The Chamber & API Team Up to Hide Oil & Gas Cash to Governments
After a year of lobbying the SEC, the Chamber & the American Petroleum Institute ensure oil & gas companies do not have to disclose their contracts with the federal government.
By Gabriel Slaughter, December 27, 2020
U.S. Chamber of Commerce, located just across the park from the White House.
On Wednesday, December 16, 2020, fossil fuel lobbying groups U.S. Chamber of Commerce and American Petroleum Institute delivered to the industry a final cherry on top of the catastrophically pro-fossil fuel cake that was Trump’s presidency.
For the past year, these two lobbying groups have been lobbying the Securities and Exchange Commission (SEC) on its rewrite of the rule to enforce Section 1504 of the Dodd-Frank Act. The SEC commissioners voted on their proposed rule on Wednesday.
The oil and gas industry got what they wanted: they will not have to publicize their contracts with the federal US government.
Senator Ben Cardin (D-MD) - An author of the recently washed-out Section 1504
What is Section 1504 of the Dodd-Frank Act? Because you didn’t ask, here’s a little history:
The Dodd-Frank Wall Street Reform and Consumer Protection Act was the Obama administration’s attempt to rein in corporate America during the recession that started in 2008. Section 1504 was introduced in 2010 to address corruption in the mining and oil industries. It required companies to publicly disclose their payments to the governments of the countries where they operate. (Side bar: the guy who co-wrote the Section, Senator Ben Cardin (D-MD) is not happy with this latest result).
That new law was groundbreaking. The UK, the EU and Canada also adopted disclosure requirements as a result. Thanks to these countries’ disclosure requirements, you can now see, for example, Exxon’s contracts from across the world.** You can even find the disclosures of Gazprom - the national Russian oil company! This is extremely useful information for citizens trying to hold their governments accountable.
**Well, not the whole world, to be precise. The USA disclosures are not available. That’s because a year after the SEC created a rule to enforce the law, the U.S. Chamber of Commerce and the American Petroleum Institute sued the SEC and won; the SEC had to re-write.
The second version of the rule came out at the end of 2016. When ‘45 came to power, it was one of the first fifteen rules on the Congressional Review Act (CRA) chopping block. It was a top priority for ex-ExxonMobil CEO, Rex Tillerson. So see ya later, fossil fuel data!
Now we have the third iteration of the rule, produced by an SEC led by Jay Clayton Esq. (who coincidentally likes to talk about himself as an anti-corruption champion).
So what’s new about this rule?
The final rule is 222 pages long, but these are some of the key points:
Oil and gas companies only have to report how much they are paying to the government across all of their drilling projects. Individual contracts and leases will not be disclosed.
Smaller and emerging oil and gas companies will not have to disclose anything.
This rule has a two-year compliance grace period. After that, companies will be required to make disclosures 270 days from the end of their fiscal year. How much are fracking companies paying to drill on Federal lands? I guess we will have to wait FOUR YEARS to know!
Companies must now only report payments of at least $150,000 where the total amount on projects paid to a government reaches $750,000 or more.
ExxonMobil CEO Darren Woods, second from the right (Photo: Richard Drew/Associated Press)
Federal & State fossil fuel graft
This new rule is a wasted opportunity to apply pressure to an industry that routinely plays financial shenanigans with government agencies. This is not a foreign corruption issue. This is a US issue. Here are two recent examples:
In 2018, Exxon got away with evading a $2.1 million tax bill when it sold an oil well lease in the Gulf of Mexico. Nobody lifted a finger.
In 2019, a report by the Government Accountability Office (GAO), an investigative branch of Congress, found that the Department of Interior has been cutting sweetheart deals in selling drilling rights to energy companies since 2000.
For better or for worse, fossil fuels are public resources that generate important revenue: In 2011, companies made $98.6 billion from production on federal leases and paid the federal government $10.5 billion in royalties alone. A lot of that money is shared with states where the wells are located.
Although the rule only applies to federal leases, state governments also have to deal with fossil fuel companies squirreling away cash. For example, coal and mining companies owe Johnson County, WY $17 million in unpaid taxes.
Why does this matter to climate politics?
The 2018 IPCC report clearly shows that we, as a species, need to halve greenhouse gas emissions by 2030 and reach a carbon-zero economy by 2050 if we want to have a decent chance of limiting global warming to 2°C, which is already a very, very, very scary outcome.
Achieving that goal will require unprecedented action by the government. What’s more, the transition to a carbon-zero economy is going to involve a lot of very difficult and complicated trade-offs: what about the 1.2 million jobs in coal, oil and gas? What about people who are experiencing the brunt of the effects of climate change? What about states like North Dakota, Texas, New Mexico and Wyoming which rely on revenue from oil and gas to provide essential services?
This new rule creates a black hole in federal and state budgets at a time when we desperately need clarity on the role that fossil fuels play in our economy.
The U.S. Chamber of Commerce and the American Petroleum Institute have once again proven their usefulness to the fossil fuel industry and their disregard for the long-term wellbeing of ordinary people and our environment.
P.S. - The prize for most ridiculous footnote goes to the American Petroleum Institute:
“Compilation [of contract-level data] would also mitigate industry’s First Amendment concerns over being compelled to speak for the political purpose of influencing another country’s affairs.”
What world do these people live in?