New financial disclosure requirements for companies that produce not only oil and natural gas but also hard-rock minerals will soon be made public by the U.S. Securities and Exchange Commission.
The rules will cover payments such as taxes, royalties, and license fees that U.S. companies make to foreign governments.
Financial disclosure is required under a sleeper provision of "Dodd-Frank," a 2,200-page law that was passed two years ago and is aimed principally at the financial services industry. But the law also includes provisions for oil and gas and mineral companies, possibly including suppliers of mining equipment and other ancillary services.
As the SEC develops rules for enforcing this section of the law, we should all be mindful that such disclosure, while desirable, could put U.S. companies at a disadvantage when competing for contracts against foreign companies that are not subject to the mandates such as state-owned or state-controlled companies.
Non-registered companies like Russia's Gazprom or the China National Petroleum Company would have an opportunity to undercut U.S. bids.
National companies control more than 70 percent of world oil resources and most of the world's hard-rock mineral resources.
More specifically, requiring U.S. companies to make public such payments to foreign governments at a level of project detail instead of on a broad, aggregated basis creates the risk that the information will not sufficiently address the whole picture.
That misguided approach would actually harm our international competitiveness. The disclosure requirement covers a large number of the world's internationally operating oil and gas companies and eight of the world's 10 largest mining companies.
They will have to report taxes, royalties, fees, production entitlements and bonuses for each project and for each government to which they make payments.
Under a separate conflict minerals rule, companies mining metals such as gold or tin would have to disclose what measures they are taking to avoid making payments to rebel groups or military units in the Congo or an adjoining nation. The public will have access to the information on the SEC website.
The SEC is expected to approve the disclosure rules on Aug. 22.
Discouraging international operations would make it harder to attract the most promising young engineers and geologists to these fields. How could we lure talented people if they knew that such disclosure requirements would hamper the ability of U.S. companies to secure contracts?
In some cases, such disclosures might breach confidentiality agreements or even violate foreign laws. We can have transparency while protecting our economic interests.
The right way to do this is through the Foreign Corrupt Practices Act that prohibits payments to foreign officials for the purpose of obtaining or retaining business — and we are doing that.
The wrong way would be to hamstring U.S. companies, isolating them from foreign markets. We would pay a huge price for such isolation in a weakened economy. And in the end we would damage the companies that produce jobs and revenue for our government.
It is not too late for the SEC to address these concerns.
Jim Constantopoulos is professor of geology at Eastern New Mexico University. Contact him at: