TOT TOTAL SE

By Dylan Tokar 

A proposed rule mandating the disclosure of payments made by oil, gas and mining companies to foreign governments has become the target of anti-corruption advocates and even some businesses who say it fails to align with international standards.

The updated rule, proposed by the U.S Securities and Exchange Commission in December, seeks to ease the compliance burden the disclosure obligations placed on the extractive industry, according to the agency.

But some companies, in written comments to the SEC, have said the proposal will do the opposite.

The multinational companies, including the U.K.'s BP PLC, France's Total SA, Norway's state-controlled Equinor ASA and Anglo-Australian miner Rio Tinto PLC, have said they support disclosing payments on a contract-by-contract basis, as currently required in Canada and Europe, instead of aggregating them on a national level, as proposed by the SEC.

The deadline to submit public comments on the proposal was Monday. The SEC said it would not make a final decision on the proposal before April 24 to allow for additional comments due to disruptions posed by the coronavirus pandemic.

The proposed rule is the third attempt by the SEC to implement a controversial section of the Dodd-Frank Wall Street Reform and Consumer Protection Act requiring extractive-industry companies to disclose the payments they make to foreign governments. A first version of the rule was adopted by the SEC in 2012.

Other countries, including Canada, Norway and members of the European Union, have used the Dodd-Frank provision as a model for legislation mandating similar disclosures by extractive industry companies in their own countries.

After its adoption by the SEC in 2012, the rule became the object of lobbying campaigns and a legal challenge by the American Petroleum Institute. In 2013, a federal court in Washington, D.C., vacated the SEC's rule, saying the agency went too far in interpreting the scope of the Dodd-Frank provision.

A second version of the rule was rescinded shortly after Republicans gained control of the U.S. Senate in 2017. Republican lawmakers continued to cite the potential costs of complying with the rule, and argued that it could make companies less competitive -- despite the disclosure obligations that had been enacted in Europe and Canada.

The proposed revisions have led to a divergence between the SEC's rule and the reporting requirements adopted abroad. That discrepancy could place additional burdens on companies that have to comply with multiple disclosure regimes, according to organizations that submitted comments to the SEC.

"While the proposed rules are based on an approach similar to the one taken by the EU, the currently proposed rules would nonetheless create substantial differences between the two regimes," Gine Wang-Reese, vice president of political and public affairs at Equinor, wrote to the SEC. "[W]e question the need for such a two-tiered test and its additional compliance burden."

Complying with the EU's contract-level requirement hasn't been too burdensome, according to Total. The chief executive of the company's Washington, D.C.-based lobbying arm, Francois Badoual, wrote to the SEC that the company's internal cost of reporting was about $200,000 per year. That cost covers about one month of work by employees at the central finance level and one to two days of data-verification work in each subsidiary.

Directors at anti-graft group Transparency International said in a letter that the proposed rule could spur other countries to eliminate their transparency laws. Similar groups also criticized the payment thresholds requiring disclosure, saying many important projects would fall through the cracks. The groups also objected to exemptions for smaller and emerging growth companies, and for situations in which a foreign law or a pre-existing contract prohibits disclosure.

Smaller companies are often more likely to pay governments large up-front bonuses to gain access to resources, the Carter Center, an organization founded by former President Jimmy Carter, said in a letter addressed to SEC Chairman Jay Clayton.

Write to Dylan Tokar at dylan.tokar@wsj.com

(END) Dow Jones Newswires

March 18, 2020 15:39 ET (19:39 GMT)

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