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If energy clients want to prevent the re-emergence in its toughest form of a resource extraction disclosure rule — which President Donald Trump killed by signing a resolution this week — they should stress its anti-competitiveness rather than its costs, according to Michael Goldberg, a partner in Baker Botts who represents energy companies.
“With or without this regulation, sophisticated clients with sophisticated law firms are not going to knowingly make improper payments that find their way into government official’s pockets,” Goldberg said.
For small oil and gas companies, any additional reporting requirements might mean paying more to hire more lawyers and accountants, but for the majors that’s not the problem. Instead, their concern is around publicly reported payments that can threaten to derail deals.
The notion that oil and gas companies should report what they pay to foreign government has not died out entirely, despite the Senate and the House passing a resolution to prevent the extraction disclosure rule from becoming effective, and Trump’s signing of that resolution.
Had Trump not signed the resolution, the rule on the books, which the Obama administration finalized in June 2016, would have required publicly traded oil, gas and mining companies to start disclosing all payments they make to foreign governments to the Securities and Exchange Commission.
The same week Trump inked the resolution killing that regulation, six Republican U.S. senators—including Bob Corker, R-Tennessee; Lindsey Graham, R-South Carolina; and John McCain, R-Arizona—sent a letter to the acting SEC Acting Chairman Michael Piwowar encouraging the agency to “revisit” the question.
“We look forward to working with the SEC in its efforts to encourage corporate transparency and combat corruption abroad,” their letter said.
In their proposal, the senators proposed SEC produce a revised rule that addresses that some host countries’ laws might prohibit such disclosure. Included on a roster of such countries: China, Qatar, Angola and Cameroon. Under a revised SEC rule, payment reporting for deals in those host countries could be explicitly exempted.
For Goldberg, those revisions might address his clients’ anti-competitiveness concerns because U.S. publicly-traded oil and gas companies would not face more burdensome reporting requirements than their international rivals.
“In foreign energy deals, to obtain a concession, there typically will be a requirement to pay for some type of social programs,” Goldberg said.
Zorka Milin, a senior legal adviser to Global Witness, an advocacy group that encourages transparency and tracks corruption, wants regulations with as many teeth as possible to deter the payment of bribes for access to natural resources.
“We are not going to give up,” she said recently. “If you shine some sunshine and companies have to disclose payments, they are less likely to engage in corruption. The lack of transparency makes it possible for these kind of things to happen,” she said.