SEC Rulemaking for Resource Extraction, Other Requirements Pushed Back to 2016

Bloomberg BNA’s Corporate Law & Accountability Report is available on the Corporate Law Resource Center. This news service keeps corporate practitioners informed of legal developments of...

By Yin Wilczek

March 30 — The Securities and Exchange Commission March 27 said it may not repropose a resource extraction rule until spring 2016.

In a filing to the U.S. District Court for the District of Massachusetts, the agency said that after a “recent assessment of its overall regulatory agenda,” it “may not take further action until Spring 2016 on this rule, as well as several other rules with statutory deadlines previously slated to proceed by this Fall.”

The commission added that the “revised estimates are necessitated by, and are a reflection of, the Commission's myriad obligations.”

Summary Judgment Motion 

The SEC issued the filing in a lawsuit by Oxfam America Inc. to compel the resource extraction rulemaking. The agency has asked the court to deny Oxfam's request for summary judgment and to grant its summary judgment motion.

SEC spokesman John Nester declined to comment beyond the filing, including what other rulemakings may be delayed.

Under Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC must require the resource extraction industry to disclose payments made to governments to further the commercial development of oil, natural gas and minerals.

The U.S. District Court for the District of Columbia invalidated an SEC rule to implement Section 1504 in July 2013.

According to its latest regulatory flexibility agenda, the SEC had intended to propose a new resource extraction rule by October 2015. Other rulemakings slated to be advanced by that time include those addressing target date funds, the use of derivatives by investment companies and credit rating agencies' conflicts of interest.

In March 24 testimony before the House Financial Services Committee, SEC Chairman Mary Jo White suggested that high priority items this year include new rules for asset managers and crowdfunding.

Oxfam's lawsuit—filed in September 2014—asked the court to direct the SEC to issue a resource extraction proposal by Aug. 1 and a final rule by Nov. 1.

Pushed Back ‘Yet Again.'

Ian Gary, Oxfam's senior policy manager for extractive industries, March 30 told Bloomberg BNA that Oxfam was “surprised” that the SEC would push back its timeline for resource extraction “yet again” in the middle of litigation “where the main issue is the SEC's delay and refusal to commit to anything but the vaguest timelines for action.”

Gary noted that even industry groups such as the American Petroleum Institute (API)—whose lawsuit resulted in the invalidation of the SEC's initial resource extraction rule—have called for timely rulemaking given that payment disclosure regulations already are law in the U.K., European Union and Norway.

“It’s been almost five years since Dodd-Frank was passed, and the SEC can justify a revised final rule that aligns with the global standard: project-level, country-by-country, with no exemptions,” Gary said. “We still believe there's no excuse for additional delay on this rule and hope the SEC will act promptly, with or without court intervention.”

This is the second time that Oxfam has sued over the rulemaking. Its prior lawsuit was filed in May 2012.

Proposed Schedule `Unrealistic.'

Meanwhile, the SEC said in its filing that Oxfam's proposed timeline for the rulemaking is “unrealistic and unreasonable.”

Because the SEC's responsibilities are “not static, the sort of rigid schedule that Oxfam demands is neither realistic nor consistent with the Commission's duty to protect investors and the markets,” the agency said.

The commission also suggested that its reproposal may not necessarily resemble the invalidated rule.

The “API decision, by making the level of public disclosure discretionary, may lead the Commission to propose a different approach to disclosure, with differing economic and First Amendment implications,” it said. “Indeed, the Commission has already received and will likely continue to receive a wealth of new substantive public comments concerning possible revisions to the vacated rule.”

To contact the reporter on this story: Yin Wilczek in Washington at ywilczek@bna.com

To contact the editor responsible for this story: Ryan Tuck at rtuck@bna.com

The filing is available at http://www.bloomberglaw.com/public/document/Oxfam_America_Inc_v_Securities__Exchange_Commission_Docket_No_114/3.

The SEC's latest regulatory flexibility agenda is available at http://www.reginfo.gov/public/do/eAgendaMain?operation=OPERATION_GET_AGENCY_RULE_LIST&currentPub=true&agencyCode=&showStage=active&agencyCd=3235.