It???s not unlike the government to look for solutions for problems that don???t exist. Later this month, the Securities Exchange Commission (SEC) will consider a proposal that would not only distract from its work of overseeing the country???s financial institutions, it could very well hurt America???s energy industry and the larger economy.
On August 22, the SEC will vote on proposed regulation that would require energy producers to disclose all payments and proprietary information to foreign governments. Penned by Senators Richard Lugar and Ben Cardin as part of the 2010 Dodd-Frank reform, the provision is intended to create greater transparency among US companies operating internationally. In reality, it would put domestic energy producers at a competitive disadvantage and likely kill jobs here at home and erode US competitiveness.
Consider a poker game where one player had to show his cards before the others made their bets. You can expect he would end up in the hole. Effectively, the Lugar-Cardin proposal puts the same handicap on oil, gas and coal producers. They would be forced to reveal their hand, giving competitors not under SEC jurisdiction ??? companies like China???s CNOOC or Brazil???s Petrobras ??? the chance to read, react, and one-up the offer.
In the global energy markets, US companies compete against other international firms for development rights in foreign countries. Accordingly, they have to place bids with the country???s government, as do their counterparts vying for the same resources. The SEC rule would force the US companies to divulge the details of their proposal ??? including financial and operational information, down to individual wells. For obvious reasons, they are put at a competitive disadvantage.
Proponents of the measure argue that it would create greater transparency and accountability, both in the private sector and in government. Few would oppose those goals, but there are better ways to achieve the same upshot that don???t come at the expense of US jobs and competitiveness. Moreover, despite the heated rhetoric inherent in this debate, the facts show that the oil and gas industry already plays by the rules.
According to a study by Transparency International last month, the energy industry is among the most compliant with anti-corruption measures and information disclosure standards. The ???Big Five??? oil and gas companies ??? Statoil, BP, BG Group, ExxonMobil, and Shell ??? were all listed in the top 20 most transparent companies.
As our economy continues to experience growth that can be called anemic at best ??? following the July jobs report national unemployment actually increased slightly, to 8.3 percent ??? we should be supporting jobs creators, not constraining them. And be sure, the oil and gas industry is a leader in job creation and domestic investment. According to a study by the Progressive Policy Institute, the oil and gas companies invested over $36 billion here at home in 2011.
Still, it seems like almost a race among lawmakers to criticize traditional energy suppliers. The Obama Administration has been almost vigilant in crusade against the oil and gas industry. In each of his annual budget plans, the President has proposed hiking taxes narrowly on oil and gas; he???s delayed, regulated, and killed important infrastructure projects, such as the Keystone XL pipeline; the Administration has limited the number of offshore drilling permits and extended the application process; and advances in natural gas have come on the shoulders of private industry and investment.
There are more pressing issues for the SEC to focus on, real problems that need addressed. The Lugar-Cardin rule would actually put America at a disadvantage. The Dodd-Frank bill has many aspects that need reconsideration, but imposing senseless disclosure regulations shouldn???t be one of them.
