On the same day Rex Tillerson is confirmed, the House votes to kill a transparency rule for oil companies
On the same day the Senate confirmed Rex Tillerson as Donald Trump’s secretary of state, the House voted to kill a transparency rule for oil companies that Tillerson once lobbied against while CEO of Exxon Mobil.
So all in all, a good day for America’s largest oil and gas firm.
Using the little-known Congressional Review Act, the House GOP voted on Wednesday to kill an Obama-era regulation that would require publicly traded oil, gas, and mining companies to disclose any payments that they made to foreign governments, including taxes and royalties.
The rule itself dates back to the 2010 Dodd-Frank Act — when senators from both parties included a provision requiring greater disclosure from mining and drilling companies working abroad. The hope was to cut down on corruption in resource-rich developing countries by increasing transparency. At the time, as Michael Grunwald reports for Politico, Tillerson was Exxon Mobil’s CEO and flew to Washington, DC, to lobby against this provision, arguing that the rule would put his company at a competitive disadvantage and make it harder to do business in places like Russia.
Tillerson lost that battle, and Congress passed Dodd-Frank with the provision intact. Over the next six years, the Securities and Exchange Commission worked to craft a rule that would give the legislation teeth. But the SEC’s first attempt at regulation was struck down by the courts in 2012, and crafting a replacement was a long, tangled process. The rule didn’t actually get finished until June 27, 2016.
That foot-dragging proved significant: Under the Congressional Review Act, the House and Senate can basically vote to repeal any Obama-era regulation finalized after June 13, 2016, by a simple majority vote — as long as the president agrees. And the SEC’s “resource extraction rule,” detested by the oil industry, was one of the first rules the GOP decided to target using the CRA.
The American Petroleum Institute has long argued that the rule is unnecessary — after all, it’s already illegal for oil and gas companies to bribe governments under the Foreign Corrupt Practices Act. These new disclosure requirements would simply add extra costs and make it harder for US mining and drilling companies to operate overseas. Publicly traded oil companies like Exxon Mobil were also concerned that the disclosure forms would reveal valuable information about individual projects, giving their state-owned and privately held competitors an unfair advantage.
Supporters of the rule, for their part, argued that the rule wasn’t substantially different from similar requirements in Canada and Europe. Foreign companies like BP and Royal Dutch Shell now regularly report taxes, bonuses, and other payments to foreign governments. Why shouldn’t American oil majors like Chevron and Exxon Mobil?
“The US had been at the forefront on the transparency issue, with more than 30 countries following in its footsteps to pass similar legislation,” said Isabel Munilla of Oxfam International, in a statement. “State-owned companies from Brazil, China, and Russia are all now required to disclose their payments. If the Senate follows suit in overturning this rule, the US will go from a leader into a laggard.”
Now that the House has voted to kill the rule, the Senate will take it’s own vote — and no filibuster is allowed. If the rule does get overturned, there’s some uncertainty on what happens next. Under the Congressional Review Act, the SEC is barred from crafting a new rule that has “substantially the same form” as the repealed regulation. But Dodd-Frank technically still requires the SEC to come up with a transparency rule. The CRA has only been used once before, so it’s unclear how this might play out in future litigation.
- Here’s a longer look at how Exxon Mobil potentially stands to make a lot of money if the Trump administration decides to lift sanctions on Russia — something Tillerson has suggested he’s in favor of in the past.
- An explanation of the Congressional Review Act. Note that Congress is planning to kill five different Obama-era regulations this week — this SEC rule is just one.
- Did Trump repeal the FCPA in oil and gas industry?