Washington, DC – Powerful Members of Congress ramped up pressure on the Securities and Exchange Commission (SEC) yesterday, urging the SEC in a letter to “resist” pressure from oil companies and “promptly release a strong and effective final rule” to implement an oil and mining financial transparency provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Fourteen Members of Congress, including Rep. Barney Frank (D-MA), ranking member of the House Financial Services Committee, Rep. Norm Dicks (D-WA), ranking member of the House Appropriations Committee, and Rep. José Serrano, ranking member of the Financial Services Subcommittee of House Appropriations, signed the letter to SEC Chairman Mary Schapiro and the other SEC Commissioners.
Known as Section 1504 or the “Cardin-Lugar” provision of Dodd-Frank, the law requires oil, gas and mining companies to disclose the payments they make to host governments around the world for the exploration and extraction of oil and minerals. However, the American Petroleum Institute (API) and its oil company members such as Chevron, Exxon and Shell are fighting implementation of the law, threatening to sue the SEC, the regulatory agency responsible for issuing final rules, unless it withdraws its proposal and starts from scratch.
The letter comes the same week as international humanitarian organization Oxfam America and allies in the Publish What You Pay coalition launched a new campaign urging oil companies to stop lobbying to water down implementation the law that will help stem corruption in resource-rich countries. Oxfam America and other anti-poverty and financial transparency groups are supporting a six-figure advertising campaign calling on the oil industry to stop fighting transparency. The ads are running online in the Washington Post, Politico, Huffington Post and The Hill and in print in the Wall Street Journal.
The House letter follows a similar letter sent two weeks ago by senior Senators, including Senators Kerry, Leahy, Schumer, Cardin and Levin. The rulemaking for the Cardin-Lugar provision is long-delayed and the House letter says “we are also concerned that the Commission is far behind in meeting the statutory deadline of April 17, 2011” and that they are aware of oil industry efforts to press the SEC to “release a watered down rule that does not reflect the statutory language as well as the legislative intent of Section 1504.”
“We are pleased to see prominent Members of Congress stand up to big oil and tell the SEC that it has a strict mandate from the Dodd-Frank Act to follow the letter of the law and that it should not cave in to pressure from industry,” said Ian Gary, senior policy manager of Oxfam America’s oil, gas and mining program. “We urge the SEC to pay close attention to the House and Senate letters and issue a strong final rule quickly. The SEC must be accountable to Congress, investors and citizens who, now more than ever, expect strong financial transparency.”
The House letter highlights three areas where supporters are concerned the SEC might try to water down the tightly-drafted provision. First, the House letter, which includes Rep. Henry Waxman, ranking member of the House Energy and Commerce Committee, says that Section 1504 reporting requirements must be applicable to “all companies that raise capital in U.S. markets and report to the SEC, with no exemptions.” Some companies have complained that local secrecy laws would make it difficult to disclose payment information. While companies have not been able to show an example of such a law, the House letter emphasizes that such obstacles, if they exist, should not “be allowed to pre-empt US law.”
Second, the House members also emphasize that the project-level reporting required by Section 1504 should not be defined by the SEC in a way that would violate the statute. For example, an industry suggestion that “project” could be defined as all activities in a country would go against the statute and “therefore, payments should not be allowed to be reported only at an aggregate level.” Finally, the House letter, which includes eight members of the powerful House Appropriations Committee, says that “any inclusion of ‘materiality’ to limit payments or projects to be disclosed would be in violation of the statute.”
“It’s time for supporters of financial transparency, investor rights and good governance in resource-rich countries to make a stand and we are heartened by the House and Senate letters. The oil and gas industry loves to trumpet their support of international transparency initiatives and their tax contributions to the US government, but when a new law requires them to tell investors and the public exactly how much gets paid to whom around the world, they bring out the lobbyists and lawyers,” said Gary.
Investors representing more than $1.2 trillion in assets under management welcomed the law and draft rules the SEC issued in December 2010. The House notes the importance of strong implementation for investors. “We believe extractive industry revenue transparency will be of great value to investors as they assess the commercial, political and reputational risk faced by companies in often volatile locations… transparency of payments made to a government can help mitigate political and reputational risks and also allow shareholders to make better-informed assessments of opportunity costs, threats to corporate reputation, and a company’s dependence on such ventures.”
While the oil industry continues fighting transparency, some companies, such as Talisman Energy, Statoil, AngloGold Ashanti and Newmont Mining, are embracing it. They already disclose payments in every country of operation and in some cases they volunteer this information at a project level.