State Department: Oil rule ‘directly advances’ US foreign policy

The State Department is throwing its weight behind controversial Securities and Exchange Commission (SEC) rules that will force oil, gas and mining companies to disclose payments to foreign governments.

“The rule directly advances our foreign policy interests in increasing transparency and reducing corruption, particularly in the oil, gas and minerals sectors,” a State Department spokesman said.

{mosads}“Corruption and mismanagement of these resources can impede economic growth, reduce opportunities for U.S. trade and investment, divert critically-needed funding from social services and other government activities, and contribute to instability and conflict,” State Department spokesman John Finn said.

The rules finalized last August are required under the 2010 Dodd-Frank financial law, but they have drawn a legal challenge from oil industry and business groups that say the mandate will impose costly burdens.

Secretary of State Hillary Clinton has previously expressed support for the Dodd-Frank provision, Section 1504, and the SEC’s rules when they were in draft form.

Additionally, Sen. Ben Cardin (D-Md.) and ex-Sen. Dick Lugar (R-Ind.), who authored the Dodd-Frank language, as well as Rep. Edward Markey (D-Mass.), have joined a closely watched lawsuit to defend the rule.

The disclosure requirement could also prompt legislation aimed at thwarting it.

The rule forces SEC-listed oil, natural-gas and mining companies to reveal payments to governments (including the U.S.) related to projects in their countries, such as money for production licenses, taxes, royalties and other aspects of energy and mineral projects.



It’s aimed at increasing transparency to help undo the so-called “resource curse,” in which some impoverished countries in Africa and elsewhere are plagued by high levels of corruption and conflict alongside their energy and mineral wealth.

But the American Petroleum Institute, the U.S. Chamber of Commerce and two other groups are challenging the mandate.

They say it will place SEC-listed oil companies at a disadvantage when competing for contracts overseas against state-owned Russian and Chinese firms that aren’t subject to the regulation.

The business groups’ lawsuit also
contends that the mandate runs afoul of the First Amendment
by “compelling U.S. companies to engage in costly speech on
controversial matters in order to influence political affairs in other
nations.”

However, the State Department aide said the rule provides needed sunlight.

“Section 1504 and the SEC rule provide transparency by ensuring that a sufficiently detailed level of information concerning payments from the extractive industry for the development of oil, natural gas, and minerals, much of which has been previously inaccessible, will soon be made public and accessible to civil society and investors,” Finn said.