Nick Snow
Washington Editor
A provision of the Dodd-Frank financial reform law that imposes a requirement for publicly traded US oil and gas companies to disclose payments to foreign governments could actually give their overseas competitors a significant competitive advantage, an American Petroleum Institute official suggested.
The law's Section 1504 requires US companies to publicly disclose detailed information about such payments, according to Misty McGowen, API's federal relations director. This could mean they would be required to report individual payments on every single well, potentially exposing confidential, proprietary business information to global competitors, she said.
"The statute is intended to further transparency by providing the citizens of resource-rich developing countries with the information they need to hold their governments accountable," McGowen explained. "This is a laudable goal, one which API supports, but it could lead to unintended and unwelcome consequences. It could seriously harm the global competitiveness of US-listed companies while doing little to further transparency."
For starters, the statute only applies to companies that file reports with the US Securities and Exchange Commission, which has charge of implementing Section 1504 and is expected to issue a final rule on it later this spring. "It does not apply to many of the biggest international oil and gas players, including many of the state-owned companies of foreign governments that control 78% of proven worldwide reserves," said McGowen. "The only transparency will be into business decisions of US-listed companies, while leaving a huge gap in information about how much revenue is flowing into foreign treasuries and how much is being siphoned off by corrupt officials."
Because the information would be publicly available, every competitor bidding on future oil and gas projects in the same host country or in other countries could, with the click of a mouse, have access to information about US-listed companies, she warned. Meanwhile, US-listed companies would have no access to sharpen their bidding strategies against unlisted companies, she said.
"Companies that want to improve transparency are making progress through a different strategy, one which API fully supports," McGowen said. "They are participating in the Extractive Industries Transparency Initiative [EITI], a voluntary, multilateral, multistakeholder global effort to promote revenue transparency in resource-rich countries." Through this effort, host governments, all oil and gas companies operating within a country, and civil society organizations are working together to ensure accurate reporting and third-party verification of payments made to host governments, she said.
McGowen said through EITI, all companies operating in a particular country are required to report the same information, placing them on a level playing field. EITI has been fully operating only since 2006, but the organization has made significant progress, with 50 major oil and gas and mining companies now supporting it. "Nine new countries have just joined the EITI fold, increasing the numbers from 32 implement and 5 compliant to 35 implementing and 11 compliant," she said.
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