President Trump and Republicans in Congress have repeatedly vowed to bolster America’s global economic competitiveness. They just made good on that promise.
Lawmakers in the House and Senate both voted to scrap a rule requiring publicly-traded companies to report all financial transactions with foreign governments concerning the extraction of energy products. In effect, the regulation forces domestic firms to open their books to rival companies abroad – many of which are entirely exempt from the requirement.
Don’t be fooled, this is not about transparency or anti-corruption. This is about excessive regulation and putting significant tax revenues at risk.
The U.S. energy industry already abides by strict transparency standards that don’t compromise America’s global competitiveness. Luckily, President Trump knows this. He’s expected to sign the repeal into law — the final step to eliminating this rule before it does any more damage to America’s energy sector.
Under the rule in question, section 1504 of the Dodd-Frank Act, every company registered with the Securities and Exchange Commission must report any payments made to the federal government or foreign governments regarding oil, natural gas and mineral projects.
Here’s the kicker: State-owned oil companies — including those run by some of the world’s most corrupt governments — are exempt from the rule. They can, however, review the information disclosed by American firms in excruciating detail, including a company’s valuation of a given energy resource site. This puts domestic companies at a serious competitive disadvantage.
Indeed, the top sixteen oil companies on the planet aren’t subject to the regulation. Government-owned National Oil Companies (NOC) own 75 percent of global oil reserves and directly compete with U.S. companies.
Companies must also disclose the geographic location of their projects, information that could prove useful to terrorists looking to target company facilities.
The rule also makes it difficult for American energy firms to negotiate with foreign governments. If a government notices a hefty payment from a U.S.-listed company to another nation in return for drilling rights, it could demand equal or greater compensation from all energy firms in the future.
At the same time, the regulation creates unnecessary administrative costs for businesses and the federal government alike. As Michigan Congressman Bill Huizenga has argued, Section 1504 is “diverting precious resources not only from the SEC, but more importantly resources from American companies that could otherwise be used to create jobs.” The SEC itself estimates recurring annual compliance costs at up to $700 million — and notes that abiding by the rule for just the first three years required more than 200,000 hours.
Worse yet, section 1504’s misguided attempts to increase transparency aren’t called for. The U.S. Foreign Corrupt Practices Act of 1977 already monitors unlawful payments from private companies to foreign governments.
And the energy industry has repeatedly demonstrated that transparency efforts don’t have to compromise American business. Take the Extractive Industries Transparency Initiative, a global collaboration between energy companies, civil society organizations, and governments. EITI rules, currently applied in 51 countries, regulate all companies within a country, including NOCs. The initiative independently reconciles company payments against government receipts — which section 1504 fails to do.
Section 1504 undermines the interests of American energy companies, while doing little to improve genuine transparency. Congress is standing with American businesses and workers on this issue — and President Trump is about to follow suit.
-Submitted by David Williams