The cost of compliance – a drop in the bucket for big oil?

Oil companies have complained about how much Dodd-Frank 1504 would cost them in reporting and compliance costs. Royal Dutch Shell argues they would lose ‘tens of millions of dollars’ while API claims the potential cost is in the ‘hundreds of millions of dollars’ for industry.

The Securities and Exchange Commission – which is currently working on the details of the rule – has also provided figures concerning the cost of compliance. It estimated that compliance costs for all affected issuers would be $11,857,200 for the work of outside professionals, plus 52,932 hours of internal personnel time. In its SEC filing, Shell used an internal personnel rate of $125 per hour which would put internal personnel costs across the industry at $6,616,600. We then get a total of $18,473,700 across the whole extractive industry, which if divided equally by the number of issuers expected to be affected by the rules comes to $16,779.

To put these numbers into perspective, we can also look at some of big oil’s recent profits:

In the first half of 2011,

• Shell made $17.6 billion
• Exxon Mobil made $21.4 billion
• Chevron made $13.9 billion
• Big oil as a whole made $78.3 billion
• … and in 2001 – 2010 big oil as a whole made $870 billion

When we see these figures, even Shell’s estimate of tens of millions of dollars is a drop in the bucket in order to pay for legislation that could lift billions out of poverty.

Sources

Letter from Kyle B. Isakower, Vice President, Regulatory and Economic Policy, American Petroleum Institute to the SEC on 11 August 2011

Letter from Martin J. ten Brink, Executive Vice President Controller, Royal Dutch Shell plc, to the SEC on 1 August 2011

Taxpayers for Common Sense, a non-partisan budget watchdog in the United States