On September 18th, Oxfam America, Inc. sued the federal Securities and Exchange Commission (SEC) for the second time in three years to compel the SEC to issue a final rule under the Dodd-Frank Wall Street Reform and Consumer Protection Act on oil and gas company disclosures of certain government payments. Although Dodd-Frank required the rule to be implemented by April 2011, the SEC does not expect to issue a proposed rule until March 2015.
Under Section 1504 of Dodd-Frank, the SEC is required to issue a rule directing publicly traded oil, gas and mining companies to disclose in their annual reports to the SEC payments to the federal government or any foreign government for the purpose of commercial development of oil, natural gas or minerals. More than a year after the April 2011 statutory deadline passed for the SEC’s issuance of the rule, Oxfam America, a nonprofit organization focusing on poverty and related issues, sued the SEC to compel the issuance of a final rule. Shortly thereafter the SEC issued a rule that required “resource extraction issuers” to disclose on publicly filed forms their payments of $100,000 or more made to governments to further the commercial development of oil, natural gas or minerals. The American Petroleum Institute (API) and others then sued the SEC, ultimately leading to the rule being overturned by a federal district court in July 2013 on grounds that the rule required public (rather than confidential) disclosure of the payment information and lacked exemptions for countries that prohibit payment disclosure.
After the rule was overturned, members of Congress, oil and gas companies with an international presence (including Exxon Mobil) and large investors (including Allianz Global Investors) have asked the SEC to issue a rule by the end of this year. Oxfam America’s lawsuit comes after it had asked the SEC to respond by August 1st to its request for prompt action in issuing a rule. Questions have been raised whether Oxfam America has standing to pursue this new lawsuit. Nonetheless, these calls for urgency underscore not only both concern for how countries use oil and gas payments and investors’ desire for information, but also perhaps more significantly a desire for consistency in similar rules and regulations around the globe. With several European countries in the process of implementing a European Union law similar to the SEC’s overturned rule, companies that previously opposed that rule are now advocating for global coordination to ensure consistency and reduce the burden on company disclosure and also to ensure disclosure by companies that do not do business in Europe and thus would not be subject to this new European Union law.