SEC Won’t Delay Transparency Rule for Oil, Gas and Mining Companies

11/12/12

Last Thursday, the U.S. Securities and Exchange commission denied requests to delay its new rules, which will compel oil, gas, and mining companies to disclose payments made to foreign governments. Business groups have also sued against the rules. However, in its order, the SEC held that the groups had failed to prove any “imminent, irreparable harm” to justify a stay.

The SEC and proponents of the new rules claim that disclosure of payments under the rules would enhance transparency and help to combat corruption done in other countries by U.S. energy companies. Business groups opposing the rules have stressed that it would lead to revealing of sensitive business information and would be too costly to maintain.

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Last month, the U.S. Chamber of Commerce, the American Petroleum Institute and other business groups had sued the SEC on grounds that the requirements of the disclosure rule overstepped the boundaries of law and exceeded the jurisdiction of the SEC. The groups had also asked for a stay on implementation of the rule lis pendens, citing that immediate compliance costs would put them at a disadvantage against global competitors.

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Justin Spickard, the API federal relations director issued a statement observing, “We’ve been working hard to increase transparency for a decade, but this rule could interfere with ongoing efforts by making U.S. firms less competitive against state-owned firms in China and Russia that have no interest in transparency.”

However, the SEC held that initial compliance costs cannot be construed as irreparable harm, and claims of competitive disadvantage are speculative in nature.

Under the new rules, oil, gas, and mining companies are required to include relevant information in their 2013 annual reports, which is due by February 2014, and the court overseeing the challenges is expected to give a decision by spring 2013. The SEC said the situation would provide challengers with the decision of the court at least one year prior to the first filings under the new rules falling due, and hence there was no reason for any immediate stay on implementation of the rules.