HOUSTON — Despite stiff industry lobbying against it, the Securities and Exchange Commission voted 2 to 1 on Wednesday to require American oil and mining companies to disclose taxes and other fees they pay to foreign governments. The disclosures are aimed at curbing corruption, which is common in some major oil-producing nations. þþþþþþ“Sunlight is the best disinfectant,” said Luis A. Aguilar, a member of the commission, quoting the Supreme Court Justice Louis Brandeis. þþIndustry groups have complained that the rule would grant advantages to foreign companies that do not have to make such disclosures, and could potentially force American companies to curb operations in countries like China, Angola, Qatar and Cameroon that prohibit public disclosure of certain payments. The groups lobbied unsuccessfully for an exemption to the mandate in cases where foreign governments restricted disclosures. þþIn a separate 3-to-2 vote, the agency decided to require companies to disclose to shareholders and the agency when their manufactured goods contain minerals like tin, gold and tungsten mined in the Democratic Republic of Congo. Belligerent armies in that country have committed significant human rights violations and often finance themselves by selling “conflict minerals,” which frequently find their way into electronics parts and equipment. þþOil experts said it was difficult to know how onerous the payment disclosure rule would be since it was not yet known how the S.E.C. would define some of the requirements. Kevin Book, an analyst at ClearView Energy Partners, said in a research note that the ruling could “impose very real competitive challenges for U.S. companies,” particularly if “compliance leads to disclosure of previously secret terms of concessions, leases and production-sharing agreements.” þþThe energy rule comes at a time when American companies are looking to take advanced drilling technologies, initially used to develop domestic shale oil and gas fields, to untapped fields in places like China and Argentina. Business practices in those countries often diverge from those that are standard in the United States. þþThe American Petroleum Institute’s chief economist, John Felmy, told reporters that the S.E.C. rule would force oil and gas companies to reveal secret, proprietary information about their expenditures and bidding strategies. “With a few clicks of a mouse, state-owned foreign firms — companies like China National Petroleum Company and Russia’s Gazprom — would plunder that information, which could help them determine their rivals’ strategies and resource levels,” he said. þþThe petroleum institute lobbied hard against the proposal, and has told the S.E.C. that it should conduct an economic analysis since American companies could potentially lose tens of billions of dollars of business. Oil company executives said they might consider a legal challenge after studying the final wording of the ruling. þþIn addition to Mr. Aguilar, Elisse B. Walter voted for the rule. Daniel M. Gallagher voted against it. The S.E.C. chairwoman, Mary L. Schapiro, and Troy A. Paredes recused themselves to avoid potential conflicts of interest. þþA research note by the Brookings Institution this week argued that increased transparency, accompanied by improved governance and accountability, could improve living standards in developing countries dependent on mineral extraction. þþ“There are two types of companies: those that focus on efficiency and innovation and can thrive in a competitive, level playing field, and those that derive gains from rent-seeking (and outright bribery), monopolistic behavior or tax avoidance,” Brookings said. þþIt identified the Norwegian oil company Statoil and Newmont Mining as two companies that disclose payments voluntarily. þþThe rule on conflict minerals, which fulfills another section of the Dodd-Frank legislation, is aimed at cutting off funds for the brutal armies. In response to industry lobbying, the final version of the regulation adopted by the commission allows firms two to four years to establish the origins of minerals and also gives them more latitude for scrap or recycled minerals. þþThe agency also revised the original rule to exclude retailers from the disclosures for products they sell under their name but are manufactured by others. þþSimon Taylor, director of Global Witness, a human rights group, said he was “extremely disappointed” with the rule revision because of the deferral of compliance. “There is a humanitarian disaster going on right now,” he said, “and we see no purpose in further delay.” þþMichael R. Littenberg, a securities lawyer who represents companies and industry groups that will be affected by the conflict minerals rule, said the final rule would still be onerous and affect thousands of electronics, automotive, aerospace, jewelry, lighting and industrial machinery companies. “It will be expensive and time-consuming to comply with,” he said. þþþThe Dodd-Frank law set an April 2011 deadline for completion of the rules, but the S.E.C. has worked slowly. After proposing regulations in December 2010, the agency missed the deadline as commissioners met with companies, advocacy groups and institutional investors to sort out complexities.þ
Source: NY Times
