Monday, October 15, 2012

Senate Authors of Dodd-Frank Resource Extraction Provision Respond to Federal Court Challenge to SEC Implementing Regulations

Senators Ben Cardin (D-MD) and Richard Lugar (R-IN), co-authors of the Dodd-Frank resource extraction disclosure provision, said that an industry federal court challenge to SEC regulations implementing Section 1504 was expected and frivolous. The SEC took two years to craft the implementing regulations, said the Senators, and the final regulations reflect abundant input from the industry. Section 1504 and the SEC regulations bring more information to the global commodities markets, noted the Senators, which would benefit from price stability. It will also empower citizens to hold their governments in the management of valuable oil, gas and mineral resources and revenues.

Increased transparency will not put companies that comply at a competitive disadvantage, said Senator Cardin, but will reduce the risks for U.S. investors and it will allow citizens in resource-rich countries to hold their leaders accountable. Congress and the SEC carefully crafted a reasonable and very manageable reporting requirement that will bring greater transparency to oil, gas and mineral sector, he added. The U.S. economy and US values substantially benefit when US companies are working in oil, gas, and mineral rich states, noted Sen. Lugar, but the benefits will not be realized if investments serve to entrench authoritarianism, corruption and instability. 

A consortium of industry groups led by the US Chamber of Commerce has asked a federal court to strike down the recently-adopted SEC regulation implementing Section 1504 of the Dodd-Frank Act by requiring resource extraction companies engaged in the development of oil and natural gas to disclose payments made to the federal government or foreign governments. The groups have asked the DC Circuit Court of Appeals to void and vacate the regulation as arbitrary and capricious and not on accordance with the Administrative Procedure Act or the Securities and Exchange Act. They also ask for a permanent injunction prohibiting the SEC from enforcing the rule. Out of an abundance of caution, the industry groups have also filed a complain setting forth their claims in the US District Court for the District of Columbia. American Petroleum Institute and US Chamber of Commerce, et al. v. CFTC, Civil Action No. 12-1668.

The industry groups allege that the SEC selectively ignored its statutory duty to conduct a meaningful cost-benefit analysis and misinterpreted its duty to make a compilation of information available to the public. They also maintain that the regulation is incompatible with the First Amendment. 

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