Wall Street fight tests oil’s clout after BP spill

A proposed amendment to the Senate’s Wall Street reform legislation has prompted a lobbying fight that will test the oil industry’s political clout following the Gulf of Mexico spill.


The industry is opposing efforts by Sens. Ben Cardin (D-Md.) and Richard Lugar (R-Ind.) to require oil, gas and mining companies to disclose payments made to foreign governments in connection with energy projects in their countries.

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The amendment’s backers say that greater “transparency” would help ensure that wealth from development flows to the public in energy-rich countries in Africa and elsewhere — rather than lining “the pockets of the rich,” as Lugar has put it. They also claim the plan benefits the United States by helping to create more stable global energy markets.

But the industry’s biggest trade group — the American Petroleum Institute (API) — and other large business groups charge that the new reporting rules would be both ineffective in fighting corruption by foreign governments and harmful to U.S. companies.

They say it would create onerous requirements that put U.S. firms at a competitive disadvantage compared to large state-owned or state-controlled Russian and Chinese firms, while undermining existing multilateral transparency initiatives.

The industry already has one massive fight on its hands, as it attempts to contain the oil spill and the accompanying public-relations catastrophe. But this second fight against the Cardin-Lugar amendment could serve as an early barometer of its ability to fend off unwanted policies as broader energy and tax bills loom.

Adele Morris, an energy expert with the Brookings Institution, suggested that the spill hasn’t necessarily sapped the industry’s reach on Capitol Hill.

“We can’t underestimate the financial resources at the behest of the large oil companies, and accordingly, their influence on Capitol Hill,” said Morris, a senior fellow with the think tank. “They have a long history of cultivating friends on the Hill, and there may be a slight blip in the public aspects of those friendships, but the private aspects of those friendships are probably intact.”

The U.S. Chamber of Commerce and the National Association of Manufacturers are also fighting the measure.

The amendment’s sponsors want Sen. Chris Dodd (D-Conn.) — who leads the Senate Banking Committee and is managing the Wall Street bill — to allow a vote on the measure or include it in a manager’s amendment. A spokeswoman for Dodd did not respond to a request for comment.

Ian Gary of Oxfam America argues that the oil industry faces peril in opposing the measure. “Those are very bad optics of the industry,” he said. “The industry as a whole needs to be more transparent both about its environmental practices and how it conducts its operations, but also its financial dealings.”

Oxfam is part of a broader coalition called Publish What You Pay that is pressing Dodd and Sen. Richard Shelby (R-Ala.), the Banking Committee’s ranking member, to back the measure.

The Cardin-Lugar plan would force many companies to provide the Securities and Exchange Commission information on payments for production licenses, taxes, royalties  and other aspects of energy and mineral projects.

Advocates of the amendment say increased transparency of payments will help reverse the “resource curse” in which energy- and mineral-rich nations are plagued by high levels of corruption, conflict and poverty.

“History shows that oil, gas reserves and minerals frequently can be a bane, not a blessing, for poor countries, leading to corruption, wasteful spending, military adventurism and instability,” Lugar said last year when introducing a bill upon which the current amendment is based. “Too often, oil money intended for a nation’s poor lines the pockets of the rich or is squandered on showcase projects instead of productive investments.”

 Lugar and Cardin argue the measure would also lead to more reliability of supply and more stable energy markets.

In a floor speech last week, Cardin made the case for attaching the measure to the Wall Street overhaul measure that’s before the Senate.

“Investors need to be able to assess the risks of their investments. Investors need to know where, in what amount, and on what terms their money is being spent in what are often very high-risk operating environments,” Cardin said.

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The amendment’s co-sponsors include Sen. Dick Durbin (D-Ill.), the Senate’s No. 2 Democrat, and Sen. Charles Schumer (D-N.Y.).

API, in a May 4 letter to the Senate, said it supports the general goals of the amendment and points to the industry’s work with an existing multilateral effort called the Extractive Industries Transparency Initiative that Cardin and Lugar also support.

But API calls the new Securities and Exchange Commission (SEC) disclosure mandates misguided.

“Requiring only U.S.-listed oil and gas companies to report every payment made to host governments will create a competitive disadvantage versus quasi-governmental and national oil companies such as Russia’s Gazprom and China National Petroleum Company (CNPC), as well as non-U.S.-listed private companies, which would not be subject to the same requirements,” the letter reads.

API warns that the disclosure would give competitors an advantage in contract negotiations with foreign governments and imperil jobs for U.S. workers.

But Cardin has said that the foreign competition argument is a red herring, claiming that the amendment would apply to large numbers of foreign companies that are subject, for various reasons, to SEC reporting requirements.

“The provisions of this amendment would apply to all oil, gas and mining companies required to file periodic reports with the SEC; namely, 90 percent of the major internationally operating oil companies and eight out of the 10 largest mining companies in the world — only two of which are U.S. companies. We are talking about foreign-owned companies, not U.S. companies, by and large,” he said on the Senate floor last Thursday.

Republican strategist Ron Bonjean said the oil industry’s collective response to the Gulf spill will determine whether it is weakened on Capitol Hill.

“If oil companies take a backseat and let BP take the heat and don’t offer an aggressive industry-wide response, then they can lose some of their clout on Capitol Hill and be hurt by amendments like these,” said Bonjean, a former aide to GOP leadership in both chambers.

But in the near term, he predicts that any kind of amendment that could affect jobs — as the industry groups allege the Cardin-Lugar plan would — faces a tough audience in an election year.