The API and a coalition of concerned business groups have sued the SEC in US federal court challenging the SEC’s implementation of Section 1504 of the Dodd-Frank Act. The suit claims that the SEC has disregarded its clear legal obligations to limit the costs and anti competitive harm of the rule.
‘The oil and gas industry strongly supports payment transparency,’ said API President and CEO Jack Gerard. ‘We’ve been working hard to increase transparency for a decade, but this rule could interfere with ongoing efforts by making US firms less competitive against state owned firms in China and Russia that have no interest in transparency.’
Gerard continued to say that the industry is working wit civil society groups and the Obama administration to implement the Extractive Industries Transparency Initiative (EITI). This is a program that would more effectively increase transparency without harming competitiveness. The initiative has already been established in 36 countries and is growing.
‘The rule as written would impose enormous costs on US firms and put them at a competitive disadvantage against government owned oil giants not subject to the rule,’ Gerard said. ‘Not only will the rule hurt the millions of Americans who own shares in oil and natural gas companies, it will also cost jobs and damage America’s energy security by making it more difficult for US firms to gain access to resources abroad.’
Under the SEC rule, publicly traded energy firms are required to release commercially sensitive, detailed payment information about foreign and US projects. Under this, firms would have to reveal extensive data about how much they pay in licenses, taxes, royalties and other fees. This would give competitors the upper hand when bidding for contracts. The SEC believe that developing and operating the systems to gather, validate and report this detailed information will cost the industry US$ 1 billion initially.
‘With reasonable changes, the SEC could have achieved the goal of increased transparency while also remaining faithful to its core mission to protect American investors,’ Gerard said. ‘The rule should allow our companies to report their payments confidentially to the SEC and allow the agency to aggregate that information and publicly report payments by country.’ Gerard also said that the rule should contain a reporting exception for payments to governments that prohibit disclosure.
The coalition includes the US Chamber of Commerce, the National Foreign Trade Council and the Independent Petroleum Association of America.
Adapted from press release by Claira Lloyd.