SEC responds to challenge of oil, gas foreign disclosure rule

The US Securities and Exchange Commission forcefully responded to the American Petroleum Institute, US Chamber of Commerce, and other groups’ legal challenge of its disclosure requirement for foreign operations of US oil and gas companies.

The rule, which US companies say would give their foreign competitors an unfair advantage, reflects congressional intent in drafting the Dodd-Frank Wall Street Reform and Consumer Protection Act, SEC said in a response it filed Jan. 2 with the US Appeals Court for the District of Columbia.

“Contrary to petitioners’ argument that the commission acted arbitrarily and capriciously by promulgating a rule without first determining whether Congress’s sought-after transparency and accountability benefits would in fact materialize, the commission rightly declined to second-guess the wisdom of Congress’s policy determination,” it said.

“Moreover, in conducting its economic analysis, the commission—which was generally dependent on industry commentators for empirical data—acted appropriately when it used the little data that they provided to quantitatively assess (and generally confirm) their claims about the potential costs of Rule 13q-1,” the response continued.

SEC said it properly rejected several proposals that it felt would have weakened the regulatory requirement, such as one that would have allowed information to be submitted confidentially and the aggregated on a per country basis.

It also said that the petitioners—the American Petroleum Institute, Independent Petroleum Association of America, US Chamber of Commerce, and National Foreign Trade Council—mounted what the SEC called “an 11th hour shift in strategy” by arguing for the first time that the rule and the statute mandating it violate the US Constitution’s First Amendment.

Asserting that the disclosure requirement involves purely factual, nonideological information that does not implicate any significant First Amendment interests, SEC said, “Tellingly, petitioners ignore both that regulated entities are subject to innumerable comparable federal, state, and local public reporting requirements, and that their novel theory could have wide-ranging and potentially devastating implications for these important government programs.”

Contact Nick Snow at

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