A less than transparent approach to transparency in Congress

The CapitolExxonMobil supports competition on a level playing field so that all companies – whether U.S.-based or international – are competing fairly on the same basis.

And we support transparency and accountability in the oil and natural gas industry. With good governance and accountability, the value generated from the natural resources of a country can flow to its people, providing a better standard of living and increasing opportunities for its citizens. As part of our commitment to honest and ethical behavior, we are an active participant in transparency and anti-corruption programs, including being a leading member of our industry’s global transparency initiative.

But in the middle of the night just before the Fourth of July recess, Congressional negotiators inserted a provision into the Financial Regulatory Reform Bill that supports neither transparency nor fair competition. There was no hearing and no debate. The provision – which would require U.S. Securities and Exchange Commission-reporting oil, natural gas, and mining companies to not only report to the SEC, but also publicly disclose payments made to foreign governments – is now buried within more than 2,000 pages of legislation that is being considered by the Senate.

What’s ironic is that supporters of this provision claim it is needed to increase transparency and accountability.  Yet, the tactics used to add the measure to the bill were anything but transparent. For something this important, with such broad implications, Americans deserve a thoughtful and thorough Congressional debate, complete with a full committee hearing and a floor vote.

The amendment requires U.S.-listed companies to essentially turn over the competitively negotiated terms of their proprietary contracts to all foreign competitors who don’t have U.S. SEC reporting requirements – providing no protection for confidential information. At a time when the U.S. is concerned about international competitiveness, this would create a new competitive disadvantage. Further, mandating disclosure of financial information by companies without regard for host government consent is not the way to encourage the cooperation or accountability necessary to improve governance in resource-rich countries.

The best way to promote transparency is through measures that encourage collaboration between governments, companies, civil society, and financial institutions. A prime example is the Extractive Industries Transparency Initiative (EITI), which is dedicated to strengthening governance by improving transparency and accountability in the extractives sector. It sets forth global principles for companies to report what they pay to governments and for governments to disclose what they receive from companies. EITI has a proven track record of success.  It strikes a balance between requiring disclosure and keeping confidentiality. The late-night addition to the financial reform bill would weaken the incentive for host governments to engage in multi-stakeholder initiatives like EITI.

In the non-transparent manner in which it was added, and in the way it is written, the so-called transparency provision in the Financial Regulatory Reform Bill violates these principles. In the interests of both transparency and U.S. competitiveness, it should not proceed.


9 Comments

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  1. jim harvey says:

    Mr. Cohen, was this legislation enacted?

    • Ken Cohen says:

      Yes; the Wall Street Reform and Consumer Protection Act was signed into law on July 21. We now await implementation from the appropriate regulatory agency, in this case the U.S. Securities and Exchange Commission.

  2. Ian Gary says:

    This narrative, while dramatic, leaves out key facts. ExxonMobil and other oil and mining companies were well aware of this provision long before it was included in the final conference Dodd-Frank Act conference report. Stand alone legislation with the same SEC requirement was introduced in the House and Senate in 2008 and was the subject of a full House Financial Services Committee legislative hearing (no oil company agreed to testify). In 2009, the bipartisan Energy Security through Transparency Act, which is the foundation for the provision, was introduced by Senators Lugar and Cardin and the American Petroleum Institute, of which ExxonMobil is a member, met with Senate staff and others and expressed their objections. The provision was also offered as an amendment to the Senate financial reform bill earlier this year and Senators Dodd, Durbin, Cardin and Lugar all gave floor speeches in favor. Oxfam America and other members of the global Publish What You Pay coalition met with API, Exxon, Chevron and other companies on numerous occassions over the last several years. Far from being a secret, last minute action, this provision was subject to extensive debate and the oil industry had every opportunity to make its views known with lawmakers.

    • Ken Cohen says:

      Ian, thanks for your comments. First, let me reiterate that ExxonMobil supports transparency and accountability in the oil and gas industry. As I mentioned in my post, we are a leading member of the Extractive Industries Transparency Initiative. We believe the multi-stakeholder process of the EITI is a more effective approach to encouraging government accountability in resource rich countries than the unilateral approach of the Senate amendment. To address the main point of your comment, the Senate amendment was never the subject of a regular committee hearing or a markup. Debate on the merits of EITI versus the amendment never got a hearing. In fact, we actively engaged with committee staff to push for a hearing to debate the vastly different approach the bill takes to disclosure compared with EITI. While there were floor speeches in support of an amendment, it did not get a floor vote. Had the amendment been voted on at that time, we do not believe it would have passed. It was added to the Senate bill with no debate on the last night of the financial regulatory reform conference. The bill sponsors were well informed of our positions, as well as on potential amendments to address the negative impacts it will have on international competitiveness.

      In our view, any measures intended to genuinely enhance transparency also need to achieve the following goals: enable US companies to compete on a level playing field, maintain the rule of law, and respect the sanctity of contracts…. read more »

      …We do not feel the legislation passed by the Senate does this. Hopefully all interested parties can work together going forward on our shared interest in ensuring that any future transparency legislation before Congress is considered in a fully transparent way.

  3. Simon Taylor says:

    Dear Ken, with all due respect, I must take issue with your description of this process, and agree with Ian’s comments below. Let’s put some of this into perspective: For years now, as Ian has described below, we in the Publish What You Pay coalition have repeatedly worked to address concerns raised by API and others. The result has been a lively debate that has allowed policy makers to craft the language of this provision, that far from weakening EITI (which by the way we fully support), instead provides it a necessary boost. You speak of cooperation with Governments – but what is your answer for those kleptocratic regimes such as Angola whose citizens can no longer afford to hold their breath? Are you suggesting their rights to hold their government’s elite accountable for its wholesale looting must play second fiddle to spurious arguments about opacity provisions within contracts? Given Exxon’s commitment to delivering a level playing field, we would hope that you would welcome this development, and that you would play a constructive role in its implementation. We look forward to working with you. Best regards, Simon Taylor, Director, Global Witness

  4. Simon Taylor says:

    Dear Ken, sorry to monopolise this medium, but I just saw your answer to Ian. To be clear, we have no problem with a multi-stakeholder approach and yes it is good to have the government involved – but there are places where government involvement is either not forthcoming, or is not serious. After ten years of seeking to address the complete lack of transparency of key income generated by natural resource extraction, I am sure you would agree its time has come. In addition, I should remind you that this is not just an issue of kleptocratic elites, but it is also one of company accountability, as our investigations have demonstrated in various countries. As for hearings, I am afraid you are wrong – I have testified at at least 2 during which the merits of mandatory disclosure as a parallel bolster to the EITI has been discussed. As to consideration of the finer points within specific legislative formulations, the vigorous debate over the past 2-3 years has repeatedly sought to address legitimate concerns – I have to say, I am struggling to see what your remaining worries consist of, best regards, Simon.

    • Ken Cohen says:

      Simon, thanks for your comments. This is an important issue, and it’s obvious that Global Witness and Oxfam America have strong feelings about it, as do we. It’s also clear that we don’t see eye-to-eye on this provision or the way it was passed. Perhaps our organizations can get together to discuss our respective views on these issues in the future.

      • Simon Taylor says:

        We would be delighted to discuss things further with you. But I would hope such a discussion could be more productive than that we have attempted to pursue with API – who I am afraid to say, approached this matter rather like a broken record: Simply repeating the same old tired concerns which we had as a group widely discussed and dealt with sensibly years previously. Of course I understand that you would have different views – and that is fine. What we want to achieve is the widest possible disclosure and we would welcome your assistance to achieve that. But regardless of different opinions about how to achieve this, I am afraid I simply do not agree with your description of legislation by stealth. This is simply not the case and I think it serves to create suspicion and lack of trust where that is simply not necessary, and I might add, such an approach does the industry position no service. This is all the more the case, when one considers the record of the oil sector, which has a well-documented record, second to none, of secretly influencing legislation on a global basis with dollops of cash – often to its own advantage, and against that of the public interest. It would be enormously welcome if we could have process of dialogue which could move along from such matters to those of substance. I very much welcome your thoughts and the… read more »

        …opportunity for further discussion at a time of mutual convenience. Best regards, Simon

  5. Per Kurowski says:

    As an oil-cursed citizen… below a link to what I had to say about that

    http://theoilcurse.blogspot.com/2012/08/secs-sunshine-rules-might-signify-more.html

  6. jim harvey says:

    Mr. Cohen, was this legislation enacted?

    • Ken Cohen says:

      Yes; the Wall Street Reform and Consumer Protection Act was signed into law on July 21. We now await implementation from the appropriate regulatory agency, in this case the U.S. Securities and Exchange Commission.

  7. Ian Gary says:

    This narrative, while dramatic, leaves out key facts. ExxonMobil and other oil and mining companies were well aware of this provision long before it was included in the final conference Dodd-Frank Act conference report. Stand alone legislation with the same SEC requirement was introduced in the House and Senate in 2008 and was the subject of a full House Financial Services Committee legislative hearing (no oil company agreed to testify). In 2009, the bipartisan Energy Security through Transparency Act, which is the foundation for the provision, was introduced by Senators Lugar and Cardin and the American Petroleum Institute, of which ExxonMobil is a member, met with Senate staff and others and expressed their objections. The provision was also offered as an amendment to the Senate financial reform bill earlier this year and Senators Dodd, Durbin, Cardin and Lugar all gave floor speeches in favor. Oxfam America and other members of the global Publish What You Pay coalition met with API, Exxon, Chevron and other companies on numerous occassions over the last several years. Far from being a secret, last minute action, this provision was subject to extensive debate and the oil industry had every opportunity to make its views known with lawmakers.

    • Ken Cohen says:

      Ian, thanks for your comments. First, let me reiterate that ExxonMobil supports transparency and accountability in the oil and gas industry. As I mentioned in my post, we are a leading member of the Extractive Industries Transparency Initiative. We believe the multi-stakeholder process of the EITI is a more effective approach to encouraging government accountability in resource rich countries than the unilateral approach of the Senate amendment. To address the main point of your comment, the Senate amendment was never the subject of a regular committee hearing or a markup. Debate on the merits of EITI versus the amendment never got a hearing. In fact, we actively engaged with committee staff to push for a hearing to debate the vastly different approach the bill takes to disclosure compared with EITI. While there were floor speeches in support of an amendment, it did not get a floor vote. Had the amendment been voted on at that time, we do not believe it would have passed. It was added to the Senate bill with no debate on the last night of the financial regulatory reform conference. The bill sponsors were well informed of our positions, as well as on potential amendments to address the negative impacts it will have on international competitiveness.

      In our view, any measures intended to genuinely enhance transparency also need to achieve the following goals: enable US companies to compete on a level playing field, maintain the rule of law, and respect the sanctity of contracts…. read more »

      …We do not feel the legislation passed by the Senate does this. Hopefully all interested parties can work together going forward on our shared interest in ensuring that any future transparency legislation before Congress is considered in a fully transparent way.

  8. Simon Taylor says:

    Dear Ken, with all due respect, I must take issue with your description of this process, and agree with Ian’s comments below. Let’s put some of this into perspective: For years now, as Ian has described below, we in the Publish What You Pay coalition have repeatedly worked to address concerns raised by API and others. The result has been a lively debate that has allowed policy makers to craft the language of this provision, that far from weakening EITI (which by the way we fully support), instead provides it a necessary boost. You speak of cooperation with Governments – but what is your answer for those kleptocratic regimes such as Angola whose citizens can no longer afford to hold their breath? Are you suggesting their rights to hold their government’s elite accountable for its wholesale looting must play second fiddle to spurious arguments about opacity provisions within contracts? Given Exxon’s commitment to delivering a level playing field, we would hope that you would welcome this development, and that you would play a constructive role in its implementation. We look forward to working with you. Best regards, Simon Taylor, Director, Global Witness