Obama’s campaign speeches always seem to include a line about how he can take credit for increasing domestic oil and gas production. As the official White House website has it, “domestic oil and gas production has increased every year President Obama has been in office.”
On Wednesday, however, his administration put into effect yet another new regulation making it harder for America’s oil and gas companies to increase production. In fact, that regulation, as the head of the American Petroleum Institute recently wrote, would make American companies unable to compete with foreign competitors.
That may be exactly why the president supported it.
The new regulation, Section 1504 of the Dodd-Frank bill, would require American companies to release information detailing expenditures on foreign operations. That proprietary information would immediately be available to foreign and domestic competitors alike, and would be used to undercut whatever advantages American companies have achieved as a result of their own hard work. Section 1504’s “extractives transparency rules,” as interpreted by Obama’s activists at the SEC, force American companies to compete with one hand tied behind their back. Competitors in Moscow and Beijing must be dancing for joy now that the rules have been finalized. Obama has just handed them the keys to the world’s oil riches.
The problems with Section 1504 go beyond the “competitive disadvantage” to which it puts American energy companies. When implemented, Section 1504 will also place American companies in conflict with foreign countries which prohibit the very same disclosures that 1504 mandates. As a result, American companies might well be forced to cease operations in nations where they have already invested tens of billions of dollars in order to avoid running afoul of the law.
As one study pointed out, there are also serious security implications involved in implementing Section 1504. American companies working in dangerous environments overseas may be placing their employees at risk if they fully disclose the locations, funding, and status of their operations. The safety of American workers and their local employees overseas should be a paramount concern, but the SEC ruling does not appear to address this concern.
In addition to the risk of violence, Section 1504 exposes American companies to the risk of greater shareholder litigation. Like all complex securities regulation, Section 1504 is a boon for trial lawyers, but not for American workers or consumers, who will end up paying the costs of litigation.