Exxon Mobil Corp., BHP Billiton Ltd. and other energy and mining firms will have to report what they pay each country they tap resources from under a rule the U.S. Securities and Exchange Commission has the votes to adopt, according to a person with knowledge of agency deliberations.
SEC commissioners are ready to approve a final rule Wednesday that will compel public disclosure of taxes, royalties and fees paid to any government — including the U.S. — for access to resources, said the person, who spoke on condition of anonymity because the pre-vote discussions are private. The measure, required by the Dodd-Frank Act, has been opposed by groups representing the so-called extractive industries who say it will open U.S.-listed companies’ strategies to competitors.
“The SEC appears to want to require publicly traded energy firms to release commercially sensitive, detailed payment information about every foreign and U.S. project,” John Felmy, chief economist for the American Petroleum Institute, said yesterday in a teleconference with reporters. “With a few clicks of a mouse, state-owned foreign firms — companies like the China National Petroleum Company and Russia’s Gazprom — could plunder information, which could help them determine their rivals’ strategies and resource levels.”
Dodd-Frank, the 2010 financial-regulatory overhaul, included the provision to boost industry transparency and combat corruption in resource-rich nations, according to Senate co- sponsors Ben Cardin, a Maryland Democrat, and Richard Lugar, an Indiana Republican.
Forcing energy and mining companies to disclose such information is like publishing the recipe for Coca-Cola, Felmy told reporters. The rule will also require reporting on payments in jurisdictions that either ban or discourage such disclosures, such as China, Angola and Qatar, he said.
“There isn’t indication that there are actual laws that conflict with this,” said Paul Bugala, a senior sustainability analyst for Bethesda, Maryland-based Calvert Investments Inc., which has supported the rule. Letting countries limit what energy companies can disclose “sounds a lot like a tyrant’s veto,” he said in a telephone interview.
Bugala said he doesn’t see a competitive disadvantage when most multinational companies will have to comply. The resulting information will fill “a black hole” for investors trying to measure company risk, he said.
SEC Chairman Mary Schapiro and Republican Commissioner Troy Paredes plan to recuse themselves from the vote because of industry ties, the person said. Schapiro served on the boards of Duke Energy Corp. and Cinergy Corp. before rejoining the agency in 2009.
Commissioners will also vote today on a rule that will require companies to certify that products using tin, tantalum, gold or tungsten are free of so-called conflict minerals said to fund armed groups responsible for violence and human-rights abuses in the Democratic Republic of Congo. The disclosures will apply to 6,000 companies, according to the SEC.
“The proposed rule would affect most manufacturers of electronics, aerospace, automotive, jewelry, health care devices, and industrial machinery,” according to a comment letter from the U.S. Small Business Administration faulting the SEC for underestimating the impact of the rule. “Businesses that don’t necessarily file with the SEC may be impacted if they are part of the supply chain,” SBA said in its letter.
While large companies, particularly manufacturers of consumer electronics, have been mapping the thousands of suppliers in their chains, other companies have been “thinking this will go away,” said Jane Luxton, a Washington lawyer who has advised clients on the rule for Pepper Hamilton LLP.
“A lot of people have been waiting to see what’s going to happen, kind of hoping this thing isn’t going to come down on them too hard,” Luxton said in a telephone interview.
SEC commissioners had also been scheduled to vote on a proposed rule to erase a ban on closely held companies soliciting investments. That rule was postponed to an Aug. 29 meeting, the agency said.
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