Wednesday, July 10, 2013

In Wake of Ruling Vacating SEC Resource Extraction Rule, Senator Cardin Re-Affirms Belief in Public Disclosure

In the aftermath of a federal court ruling vacating the SEC’s Dodd-Frank resource extraction disclosure rule, Senator Ben Cardin (D-MD) has reaffirmed his belief in the public disclosure of annual reports of resource extraction payments that energy companies may have made to governments. Senator Cardin, along with former Senator Richard Lugar (R-IN), is a co-author of Section 1504 of the Dodd-Frank Act, codified as Section 13(q) of the Exchange Act, which directed the SEC to adopt regulations requiring resource extraction issuers engaged in the development of oil, natural gas, or minerals to disclose payments made to the federal government or foreign governments.

In a statement, Senator Cardin expressed disappointment with the ruling, which essentially instructed the SEC to redraft the regulation. He noted that Congress was clear both in the letter and spirit of Section 1504 that this information should be in the public domain. The senator lamented that the federal court ruling will delay implementation of vital transparency rules that would shine much needed light on information designed to protect investors and promote U.S. energy security.

A federal judge vacated and remanded the SEC regulation implementing the resource extraction payment disclosure section of the Dodd-Frank Act because the Commission misread the statute to mandate public disclosure and its decision to deny any exemption from the disclosure requirement was, given the limited explanation provided, arbitrary and capricious. The court found that Section 13(q) requires disclosure of annual reports but says nothing about whether the disclosure must be public or may be made to the Commission alone.