House GOP moves to shield oil companies from disclosure rule

A House GOP bill to implement a U.S.-Mexico offshore energy accord exempts oil companies operating under the pact from controversial federal rules that force energy producers to disclose their payments to foreign governments.

The provision could become a sticking point in enacting the Transboundary Hydrocarbon Agreement, a 2012 accord to enable cooperation in development of oil-and-gas along a maritime boundary in the Gulf of Mexico.

“I don’t see how that provision can be taken out,” said Rep. Doug Lamborn (R-Colo.), the chairman of a House subcommittee that reviewed the bill Thursday.

The U.S.-Mexico energy accord has strong support from Republicans and the Obama administration.

Backers note it will open a substantial offshore region to oil production and enable new cooperation between U.S. companies and PEMEX, Mexico’s state-owned oil giant.

But Interior and State Department officials declined, at Thursday's hearing, to weigh in on the GOP implementing bill’s limited exemption from Securities and Exchange Commission disclosure rules.

The legislation appears to be the first bill introduced to alter the resource payments disclosure provision in the 2010 Dodd-Frank financial law, a provision that faces heavy opposition from oil industry and business groups.

Dodd-Frank requires SEC-listed oil, natural gas and mining companies to disclose payments to foreign governments related to projects in their countries, such as money for production licenses, royalties and so forth.

On Thursday, Republicans and officials with oil industry groups said the exemption in the GOP bill is needed to prevent a collision with confidentiality provisions in the U.S.-Mexico accord.

“The treaty that we are hammering out with Mexico does address confidentiality and allows for it for competitive reasons for both their company and American companies, so that right there puts that agreement at odds with Dodd-Frank,” Lamborn, chairman of the Subcommittee on Energy and Mineral Resources, told reporters.

Daniel Simmons of the Institute for Energy Research (IER) told the subcommittee that the U.S.-Mexico accord and the Dodd-Frank mandate could together “create an impossible situation for American companies” weighing expensive deepwater projects in the transboundary region.

“Any legal uncertainty brought about by disclosure law could easily dissuade American companies from undertaking what is already an expensive decision, in turn reducing opportunities for new jobs for Americans,” said Simmons, director of regulatory and state affairs for IER, which receives fossil fuel industry backing.

Obama administration officials declined to weigh in on the exemption.

Tommy Beaudreau, the Interior Department’s acting assistant secretary for land and minerals management, said during the hearing that he doesn’t have a view of the provision at this point and wants more information.

“It is something that we are going to have to talk with the committee about, try and understand what the committee is getting at there, and work with them on it,” he told reporters after his appearance before lawmakers.

But Oxfam America, which is a major backer of the SEC rules, criticized the exemption and is concerned the bill is part of a wider effort to repeal the Dodd-Frank provision.

“We agree with the SEC that no exemptions to the payment reporting requirements of [Dodd-Frank] Section 1504 are warranted and believe that oil industry arguments in favor of exemptions are groundless. The exemptions language in this proposed legislation implementing a US-Mexico transboundary hydrocarbons agreement is irrelevant and unnecessary,” said Ian Gary, senior policy manager of Oxfam America’s oil, gas and mining program, in a statement.

The American Petroleum Institute, which also backed the exemption Thursday, is currently challenging the SEC rule in court, and has said it may seek legislation to thwart the regulation.

Lamborn, for his part, suggested the provision in the U.S.-Mexico energy bill could be a “model” going forward, and expressed concern that similar conflicts could arise between the Dodd-Frank provision and confidentiality laws in other nations.

The Dodd-Frank disclosure provision is aimed at undoing the “resource curse,” in which some impoverished countries in Africa and elsewhere are plagued by corruption and conflict alongside their energy and mineral wealth.

Human rights and anti-poverty groups say greater transparency will help ensure the public in these nations benefits from their natural resource wealth. Backers also argue the disclosure will provide greater information to investors.

Rep. Raul Grijalva (D-Ariz.) criticized the exemption is the transboundary bill during Thursday's hearing, stating that the Dodd-Frank mandate “goes to the core” of the SEC’s investor protection mission.

But oil industry and business groups challenging the SEC rule in court say it will impose costly burdens and hinder competitiveness, especially by placing SEC-listed oil companies at a disadvantage when competing for contracts overseas against state-owned Russian and Chinese firms.

The industry unsuccessfully appealed to the SEC to include various exemptions in the rule, including an exemption when or if foreign government bars the disclosure.

As the administration weighs its position on the Dodd-Frank exemption in the House U.S.-Mexico bill, the topic looms as a potential stumbling block to enacting an energy accord that has support from the oil industry, Republicans and the Obama administration.

“We believe the [transboundary] agreement would help facilitate the safe and responsible management of offshore petroleum reservoirs that straddle our maritime boundary and strengthen overall our bilateral relations,” said Carlos Pascual, the State Department’s special envoy and coordinator for international energy affairs, who told the House committee that the administration wants “swift passage” of implementing legislation.

The U.S.-Mexico agreement will make nearly 1.5 million acres available for leasing, U.S. officials say.

It will also make the wider transboundary region more attractive to U.S. energy companies by removing legal uncertainties, Interior and State Department officials say.