Dodd-Frank, the monstrous financial “reform” legislation enacted two years ago, contains hundreds of byzantine provisions targeting banks, mortgage lenders, and traders on Wall Street. All of those new rules and regulations have been contested from both sides of the political aisle, and regulators have requested additional time to even understand its requirements. There’s one little-known provision, however, that was snuck into Dodd-Frank at the last minute and should alarm everyone, regardless of political point of view. Namely, new payment disclosure rules for American oil, gas, and mining companies that instantly threaten our nation’s energy security.
Typical of the current trend in Washington, Congress has tasked a regulatory agency, the Securities and Exchange Commission (SEC), to carry out this mandate. The new regulation, formally called “Disclosure of Payments by Resource Extraction Issuers,” is found in Title XV, Section 1504 of the bill. Put simply, the rule would require that any company listed with the SEC and engaging in energy production overseas must disclose literally every single payment made to a foreign government.
The rule would create a competitive disadvantage for American energy producers because not only would state-owned companies such as those in Iran and Venezuela be exempted, they would also suddenly possess detailed knowledge down to individual wells and projects.
Senator Ben Cardin (D – Maryland), one of the champions of this provision, has curiously argued that “it’s appropriate to require companies to provide project-level information…” According to him, specific, sensitive financial – even proprietary – data on particular drilling projects should potentially be surrendered, including to those countries or companies who don’t share America’s intentions.
Pete Sepp at the National Taxpayers Union recently explained the problem well:
“…Here is the painful rub with Section 1504: In essence, the rule would give foreign competitors—largely state-owned oil and gas firms—access to information about what American companies are paying to governments overseas, enabling them to outbid and outmaneuver in the global race for energy resources.”
That means that energy firms controlled by the Iranians and the Chinese would receive a huge helping hand compliments of the SEC, one that would severely undercut the international competitiveness of American companies. What’s more, the state-run energy firms that would benefit from the SEC’s new payment disclosure rule already maintain a large advantage over our domestic producers – not only financial backing from their home governments, but also ownership of the lion’s share of proven oil and gas reserves worldwide. (According to The Wall Street Journal, state-run companies now control more than 75 percent of global oil production.)
And, quite simply, after the rejection of the Keystone XL pipeline and renewed calls for new tax hikes on American oil and gas companies, this new SEC regulation would deal yet another blow to an industry that is essential to our economic recovery. Why then would Congress and the SEC side with petro-dictators over American motorists and manufacturers?
An alternative would be for the SEC to implement a payment disclosure rule on a country-by-country basis, which could help protect American companies’ interests in specific projects abroad. Or, preferably, Congress could reconsider that section of Dodd-Frank altogether. Recall that Capitol Hill spent significant time more than 30 years ago hashing out the Foreign Corrupt Practices Act, which already specifically addresses the transparency and payment issues at hand in Section 1504. For the sake of American future energy and economic security, our chief securities regulator must keep America’s interests first – not Russia’s or Iran’s or Venezuela’s.