Disclosing payments to foreign govenrments

Houston Chronicle:

Confronting an increasingly competitive environment around the globe, the major oil companies now face legislation that aims to use them to help keep corrupt regimes abroad from stealing their own people's oil wealth.

The incoming Congress is likely to consider a measure that would force oil producers, mining companies and other "extractive" industries that file annual reports with the U.S. Securities and Exchange Commission to reveal how much they pay to foreign governments.

Championed by human rights groups and other transparency advocates, the proposal is intended to shed light on some of the billions of petrodollars that flow into often opaque, repressive regimes.

The goal is to help the citizens of oil-producing states hold their governments more accountable and to keep oil company money from fueling the civil wars that have plagued oil-wealthy nations.

Oil industry officials argue the measure could hamper voluntary transparency efforts.

And they fear it would disadvantage U.S. companies to the benefit of foreign competitors — particularly in China — that would not have to make such disclosures.

"In these economic times, do you really want to risk putting U.S. companies at a competitive disadvantage when you're struggling with the issue of global energy security?" asked Walt Retzsch, a senior policy adviser for the American Petroleum Institute, the industry's Washington-based trade group.

U.S. companies raised similar concerns about competitiveness three decades ago with passage of the Foreign Corrupt Practices Act, which bars American firms from paying bribes when operating overseas.

Over time, however, the U.S. model became the norm of international business. But bribery demands remain a major problem in many countries.

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Opponents of the measure say companies covered by Frank's measure would have to compete with Chinese firms and other players that might be beyond the law's reach. This could give those rivals a negotiating advantage in making deals with nations uninterested in opening their books.

Transparency advocates say the industry overstates the case. "We don't believe that the gaps in coverage would be big enough that they would pose a significant competitive problem," said Karin Lissakers, director of the Revenue Watch Institute.

How much the oil companies pay to foreign governments is unknown.

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It is not clear to me that this would be a big problem or that it would be much of a benefit either. It could make things worse of other reasons. I can see a situation where the governments start looking at what is being paid to others and demand the same or more exacerbating the problem. I don't think the local governments who received the payments will be embarrassed by them unless they are getting less than everyone else.

I think the real problem is not going to be a refusal to deal with companies subject to the regulation, but with increased demand for higher payments to match others.