[T]he Republican-controlled Congress has overturned a rule drafted by U.S. Sen. Patrick Leahy, D-Vt., that required energy extraction companies to disclose all payments made to foreign governments.
The rollback of the rule passed the House on Wednesday, just as former ExxonMobil CEO Rex Tillerson was confirmed by the Senate to be secretary of state. (The Senate passed the House resolution Friday morning, and Republican President Donald Trump is expected to sign it into law in the coming days.)
Tillerson — who opposed the Leahy rule when it was being drafted — has come under fire for the close relationship he fostered with Russian President Vladimir Putin while running Exxon.
During Tillerson’s confirmation hearings, Democrats expressed concern over Tillerson’s connections to Russia and Exxon.
Sen. Ben Cardin, D-Md., the ranking Democrat on the Foreign Relations Committee, told Tillerson that “having a view from the C-suite at Exxon is not at all the same as the view from the seventh floor of the Department of State.”
In a fiery floor speech Thursday, Leahy said that overturning the rule would spawn corruption and bribery at the highest levels of foreign government, and he invoked Russia as an example.
“The practical effect of overturning this rule is that U.S. and foreign companies will be able to continue to make secret payments to corrupt foreign autocrats like Vladimir Putin and kleptocracies in Africa like the governments of Angola and Equatorial Guinea,” Leahy said. “By doing so, these companies will be aiding and abetting those kleptocrats when they pocket the proceeds for their personal use. We have seen this for years. The people of those countries barely survive on $1 or $2 per day, while their leaders drive Mercedes, fly private jets to vacation homes on the French Riviera or in Santa Monica, and pay off the armed forces to keep themselves in power.”
The rule was created by Leahy and two other senators: Dick Lugar, R-Ind., and Maryland’s Cardin, who vigorously questioned Tillerson during his confirmation. The bipartisan group inserted a directive into the Dodd-Frank Wall Street reform bill — which became law in 2010 — calling on the Securities and Exchange Commission to draft the specific disclosure requirements.
The specific SEC rule language was initially adopted in 2012, but was quickly challenged in court by trade groups — including the American Petroleum Institute and the U.S. Chamber of Commerce. It was subsequently blocked by the U.S. District Court for the District of Columbia in July 2013.
After the court struck down the rule as being “arbitrary and capricious,” the SEC drafted new rule language with less stringent disclosure requirements. The final rule was adopted by the SEC in June of last year, and it was set to take effect in 2018.
The scrapped rule would have required all public oil, natural gas and mining companies to file publicly available reports annually that documented payments made to the U.S. federal government and foreign powers for the purpose of furthering energy development.
The rule mandated disclosure for various payment types, including licensing fees, dividends, bonuses and infrastructure improvements. After the United States adopted the Leahy rule, a number of other powers, including Canada and the European Union, adopted similar measures.
“The US had been at the forefront on the transparency issue, with more than 30 countries following in its footsteps to pass similar legislation,” said Isabel Munilla of Oxfam International, in a statement. “State-owned companies from Brazil, China, and Russia are all now required to disclose their payments. If the Senate follows suit in overturning this rule, the US will go from a leader into a laggard.”
Politico reported that while Leahy’s rule was being debated, Tillerson personally lobbied against it, contending that it would make it harder to do business in countries like Russia.
While Tillerson was unsuccessful in stopping the rule, congressional Republicans overturned it expeditiously.
Sens. Bill Huizenga, R-Mich., and James Inhofe, R-Okla., introduced language to roll the rule back using the powers of the Congressional Review Act, which allows recently passed regulations to be overturned by a simple majority vote. Because Republicans control both chambers of Congress, no Democratic support was needed.
The House passed the resolution Wednesday, 235 to 287. The Senate passed the House resolution Friday morning on a strict party line vote of 52 to 47. All three members of the Vermont congressional delegation voted against overturning the rule.
In his floor speech Thursday, Leahy argued that by making it easier for energy companies to make shadow payments to foreign governments, not only would corruption rise, but so would terrorism.
“By overturning this rule, senators should know that violent extremists, terrorists and other criminal enterprises will be among the beneficiaries,” Leahy said. “Corruption is among the most corrosive forces that breed instability and violence, and then countries like ours end up trying to feed and shelter the innocent people who bear the brunt of it.”
The rollback of the disclosure rule likely portends what is going to be a favorable attitude toward energy companies by the Republican-controlled government.
One such change could be the rollback of Obama’s economic sanctions on Russia by President Trump. A planned $1 billion Exxon drilling project planned for Russia’s arctic was blocked by Obama’s sanctions, and Tillerson has signaled he would like to see sanctions eased.
