Congress Rescinds Rules Requiring Energy Companies to Disclose Foreign Government Payments
The U.S. Congress recently voted to rescind a rule requiring energy companies to report payments to foreign governments for the right to develop oil, gas and mineral assets. Lawmakers relied on the Congressional Review Act to repeal the Securities and Exchange Commission rule, a seldom used law that gives Congress the authority to overturn agency regulations.
The energy reporting measure, promulgated under the Dodd-Frank Act, required firms with shares listed on U.S. stock exchanges to report payments by foreign governments. Proponents of the measure called it an initiative that would combat corruption, poverty and instability in countries that derive much of their wealth from exploiting natural resources.
After a court battle, a final version of the rule was approved in 2013, which specifically required energy firms to disclose their payments on a project by project basis. The energy companies pushed for a lump sum formula in order to maintain confidentiality, which is the approach in the U.K. However, the SEC claimed project-level data would fulfill the rule’s anti-corruption mission. The State Department also supported the measure saying that increasing transparency and reducing corruption in the oil, gas and minerals sectors would advance the U.S. foreign policy interests.
The rule had been opposed by the American Petroleum Institute claiming the measure required disclosure of commercial terms such as taxes, royalties and other fees that were prohibited in many countries. The API also argued that U.S. listed companies were at a disadvantage because overseas energy companies, particularly state-owned entities, were not required to make similar disclosures, and thus were more likely to be awarded concessions. Critics also argued that the measure was duplicative because these firms must already comply with the Foreign Corrupt Practices Act.
Although these firms currently have similar disclosure requirements in Canada and Europe, lawmakers agreed that U.S. energy companies were disadvantaged and that this information should not be included in filings with the SEC.
In the final analysis, this is the beginning of a shift in the energy regulatory framework being ushered in by the Trump administration. The oil and gas sector is also anticipating a rollback of rules governing hydraulic fracturing (fracking). Going forward, attorneys with expertise in oil, gas, and energy will continue to monitor these developments.