Oil firms near win in disclosure fight

Decadeslong campaign targets rule on foreign payments

WASHINGTON — A decade ago, Congress passed a law requiring oil and gas companies to report the payments they made to foreign governments to extract natural resources. The goal: open up to public view the vast sums of money moving through government accounts in nations such as Nigeria and Venezuela.

But after a lengthy legal and lobbying campaign by the U.S. oil and gas industry, tracking that money and rooting out the corruption endemic in many oil-rich nations is likely to be far more difficult.

The Securities and Exchange Commission is considering an amended rule that would require U.S.-based companies to report overall payments to governments, buy not force them to do so on a projectby-project basis, as is required in the European Union and Canada. That would leave anti-corruption efforts with a general

sense of the money flowing into government coffers, but not the details of whether revenues are getting skimmed by corrupt officials or the country is getting its fair share for the oil and gas that’s extracted, said Zorka Milin, an attorney with the nonprofit Global Witness.

“In order for sunshine to work it has to shine enough light and in this case it is not enough,” she said. “This rule would fail to deter corruption and expose the questionable deals.”

For the oil industry, the release of this draft proposal last month marked something of a victory after years of lawsuits and a move by the Trump administration and Republicans in Congress to block implementation of the law.

The bipartisan CardinLugar Anti-Corruption Provision passed in 2010 as part of Dodd-Frank, Congress’s effort to regulate Wall Street and limit the amount of risk banks could assume after the 2008 financial crisis.

The provision drew opposition from oil companies from the beginning.

When the SEC released its rule implementing the law in 2012, the American Petroleum Institute and the U.S. Chamber of Commerce filed suit, claiming the law would put their members at a disadvantage to stateowned firms in Russia and China that “have no interest in transparency.”

Big Oil lobbies

In the years ahead, the industry heavily against the SEC rule, resulting in legislation in 2017 forcing a rewrite. During the first three months of that year, Exxon Mobil and Chevron, both of which approached lawmakers about that legislation, spent a combined $6.7 million on lobbying.

With the SEC no longer requiring as much detail on their payments, that opposition has dissipated. A Chevron spokesman said they were still reviewing the SECs proposed rule but “generally supports efforts to promote revenue transparency.”

Exxon referred requests for comment to the American Petroleum Institute.

“We have always felt that successful implementation of the Dodd Frank legislation depends on rules that manage the need for revenue data with the concerns with disclosures that could create competitive harms and undermine development,” API Director Stephen Comstock said in an email. “We are still reviewing the proposed rule and how API might comment, but we certainly recognize that the SEC has taken a number of steps to strike a more equitable balance in this most recent approach.”

So far, there’s little evidence that the disclosure rules as originally written would detract from companies’ ability to strike deals with foreign governments. The European energy majors Royal Dutch Shell and BP have been required under EU regulations to report their payments to foreign governments on a project by project basis since 2013.

The British government said in a 2018 report it has not seen “any convincing evidence” that the disclosure rules had caused any companies to lose business.

But the SEC under Chairman Jay Clayton, an attorney who formerly represented Goldman Sachs and other Wall Streets banks, has taken a different opinion. “The proposal is designed to address the statutory mandate in a manner that does not result in undue compliance burdens or competitive harm,” Clayton said when the proposed rule was released in December.

New vigor

In the meantime, prosecutors around the globe are pursuing investigations into corruption around oil and gas revenues with newfound vigor.

In 2017 the Houstonbased subsidiaries of oil equipment giants Keppel Offshore & Marine and SBM Offshore both pleaded guilty to bribery charges stemming from a long-running Brazilian corruption investigation and agreed to pay the U.S. Justice Department a combined $660 million in penalties.

Shell and the Italian oil firm Eni are in the midst of what looks to be a yearslong trial in Italy over allegations they paid paid $1.1 billion to a former Nigerian oil minister to gain access to a lucrative oil field off the West African coast.