Tacitly acknowledging two substantial errors in drafting special disclosure provisions of the Dodd-Frank Act that apply to the oil, gas and mining industries, the Securities and Exchange Commission (SEC) has declined to appeal a District Court ruling striking down the provision.
In July, the U.S. District Court for the District of Columbia struck down an SEC rule that required resource extraction companies to publicly disclose payments made to foreign governments. The SEC let the deadline to appeal the ruling, Sept. 3, pass without action, instead opting to revisit the rule and develop a new version of it that resolves the issues laid out by the court.
U.S. District Judge John Bates found two flaws in section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which required oil, gas and mining companies to disclose payments made to foreign governments for permits, licenses, etc.
Bates determined that the mandate for public disclosure was problematic, as it made disclosure mandatory and did not allow for confidential submission of the information. Additionally, the SEC rule was in direct conflict with laws in several countries that prohibited disclosure of that information. The SEC would not allow for exemptions.
The American Petroleum Institute saw the court’s ruling as a victory, and anticipates the SEC’s ability to rewrite the rule in order to encourage transparency without harming U.S. extraction firms.
Activist groups, although disappointed at the setback, see an opportunity for the SEC to create a stronger rule that will mandate more accountability for oil, gas and mining companies.
SEC spokesman John Nester confirmed the Commission’s intention to look into the matter further. In an e-mail to The Wall Street Journal, Nester said, “The court remanded the matter for further SEC proceedings, which the Commission will undertake informed by the court’s decision.”
Only time will tell if a new iteration of the rule will protect the interests of investors, U.S. citizens and the extractors themselves.