NEW YORK (CNNMoney.com) -- A new law requiring oil companies to disclose all payments made to governments has sparked a sharp debate, with Big Oil saying it will put it at a big competitive disadvantage.
The law, attached at the last minute to the financial reform bill last month, applies to extractive industries - basically all U.S.-listed oil, gas and mining companies.
These companies pay hundreds of billions of dollars each year to governments in the form of royalties, taxes, and other fees. The problem, say some, is that these payments are often not transparent. Now firms must disclose these payments.
The law is very specific, requiring information about each individual project in countries where they operate, not simply a lump-sum figure.
Supporters say it's necessary for two reasons: First, it provides investors with more knowledge of the risks associated with a company's operations.
If an oil company is paying far less in royalties in one country over another for the same amount of oil, then it makes that cheaper country much more important to the firm's balance sheet. Investors have a right to know which countries those are.
And second, it will help ward off corruption.
"If people know how much the government is taking in, they can begin asking what is happening to that money," said Karin Lissakers, director of Revenue Watch, one of the organizations that pushed for the law. "Where are the roads, where are the schools, where are the clinics?"
Corruption is a persistent problem in many countries.
One of the most high profile cases in recent years involves Teodoro Nguema Obiang, the son of the president of Equatorial Guinea.
With a government salary of $60,000 a year in a country where 77% of the people live below the poverty level, Obiang managed to buy a $35 million house in Malibu, a $33 million private jet, estates in South Africa, and a stable of cars including a couple of Bentleys and a Lambroghini, according to numerous media reports. A U.S. Justice Department investigation linked these purchases with skimmings from the country's huge natural resources industry.
"This is the missing ingredient for citizens to hold their government's accountable for how their money is spent," said Isabel Munilla, director of the U.S. branch of Publish What You Pay, a coalition of environmental, human rights, and religious groups.
But the oil industry says the law is misguided.
It's all for transparency, it says, but companies that have to publish how much they are paying for each project leave themselves vulnerable to underbidding from companies that don't have to publish their own numbers.
The industry concedes that many companies from fast-rising nations like China and Brazil are covered under the law, but says that dozens of smaller firms, along with some notable biggies like Russia's Lukoil and Rosneft, would be exempt.
"It puts our companies at a competitive disadvantage," said Misty McGowen, director of federal relations at the American Petroleum Institute. "If one company has that proprietary information at their disposal, they could use it to negotiate a new contract."
Instead, API supports another version of the disclosure law, known as the Extractive Industry Transparency Initiative. That program, already operating in some 30 nations, applies to all firms operating within signatory countries. But it can be less specific than what's called for under the U.S. law, requiring disclosure of total payments but not broken down by project.
In some cases, names of companies operating in countries aren't disclosed, simply an overall industry payment figure is.
Publish What you Pay and Revenue watch also support the transparency initiative, but say it doesn't go far enough. For one, participation by countries is voluntary, and they say some countries will never sign up.
While the U.S. law was passed a month ago, it took many by surprise.
Greg Priddy, a global energy analyst at the Eurasia group, a political risk consultancy, said supporters of the law were able to get it passed quite quickly by attaching it to the financial reform bill. The industry, he said, had little time to react.
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