Sort by

Big Oil Fights Dodd-Frank Disclosure Rule

J. Mijin Cha

Oil companies are doubling down on fighting a transparency provision in Dodd-Frank that would require the disclosure of payments made to foreign governments in connection with energy projects in their country. The provision requires information on payments for production licenses, taxes, royalties and other aspects of energy and mineral projects to be disclosed by oil and mineral companies to the Securities and Exchange Commission. While the rule was ultimately adopted as part of Dodd-Frank, it was first introduced by Democratic Senator Cardin and Republican Senator Richard Lugar, who recently lost a primary challenge to a Tea Party-backed candidate.

The rational behind the provision is that the disclosure of this information will help reverse the “resource curse”, where some energy and mineral rich nations are plagued by high levels of corruption, conflict and poverty. Advocates in favor of the provision argue that the rule will help citizens hold their governments accountable because they will see how much money is being paid by the oil and minderal companies for natural resource extraction. 

Not surprisingly, the American Petroleum Institute, the oil-industry’s front group, is heavily lobbying the SEC to provide wide exemptions to the disclosure provision. Most recently, the special interest group seized upon a recent executive order that calls for more international regulatory harmony to claim the Dodd-Frank disclosure rule would make the industry either violate foreign laws that ban disclosure or prevent operation in those countries that ban disclosure.

Arguing against API's claim, one of the provisions main sponsors, Senator Ben Cardin, rightly pointed out that any exceptions would create a “race to the bottom” that would encourage other countries to enact reduced transparency laws and also make the U.S. lawmaking process subservient to foreign governments. This last point is particularly important when we think about the countries from which much of our oil and minerals come and their troubled records on democracy and transparency.

API’s lobbying must be paying off to some degree, as the SEC is more than a year late in issuing a final rule. This delay prompted Oxfam America to sue the agency to force it to issue the final rule. However, if it turns out that API is ultimately successful in watering down the rule, it will be yet another example of the poisoning influence of money in the political system. API spent nearly $6 million in just the first three quarters of last year on lobbying -- money well spent if they succeed in forcing the SEC’s hand.