SEC schedules vote for controversial rule on oil company payments

The Securities and Exchange Commission will vote Aug. 22 on long-delayed rules that would force oil companies to reveal payments to foreign governments — regulations at the heart of a battle between energy companies and human-rights groups over the scope of the disclosure.

The commission will also vote on separate rules aimed at making a range of companies more accountable for the trade of “conflict minerals” that originate from the Democratic Republic of the Congo (DRC) and surrounding areas.

The SEC has been under pressure from Democrats to act on both measures.

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“Conflict minerals and non-transparent payments for natural resource extraction continue to be a weight on developing nations’ growth and are a risk to investors and the public. Worse, continued delay undermines efforts in the DRC to make the mining industry more transparent and to diminish the link between minerals and the funding of brutal violence carried out by warlords,” states a June 22 letter to the SEC from 57 House Democrats and one Republican.

Both rules are required under the 2010 Dodd-Frank financial reform law, and have been the subject of intense behind-the-scenes lobbying at the commission between advocates of the measures and industry officials that fear new costs and competitive harms.

Advocates call the “conflict minerals” rule a way to ensure that companies’ supply chains for gold, tin, tungsten and tantalum aren’t enriching armed groups responsible for violence in the region — including rapes by militias.

Under the measure, companies are required to publicly report whether their products contain conflict minerals from the DRC or a neighboring country, and if so, track the source and chain of custody of the minerals.

Republicans and business groups have expressed concern about the rule, warning it could heap burdens on companies trying to meet the requirement while doing little to actually alleviate suffering in the DRC.

Groups that have warned the SEC of competitive harms include the National Association of Manufacturers, the U.S. Chamber of Commerce and the Retail Industry Leaders Association.

The separate payments disclosure rule is aimed at increasing transparency to help undo the “resource curse,” in which some impoverished countries in Africa and elsewhere are plagued by high levels of corruption and conflict alongside their energy and mineral wealth.

The Dodd-Frank law requires SEC-listed oil, gas and mining companies to reveal payments to governments related to projects in their countries, such as money for production licenses, taxes, royalties and other aspects of energy and mineral projects.

Major oil companies such as Exxon are pushing the SEC to include various exemptions to the requirements and leeway to report the information on a broad, aggregated basis.

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 Co.

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.

Sens. Dick Lugar (R-Ind.) and Ben Cardin (D-Md.) authored the payments disclosure section of Dodd-Frank.

Lugar, in statement Monday, called the provision an important step.

“Information is power. It is power for shareholders and power for citizens living under oppressive regimes. With the Cardin-Lugar Amendment, the U.S. is leading the world in the moral and economic necessity to choose transparency over shadow, rule of law over corruption,” he said.

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