Swimming against the tide of expert and public opinion, the American Petroleum Institute (API) certainly has clever lawyers.
Somehow this lobby group, which represents the US oil and gas industry, managed to persuade a US District Court earlier this year that the public disclosure of payments by extractive companies to governments would put it at a commercial disadvantage.
It’s a slap in the face for millions in resource-rich countries who may miss an excellent opportunity to hold their governments more accountable.
The combined population of sub-Saharan Africa’s top three oil producers – Nigeria, Angola, and Equatorial Guinea – is about 230 million. And as this year’s Africa Progress Report reports – their respective state-owned oil companies all scored a zero on the reporting of anti-corruption measures in a 2011 survey.
The API arguments also contradict such widely-respected players as Statoil, investors representing more than US$ 5.6 trillion, and the impressive, former leader of BP, John Browne who say detailed public disclosure of payments by multinationals is good for citizens and investors too.
“In my experience, it is rare for a company to lose business by being too transparent,” wrote Lord Browne in an April 2012 opinion piece for the Financial Times.
“Payment disclosure regulations, such as Section 1504… play a critical role in encouraging greater stability in resource-rich countries, which benefits both the citizens of those countries and investors,” a group of investors wrote in a public letter to the SEC.
As if to prove the importance of transparency for investors, the share value of Cobalt International Energy lost US$900 million in April 2012, when it emerged that three of the most powerful officials in Angola had held concealed interests in the company.
The US had become a world leader on transparency issues in July 2010 when Congress passed Section 1504 of the Dodd-Frank Act, requiring companies to disclose publicly their payments to governments for access to natural resources.
But even as the US was receiving plaudits from around the world and prompting similar ground-breaking legislation in Europe, the API was doing its best to block the legislation.
In July this year, the API, whose members include Chevron and ExxonMobil, somehow persuaded a US District Court to block implementation of Section 1504, requiring the US Securities and Exchange Commission to review its implementation.
SEC workplans show no signs of urgency to fix this issue (here), but the SEC’s stated mission is to protect investors.
And until the SEC implements Section 1504, US investors face uncertainty, risk, and the possibility of nasty surprises – political risk or even the sudden and unexpected loss of share value.
So the SEC must finish the job to protect US investors and resource-rich communities alike, because justice requires transparency not clever lawyers.