Bill Gates jumps into fray over SEC oil transparency rule

Source: The Hill
Date: 16 Feb 2012

Bill Gates is pressing the Securities and Exchange Commission to issue strong rules that force oil and mining companies to disclose payments to foreign governments, arguing that exemptions energy producers are seeking would defeat the measure’s intent.

“I feel it is critical to ensure the final rules for this provision are strong and robust and in keeping with the intentions of Congress,” writes the billionaire philanthropist and Microsoft founder in a letter obtained by The Hill.

Gates is weighing in on rules that are required under the 2010 Dodd-Frank law but have come under attack from major oil companies such as ExxonMobil, which say they will create a competitive disadvantage.
The decision by the politically influential billionaire to jump into the fray could provide a lift for human-rights groups that want tough rules and are concerned about delays in the regulation.

The Dodd-Frank provision is meant to help undo the “resource curse,” in which some countries in Africa and elsewhere are plagued by high levels of corruption, conflict and poverty despite their energy and mineral wealth.

The rules will require SEC-listed oil and mining companies to disclose what they are paying foreign governments (and the United States) for production licenses, taxes, royalties and other aspects of energy and mineral projects.

Gates’s Feb. 9 letter notes that in Africa and other regions, natural resources “represent the best chance to finance development and reduce poverty and aid dependency,” noting that Africa’s natural resources were worth $246 billion in exports in 2009.

“Little of this value remained in Africa. Transparency of financial flows is critical to ensuring these valuable resources are transformed into public benefits,” Gates writes.

Gates doesn’t call out oil companies, but argues against several exemptions and provisions they’re seeking.

From the letter:

A primary goal for the Disclosure of Payments by Resource Extraction Issuers was to make this information available to citizens when their own government denied them access. It is in the most secretive jurisdictions that corruption, poverty, and instability flourish and the risk to investors is greatest. Any exemption from reporting payments to governments that object to such disclosure would defeat a primary purpose of the law.

It is also important to seek disclosure below the country level. Project level reporting will give both citizens and investors valuable information.

But a number of companies such as Exxon, Chevron and Shell warn that the rules will hinder them when competing for projects against Russian and Chinese state-owned or state-controlled companies that would not be captured by the SEC mandates. Click here and here for more on the industry’s concerns.

The industry is seeking certain exemptions and the ability to report information on a more aggregated basis through an expansive definition of “project,” and wants to limit the amount of information made public.

Recently the American Petroleum Institute (API) urged the SEC to pull back and re-propose the rule, claiming that the rule as currently proposed “would not survive judicial review.”

Groups such as Oxfam America, Global Witness, the Revenue Watch Institute and Publish What You Pay have been urging the SEC not to bend to the oil companies’ wishes, arguing the industry’s proposals would gut the rules meant to ensure the public benefits from energy and mineral development.

The groups recently launched a public relations and advertising campaign to pressure the SEC to issue the delayed rules.

Click here to see submissions to the SEC from oil and mining companies, lawmakers and human-rights groups. The letter Gates sent the SEC has not yet appeared in the SEC docket.

By Ben Geman

The Hill