Recently a collection of NGOs, led by the organization “Publish What You Pay” (PWYP), wrote to ExxonMobil with an unusual request. The group urged us to disassociate ourselves from a legal challenge to rules issued by the U.S. Securities and Exchange Commission (SEC) to implement the international transparency provisions of the 2010 Dodd-Frank law. Implied in the group’s request is that support for the court challenge is equivalent to opposing efforts to foster transparency in oil and gas and other extractive industries.

That implication is dead wrong.

I responded to them this week in a letter you can read here. But I want to take this opportunity to highlight publicly a few points (missed by PWYP) that are germane to the issue of transparency and to the court challenge against the SEC rules. The legal challenge was filed by the American Petroleum Institute, U.S. Chamber of Commerce, Independent Petroleum Association of America and National Foreign Trade Council.

The first, and most significant, point is that ExxonMobil believes transparency is an important and worthy goal, and we have supported efforts to promote transparency since long before Congress and the SEC took up the issue.

Since its inception more than a decade ago, we have been an active participant in the Extractive Industries Transparency Initiative (EITI), a constructive framework endorsed by the Obama administration that engages governments, business, civil society and financial institutions in a collaborative effort to improve transparency and accountability in the extractive industries sector (see video below). ExxonMobil has supported EITI implementation in countries such as Iraq, Indonesia, Chad, Cameroon, Kazakhstan, Equatorial Guinea and Azerbaijan, and in potential new applicant countries such as Australia, Colombia and Papua New Guinea.

A few other things worth considering:

• ExxonMobil supports the disclosure of government revenues from the extractives sector so long as there is sufficient aggregation of reported data to protect proprietary information and the competitiveness of individual companies.
• As currently written, the SEC’s transparency rules will disadvantage U.S.-listed companies against numerous large foreign competitors that are not bound by Dodd-Frank.
• According to the SEC’s own estimates, its rules will cost industry $1 billion upfront to establish necessary accounting systems, not to mention hundreds of millions of dollars annually in compliance costs. That doesn’t include the billions of dollars of additional costs the SEC acknowledges for the lost business that could result from the regulations’ perverse directives to divulge proprietary data and to either break the law or cancel projects in countries prohibiting such detailed disclosure.
• Ostensibly designed to promote transparency, the new SEC rules will actually harm it, as countries wishing to shield detailed information from public view will simply do business only with companies not bound by Dodd-Frank (which includes the vast majority of the world’s largest oil companies, which are not publicly traded in the U.S.).

It seems to me that to have a chance of being successful, a transparency initiative at a minimum must pass three tests. It must apply to all companies. It must protect proprietary information to provide a competitive framework for the energy industry. And it must not violate host government laws or contractual obligations.

The so-called transparency rules finalized last year by the SEC fail all three tests. They will harm American businesses and American consumers while undercutting effective efforts to promote transparency that have been underway for the last decade.

Because we support transparency, as well as the principle that American businesses should not be disadvantaged by their government’s rules, ExxonMobil supports asking the judiciary to review a set of regulations that seem to run counter to the intent of Congress, as provided both under the Securities and Exchange Act of 1934 and the Dodd-Frank Wall Street Reform and Consumer Protection Act it passed 76 years later.