Bernard Weinstein, the associate director of the Maguire Energy Institute and a George W. Bush Institute fellow, said that the conflict minerals provision of the Dodd-Frank Act may disadvantage U.S. companies.
Section 1504 of Dodd-Frank requires that companies involved in resource extraction disclose in their annual reports any payments, including royalties, license fees, taxes, bonuses and production entitlements, made to foreign governments, The Hill reports.
The rule is intended to increase transparency and accountability in the gas and oil industry, as well as end the resource curse — the paradox of countries rich in resource wealth that have high levels of violence, crime and corruption.
“Simply put, public disclosure of all payments to foreign governments would provide non-[Securities and Exchange Commission] registered companies, whether state-owned or private, an opportunity to undercut American bids,” Weinstein said, according to The Hill. “What’s more, non-SEC registered companies would have a leg-up in forming joint ventures with national oil companies [that] control more than 70 percent of global oil production.”
Weinstein also criticized President Obama’s call for higher taxes on the oil and gas industry and the elimination of a provision that allows companies to deduct nine percent of their production costs, as well as certain drilling exemptions and tax credits.
“Eliminating this particular deduction would have a dramatic impact on the job market, encouraging segments of the oil and gas industry to outsource their work to countries with lower tax rates, and it could also result in higher prices for gasoline, diesel and jet fuel,” Weinstein said, The Hill reports. “Elimination of important tax incentives for the energy sector, coupled with the new financial disclosure requirements under Dodd-Frank, may punish the 9.2 million Americans whose jobs are supported by this industry.”