HOUSTON/CALGARY Feb 3 Canadian and European oil
companies will find themselves at a competitive disadvantage to
their American rivals if U.S. lawmakers scrap tighter
transparency requirements on the industry, as expected,
according to company executives, legal experts and trade groups.
The U.S. Senate is poised to overturn the so-called
"resource extraction rule", a regulation requiring U.S. natural
resources companies to disclose taxes and other payments to
foreign governments, in a vote that could come as early as
The rule is among a handful of regulations ushered in during
the final months of Barack Obama's presidency that Republican
lawmakers - who now control Congress - have targeted as being
overly burdensome and bad for the U.S. economy. Democrats have
no way to keep the law in place as Republicans need only a
simple majority to kill the measure.
But overturning the regulation, set to take effect next
year, would leave Canadian and European natural resource
companies with the most-stringent reporting standards in the
world for payments to foreign governments - as U.S. behemoths
like Exxon Mobil Corp and Chevron Corp get a
Certain details of contract negotiations and terms of bids
to access reserves are currently required under regulations now
in place in both Canada and Europe. Such information could
reveal to competitors negotiating tactics and other metrics that
many companies consider proprietary, observers say.
"It definitely could put Canada at a disadvantage because we
are fairly stringent on our rules, both domestically and
internationally, on how our companies operate," said Mark
Salkeld, chief executive officer of the Petroleum Services
Association of Canada, an industry trade group.
European oil company Royal Dutch Shell Plc,
meanwhile, pointed out that a reversal in the United States
would go against the broader global trend toward transparency in
the notoriously murky industry.
"The trend that we have, with access to information, with
bringing distant countries into our space all the time, we will
have to live with that. I don't think any single political
system can turn that around," CEO Ben van Beurden told reporters
when asked about the proposed change in U.S. regulation.
"BANG FOR THEIR BUCK"
Required by the 2010 Dodd-Frank Wall Street reform law, the
U.S. Securities and Exchange Commission's extraction rule was
finalized last summer.
Canadian and European regulations were modeled after the
But the rule was quickly targeted by Congressional
Republicans after victories in the November election that
brought President Donald Trump and his anti-regulation,
pro-energy agenda into the White House.
Trump has signaled a sweeping reduction in regulation to
bolster the American drilling and mining industries, including
by undoing Obama's initiatives to combat climate change.
Vivek Warrier, a partner at Bennett Jones, a law firm in
Calgary, said that could put Canadian companies at an even
"When a potential investor comes in, they will look at the
additional regulatory compliance costs that will impact Canadian
companies and probably conclude there's better bang for their
buck south of the border," he said.
Suncor Energy Inc, Canada's largest oil and gas
producer, said reporting on payments to foreign governments is a
minor administrative burden. "But generally speaking we support
reporting payments to governments as it contributes to greater
transparency," said Sneh Seetal, a Suncor spokeswoman.
Canadian Natural Resources Ltd and Cenovus Energy
Inc, two Canadian oil producers, declined to comment.
American oil companies, including Exxon Mobil, meanwhile,
say that the regulation had threatened to put them at a
competitive disadvantage to huge state-controlled oil companies
like Russia's Rosneft Ltd and China's CNOOC Ltd
"As publicly traded companies, we have to compete globally
with state-owned companies who hold a large majority of proved
reserves and have no similar transparency or reporting
obligations," Exxon spokesman William Holbrook said.
Stephen Comstock, director of tax policy for the American
Petroleum Institute, said revoking the U.S. extraction rule is
"a necessary step by Congress to establish sensible regulations
that balance increasing transparency without diminishing our
industry's competitive advantage."
Exxon and the API said they support an alternative scheme
whereby a host country would report to its citizens at a regular
interval how much money in total was generated from extractive
industries, without breaking out company details.
The U.S. oil industry also said that the U.S. Foreign
Corrupt Practices Act would still remain in effect, prohibiting
bribery of foreign officials.
(Reporting by Ernest Scheyder in Houston and Nia Williams in
Calgary; Additional reporting by Lisa Lambert and Sarah Lynch in
Washington, D.C., Ron Bousso in London; Editing by Richard
Valdmanis and Lisa Shumaker)