Earlier this year I explained ExxonMobil’s support for a legal challenge to the initial transparency rules issued by the Securities and Exchange Commission (SEC) under Section 1504 of the 2010 Dodd-Frank Act.

These rules would have harmed millions of American shareholders by forcing companies like ExxonMobil to make public proprietary business information that could be used for unfair advantage by our competitors, especially government-owned oil companies not subject to the same rules. Not only that, they would also have inhibited legitimate efforts to promote transparency.

So we were pleased that the U.S. District Court for the District of Columbia agreed with our reasoning and vacated the regulations just before the July 4th holiday. We think the court’s opinion provides a sound basis for new disclosure rules.

The path forward

Earlier today the American Petroleum Institute offered several constructive proposals to the SEC suggesting ways it can re-write the rules to support transparency while also protecting investors from harm.

For one thing, the API comments emphasize that many leading industry companies have pioneered transparency efforts – notably through the Extractive Industries Transparency Initiative (EITI) – long before Congress took up the issue with Dodd-Frank.

More importantly, the API comments offer a reasonable pathway forward aligned both with Dodd-Frank’s goals as well as the District Court’s decision.

Safeguarding confidentiality while promoting transparency

API’s letter proposes that the SEC let individual companies file their information confidentially, with data made public in aggregated fashion to protect proprietary commercial details. And it explains why the SEC’s rules must include an exemption from reporting where it would cause a company to violate a host government’s own non-disclosure laws. Both of these points received strong support from the federal district court.

The API comments also propose a new and improved method for reporting the project-level information called for by Dodd-Frank. This proposal would sort the payment data into categories that matter for citizens of resource-producing countries: oil or gas, onshore or offshore, state or province.

This approach will make comparisons of the data meaningful and provide more useful information for citizen-government accountability purposes. At the same time it will still protect companies against disclosure of proprietary commercial terms.

We think this proposal is a win-win for all concerned and would promote transparency while also protecting businesses and the millions of Americans whose financial future is supported through investments in companies like ours. If done right, these new regulations can become the model for similar efforts in other nations that serve the goals of transparency and good government all over the planet.