says SEC must pull back transparency rule

A powerful petroleum industry group is demanding that the Securities and Exchange Commission withdraw and revise proposed rules that mandate disclosure of oil and mining companies’ payments to governments.

A Jan. 19 letter from the American Petroleum Institute to the SEC alleges that the regulators’ late 2010 proposal illegally shirks adequate economic analysis, and that the SEC should take another swing.

“This economic assessment is so deficient that, as a matter of law, the Commission may not finalize the rule without first re-proposing it with a proper economic analysis on which the public may comment,” states the letter (available here) from Harry Ng, API general counsel.

The rules, required under 2010’s Dodd-Frank Wall Street reform law, require companies to provide the SEC data about payments for production licenses, taxes, royalties and other aspects of energy and mineral projects in countries where they operate.

The disclosure rule is aimed at ending the “resource curse” in which some energy- and mineral-rich nations in Africa and elsewhere are plagued by high levels of corruption, conflict and poverty.

Sens. Richard Lugar (R-Ind.) and Ben Cardin (D-Md.) authored the provision in the Dodd-Frank law.

Western oil companies say they, too, support disclosure.

But they allege the SEC rule could place them at a disadvantage when competing for contracts against state-owned or state-controlled companies that would not be captured by the mandates, such as Russia’s Gazprom and the China National Petroleum Company.

API is pressing the SEC to include provisions that they say would help avoid competitive harms, such as allowing aggregate payment information by country.

The new letter also notes that the SEC should “define ‘project’ to mean activities in a particular geologic basin or province, and should include only those projects that reasonable investors would consider ‘material.’”

The industry is also seeking exemption from the requirements if the disclosure would violate the laws of a host country.

API argues that the proposed rule’s examination of its economic effects is so lacking that it “would not survive judicial review.”

But human rights groups — not to mention George Soros — are pushing back against industry attempts to win various exemptions that activists argue would gut the rules.