The House of Representatives advanced two items on the oil industry’s wish list Thursday, by passing legislation that would unleash drilling in the Western Gap area of the Gulf of Mexico and waive new financial reporting requirements on companies’ foreign dealmaking.
The legislation passed 256-171 would implement a one-year-old agreement between the United States and Mexico that sets the framework for oil and gas development along the two countries’ maritime boundary. Although Mexico ratified the deal in April 2012, Congress has not acted on it — despite oil companies’ zeal to develop the region.
That part of the measure has bipartisan support on Capitol Hill and the blessing of the White House. The Obama administration inked the international pact in February 2012 and said in a statement of policy this week that implementing the agreement is key to unlocking nearly 1.5 million acres of the outer continental shelf for drilling.
But the bill also contains a separate, unrelated provision that would effectively undo a new Securities and Exchange Commission rule that forces publicly traded companies to disclose what they pay other countries in exchange for harvesting oil and natural gas.
Mandated by the 2010 Dodd-Frank financial law, the SEC’s transparency rule is meant to discourage graft, expose bribes and deter corruption in resource-rich nations where oil and mineral wealth isn’t trickling down. But the oil industry, led by the American Petroleum Institute, argues the requirement to provide financial details for specific projects rather than whole countries at a time would give their rivals a competitive advantage, since similar disclosure isn’t required for foreign state-owned oil companies or privately held U.S. firms.
The API and Chamber of Commerce has led a so-far unsuccessful legal battle against the rule and has now turned to Congress for relief. In a e-mail blasted to members of the House on Wednesday urging them to support the bill, the Chamber of Commerce said the Securities and Exchange Commission “refused to provide any common sense exemptions or take conflicting laws of other nations into account.”
Obama administration officials labeled the SEC provision “unnecessary” and “extraneous,” but stopped short of a veto threat.
No laws in Mexico prohibit disclosures of company payments to the government — or by Mexican companies to other governments. In a letter to House members on Thursday, Mexican civil society organizations emphasized that “disclosure of information required by (the SEC rule) does not contravene any Mexican law and, moreover, improves the guarantee of the right of public information access.”
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Rep. Alcee Hastings, D-Fla., called the SEC waiver “a poison pill” that didn’t belong in the bill.
And Rep. Peter DeFazio, D-Ore., said it would give the oil industry too much leeway. “I get nervous when I think U.S. companies are going to be negotiating secret agreements with Russia and these are going to protect our taxpayers, they’re going to protect our shareholders, they’re going to protect our public interest,” he said.
DeFazio and Rep. Maxine Waters, D-Calif., insisted that the legislation would have sailed through the House with few “no” votes if the SEC provision hadn’t been included. Waters pointedly told GOP lawmakers Thursday: “It was bipartisan before you sneaked in the exemption that would allow companies to bribe other governments . . . and keep payments under the table.”
But Rep. Doc Hastings, R-Wash., who heads the House Natural Resources Committee, suggested that offshore drilling opponents were hiding behind the furor over the SEC provision. He noted that a possible Democratic amendment to remove the SEC provision was drafted but ultimately not offered for debate.
Oxfam America, which has defended the SEC reporting requirement in court, argued that passing the legislation — with the provision intact — would push the United States out of step with a worldwide move toward greater transparency toward extractive industries.
The waiver language in the western gap drilling bill would exempt companies from the requirement to tell the SEC about payments under any transboundary hydrocarbon agreements in the world, even if the U.S. is not a party to those pacts, said Ian Gary, with Oxfam. “The exemption provision would apply to payments anywhere in the world where those payments derive from a field developed under a transboundary agreement,” Gary said.
The bill sponsor, Rep. Jeff Duncan, R-S.C., told reporters Wednesday the exemption would apply only to payment disclosure under the U.S.-Mexico hydrocarbon agreement.
“If future transboundary agreements want to write language that would be in conflict with what we have today, they have the right to do that,” Duncan said.
But the bill text waives the SEC reporting requirement for any “actions taken by a public company in accordance with any transboundary hydrocarbon agreement.”
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Even though the measure is expected to pass the House later today, it faces a tough ride in the Senate, because the SEC reporting requirement at issue was driven by former Sen. Dick Lugar, R-Ind., before his retirement. Opposition to the move — along with respect for a former Senate colleague — could be enough to quash the waiver provision.
Leading Republicans in the Senate — including some oil industry allies — aren’t sold on the approach. Sen. Lisa Murkowski, R-Alaska, the top GOP member on the Energy and Natural Resources Committee, and the panel’s chairman, Ron Wyden, D-Ore., have drafted a treaty implementing bill that doesn’t contain the SEC waiver.
“We didn’t include it in ours because essentially, we wanted a clean version,” Murkowski said. “We didn’t really feel that disclosure aspect was really part of an energy committee issue.”
“We’re happy with the bill that we’ve introduced,” she added.
Because the oil industry eagerly wants both parts of the House bill advancing Thursday, it’s unclear whether their congressional allies in the House would accept a pared-down clean treaty bill like the Murkowski-Wyden measure, or if they would insist on the SEC provision as part of the deal.
The underlying hydrocarbon accord is designed to encourage commercial unitization agreements where oil and gas resources that straddle the boundary are effectively divvied up between Mexico’s national oil company, Pemex, and firms working on the U.S. side.
Administration officials have told Congress that the deal and the legislation that would implement it would accelerate the development of the oil and gas resources along the maritime border. That’s especially significant as depletion of Mexico’s onshore and shallow Gulf resources drives Pemex into deeper territory, closer to the boundary area.
Duncan said the measure would help rev up the U.S. economy and support jobs, by allowing offshore drilling in new areas of the Gulf.
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