On February 14, 2017, President Trump signed into law a Congressional joint resolution (H.J. Res. 41) that rescinds the SEC’s Dodd-Frank Act mandated rule (Rule 13q-1 under the Securities Exchange Act of 1934, as amended) that otherwise would have required oil, gas and mining companies filing reports with the SEC to disclose – beginning in 2019 – any payment of $100,000 or more made to U.S. federal or foreign governmental authorities in connection with the commercial development of oil, gas and/or minerals anywhere in the world.
SEC registrants engaging in oil, gas and/or mineral extraction activities outside the United States should keep in mind that, if they have securities listed in the European Union and/or Canada, they may be subject to non-U.S. governmental payments disclosure requirements. And NGOs, investors and other constituencies may continue to call for voluntary disclosure of such payments under guidelines established by the multinational Extractive Industries Transparency Initiative, or “EITI.”
As explained in our prior Alert, Congress acted pursuant to a seldom-invoked statute, the Congressional Review Act of 1996 or “CRA,” authorizing the use of certain “fast-track” legislative procedures to invalidate federal agency rules adopted in the last 60 legislative days of the previous session of Congress. Because the SEC adopted a revised version of Rule 13q-1 (and Form SD) in June 2016, after the first version was stricken by a federal district court, the rule was a logical target for Congressional repeal.
It remains to be seen whether House Republicans follow through on widely reported plans to introduce an amended version of the Financial CHOICE Act of 2016 which, in its previous incarnation, would have repealed (among other provisions of the Dodd-Frank Act) the existing statutory mandate for SEC implementation of the resource extraction governmental payments disclosure requirement still codified in Section 13(q) of the Exchange Act. Absent such repeal, Section 13(q) technically directs the SEC to go back to the rulemaking drawing board – however unlikely that prospect might seem in the near term given the change in SEC leadership. In this regard, the CRA bars the SEC from promulgating any new rule that is “substantially the same” as the now-defunct Rule 13q-1 without additional legislative authorization.
The related White House press release is available here.