President Trump Signs Repeal of SEC's Extraction Payment Disclosure Rule
On February 14 the President signed legislation to annul the SEC’s Extraction Payment Disclosure Rule. The rule would have required public oil and gas companies to disclose in annual reports for fiscal years ending on or after September 30, 2018 payments totaling $100,000 or more in any year made to the U.S. or any foreign government connected to the development of oil, natural gas and minerals. The signed legislation invalidates the rule under the Congressional Review Act, which allows Congress to invalidate recently adopted regulations through a simple majority vote.
Consequently, the SEC is prohibited from implementing the rule and from adopting a substantially similar one without authorization from Congress. However, the SEC adopted the Extraction Payment Disclosure Rule as mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act. When an administrative rule mandated by statute is invalidated under the Congressional Review Act, the adopting agency is provided one year from the date of the rule’s repeal to adopt and implement a new rule.
It remains to be seen how the SEC will attempt to reconcile its statutory mandate by February, 2018 with the prohibition from adopting a substantially similar rule. In the meantime, public oil and gas companies should continue to gather information relating to extraction payments in anticipation of a new SEC rule. Also, public companies will still be subject to the anti-fraud and accounting provisions of the Foreign Corrupt Practices Act and related disclosure obligations (as well as the anti-corruption laws that apply in the countries where they have a presence).