SEC Schedules Vote on Controversial Extractive Industry Rule

A first version of the rule, adopted by the SEC in 2012, was defeated in court by the American Petroleum Institute, a trade association, which had argued that the rule would have put companies it represents at a competitive disadvantage. Opponents of the new proposal have indicated they might launch a new legal challenge against the rule, if passed.

A second version of the rule was rescinded by Republicans after the party gained control of the U.S. Senate in 2017.

The latest version—the SEC’s third—takes a more industry-friendly approach than previous iterations. But the agency’s efforts to ease the compliance burden on companies has drawn criticism from anticorruption advocates, who have accused it of rushing a vote in the final weeks of the Trump administration.

“The SEC threw this in at the last minute,” said Zorka Milin, a senior legal adviser for Global Witness, a London-based anticorruption advocacy and investigative group.

The rule could be one of the last completed by SEC Chairman Jay Clayton, who is set to depart the agency at the end of the year.

The SEC’s most recent proposal, unveiled last year, softens key definitions and adds exceptions to some of the rule’s requirements.

It requires public disclosure of reports regarding payments by oil, gas and mining companies. But it allows information on payments to be aggregated at a national level in most cases, instead of on a contract-by-contract basis.

The rule has caused a split between some large U.S. oil and gas companies, represented by the API, and rivals in Europe and Canada, which are subject to transparency rules that were modeled after the Dodd-Frank provision.

Companies such as the U.K.’s BP PLC, France’s Total SA, Norway’s state-controlled Equinor ASA and Anglo-Australian mining company Rio Tinto PLC have voiced support in comments to the SEC for disclosing payments on a contract-by-contract basis.

The API, meanwhile, has voiced support for key aspects of the latest proposal. But it has also requested several changes, including to a proposal that would require companies to directly disclose payments made to foreign governments.

The Dodd-Frank provision allows the SEC to either require companies to disclose the payments to a searchable database, or to collect such information confidentiality and publish it in an aggregated, anonymized compilation.

The latter approach “will help protect resource extraction issuers and their shareholders from harm that would result from disclosure of proprietary and competitively sensitive information,” Stephen Comstock, the API’s vice president of global policy, wrote in March.

Write to Dylan Tokar at [email protected]