Suncor Energy’s tar sands operation near Fort McMurray, Alta., is seen in September, 2014. A Suncor spokesman disagreed that financial reporting requirements were a competition issue Friday.TODD KOROL/Reuters
Republicans have begun unwinding a series of Obama-administration regulations that had been opposed by U.S. oil companies, raising new concerns in the Canadian industry about an erosion of competitiveness.
The Republican-led Congress passed a law Friday to rescind a recently adopted anti-corruption rule that would force resource companies to publicly report what they pay in fees and taxes to federal and local governments – a regulation that the U.S. petroleum industry had fought through the courts. President Donald Trump is due to sign the bill in the coming days.
The House of Representatives also passed and sent to the Senate a law to void new regulations to force oil and gas companies working on federal lands to limit their emissions of methane, a powerful greenhouse gas. The Trump administration is expected to launch a more sweeping effort to roll back broader methane regulations imposed by the Environmental Protection Agency, though that process will take some time.
In Congress this week, Republicans employed a rarely used measure to reverse recently enacted rules of an outgoing administration by a simple majority vote, depriving the Democrats of the ability to filibuster.
Mr. Trump and his Republican colleagues vow to slash the regulatory burden on the U.S. energy sector – and cut taxes – in order to boost investment and spur production. Some producers on this side of the border will find it harder to raise capital if they are saddled with regulatory costs that their American competitors don't face.
The Canadian Association of Petroleum Producers worked with the federal government to design the transparency regulations here, and CAPP vice-president Ben Brunnen said there is value for companies in publicly reporting the financial benefits they provide to communities where they invest.
But producers worry when the regulatory burden favours their competitors, and are watching closely as the Republicans dismantle former president Barack Obama's environmental and transparency rules, he said.
"CAPP and our members are definitely aware and concerned about any potential competitiveness imbalances between Canada and the U.S. from a policy perspective," Mr. Brunnen said. "We're keenly aware of the importance of a level playing field where investment can flow over the border quite freely."
The Canadian transparency law requires domestic oil and mining companies to report payments to governments at home or abroad in excess of $100,000; foreign companies must report payments made to governments here. The measure was adopted by the former Conservative government with the expectation that the United States was adopting similar rules, and companies must begin reporting this year. Britain and most European countries have similar anti-corruption regulations.
The Mining Association of Canada pushed for the federal law and its president, Pierre Gratton, said his members continue to support it. Canada is a major source of mining investment around the world and Mr. Gratton travelled this week with Natural Resources Minister Jim Carr to Mexico, where Canadian companies provide 70 per cent of the mining investment.
"The mining industry believes in this legislation as one effective tool to combat corruption," he said in an e-mail from Mexico City. "We, like communities, want to know where the taxes we pay are going."
Suncor Energy Corp. does not see the reporting requirement as a competitive issue, company spokeswoman Sneh Seetal said Friday, adding that the administrative effort is modest and the benefits to transparency are significant.
John Boscariol – a trade lawyer at McCarthy Tétrault LLP who focuses on anti-corruption measures – said the transparency rules give competitors a window into a company's financial arrangements.
"Sometimes it doesn't have to be a huge advantage for them to be able to win the contract."
The rule could even apply to Canadian pipeline and oil-field-service companies operating in foreign countries, in some cases, he noted.
The disparity with U.S. rules could hurt Canadian companies in bidding for projects or work overseas as some governments resent the imposition of foreign financial disclosure laws in their jurisdictions, said Gary Leach, president of the Explorers and Producers Association of Canada, which represents smaller companies.
Mr. Boscariol said the U.S. move is also a blow to the global push to halt bribes and other illegal payments to political leaders. Disclosure of payments rules, and penalties for non-disclosure, can help regulators who have a hard time proving corruption by other means.
"The whole principle of publish what you pay is designed to reduce corruption worldwide," he said.
Kelly Cryderman