Last Tuesday, President Trump signed a law rolling back a regulation that required oil, gas and mining companies to disclose payments they made to foreign governments.
Oil and gas companies say the transparency regulation was burdensome, and raised costs for their products that have been passed on to consumers. But an underlying law still exists, with an aim to prevent American companies from contributing to corrupt governments and embezzlement schemes overseas.
To the extent the rollback made news, it was because the Congressional Review Act made it possible, and because it passed the House the same day the Senate confirmed Secretary of State Rex Tillerson—Tillerson, who lobbied personally against the regulation when he headed ExxonMobil.
So there’s more to the story: this rollback matters not just to how the Congressional Review Act is used, but also to global affairs. It could make life easier not just for oil companies, but also for your run-of-the-mill guerrillas and dirty politicians exploiting natural resources overseas.
A little background, starting in Angola
The Securities and Exchange Commission passed the anti-corruption regulation recently, in June of 2016, six years after the passage of the Dodd-Frank financial reform law which required it. But this isn’t some Obama-era idea.
The rule’s transparency principle has a long and twisty history going back to the Angolan Civil War, and an exposé published by the group Global Witness called A Crude Awakening, in which the group argued that secret payments by the oil sector to Angola’s government kept the country poor, created questionable loans and raised unmanageable risks for investors. (Among the companies operating in Angola at the time were ExxonMobil, BP-Amoco, and the French company Elf, now part of Total.) The report launched a campaign, public pressure caused BP to be the first oil company to disclose its payments in Angola, and the public discussion yielded something called the “Extractive Industries Transparency Initiative.”
By 2006, the EITI had set international standards for how to share information about payments to foreign governments. Now more than 40 countries have joined, including the US, which joined as a direct result of the Cardin-Luger provision within Dodd-Frank—Section 1504, nicknamed after its authors, Senators Ben Cardin of Maryland, a Democrat, and Richard Lugar of Indiana, a Republican.
Senator Lugar has said the rollback of Section 1504 is a tragedy. In an op-ed, he and Senator Cardin wrote:
[The provision] is our most affordable and effective means to make a difference in many underdeveloped nations. Cast it aside and we are undoing a clear act of moral leadership, turning our back on corruption. This would betray our own principles and severely undercut our allies in Europe and Canada. It would cost countless lives over the long run and harm our security.
Implications, starting in Washington
The regulation is dead. But plenty of issues live on:
- The law is still the law. What the President signed doesn’t kill Cardin-Lugar; it just voids the rule. Section 1504 still requires that the SEC make a regulation; confoundingly, the new rule can’t be like the old rule, which went through two rulemakings to exist (because the American Petroleum Institute sued over the first one). But the combined record is pretty exhaustive. Can the SEC really now disregard all of that? If the SEC slows down or refuses to make a rule, are there penalties? Can anyone sue to force the regulatory process to continue? We’re in uncharted territory here, for this anti-corruption rule and maybe for other regulations rolled back under the CRA—such as the stream rule Emily wrote about.
- Anti-corruption laws around the world now may be a bit more shaky. Other oil and gas and mining companies have disclosed their payments to foreign governments under transparency requirements—in the U.K., for example, that includes majors like Shell, and Russian state-owned companies like Gazprom, traded on the London Stock Exchange. If disclosure stops here, it might stop there. That could lessen pressure both on the companies and the targets of corruption investigations. In their op-ed, Senators Cardin and Lugar suggested that Russia, Venezuela and Iran would love the rollback.
- Rolling back this anti-corruption regulation, and a proposal to roll back a separate conflict minerals regulation, could further destabilize minerals-rich states with shaky governments, like the DRC. More about that in a future post.
Big questions remain about how well anti-corruption transparency works, because it was just a couple of years old when it got killed on Tuesday. But when it comes to extractive industries, transparency isn’t just an anti-poverty or anti-corruption interest. The risk of local ecological catastrophe, and the contribution of these industries to climate change, make it an environmental value too.
So we ought to keep watching.
A Ugandan billboard, 2005. By FutureAtlas.com on Flickr; Creative Commons license.