U.S. Energy Companies: Forced to Show Their Cards

The United States is one of the rarest countries in the world where not only do private individuals own and profit from mineral rights, but the companies that produce and extract these minerals are privately owned and publicly traded.

Throughout most of the world, the minerals beneath the earth’s surface are the property of the state, and the entities that extract these resources are governmental bodies. In fact, close to 80% of the world’s oil resources are controlled by state-owned oil companies—the real Big Oil.

This is the primary reason why, although the oil industries of Imperial Russia, Baku, and modern day Azerbaijan started earlier than US industries, our capitalist nation facilitated enormous technological development and private wealth generation that places US industry generations ahead.

However, new regulations to be voted on this Wednesday will make it mandatory for US companies to divulge critical information publicly. The real Big Oil—Saudi Aramco, Gazprom, Petróleos de Venezuela, Petrobras (Brazil), and other nationally controlled oil companies that control 80% of the world’s total oil and gas reserves—will happily take advantage of the US government’s actions. This terrifying intrusion of government into business will, down the pipeline, cut American companies off at the knees, crippling them in a competitive market to which they already have only limited access.

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The SEC has broad discretion in determining what the disclosure requirement under 1504 will be. Yet indications from meetings with SEC officials are that it may favor a draconian approach that would       irreparably harm U.S. oil and natural-gas companies.

The danger arises if publicly traded energy firms are required to release — for public consumption — commercially sensitive, detailed payment information about every foreign project. This means they would have to reveal extensive data, including the names and locations of their most important personnel and capital assets, in addition to how much they pay for licenses, taxes, royalties and other fees.

But the rule would only cover companies listed by the SEC. State-owned multinationals — which constitute the vast majority of energy assets world-wide and own 78% of all oil and natural-gas reserves — will not have to comply. The 16 biggest oil companies in the world do not fall under SEC jurisdiction.

Forcing publicly traded companies to release proprietary information about their foreign operations would put them at a serious competitive disadvantage because state-owned firms could plunder that information and determine their rivals’ strategy and resource levels. Information worth billions of dollars would be just a few mouse clicks away.”

It is astounding that the U.S. government even considers taking such action to handicap one of its oldest and most competitive industries. Essentially they are saying that American companies playing the game overseas must show their cards to the others at the table.

American oil companies are already treated differently than any other industry. According to Forbes,

“In 2011 these three oil giants each paid more in income taxes than any other corporation in America. ExxonMobil in 2011 made $27.3 billion in cash payments for income taxes. Chevron paid $17 billion and ConocoPhillips $10.6 billion.

And not only were these the highest amounts in absolute terms, when compared with the rest of the 25 most profitable U.S. companies, the trio also had the highest effective tax rates.

Exxon’s tax rate was 42.9%, Chevron’s was 48.3% and Conoco’s was 41.5%. That’s even higher than the 35% U.S. federal statutory rate, which is already the highest tax rate among developed nations.”

Yet still there is a concerted effort to make these companies pay more.

How can American companies be competitive on a world market if, when sitting at the table, they are forced to show their cards? It is time for the people of the US to wade into this argument with informed opinions before one of the most productive engines of the American economy is stopped.