SEC’s Resource Extraction Issuers Rule Struck Down

March 9, 2017

On February 14, 2017, President Trump signed a joint Congressional resolution, effectively repealing the United States Securities and Exchange Commission’s (the “SEC”) Resource Extraction Issuers Rule (the “Rule”).

The Rule, which was adopted by the SEC in June 2016, would have required “resource extraction issuers” (including foreign issuers and smaller reporting companies that file annual reports with the SEC) to annually disclose payments made to governments for the commercial development of oil, natural gas or minerals. The SEC adopted the Rule pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and compliance was set to begin for fiscal years ending on or after September 30, 2018. The Rule, which was a revision of the SEC’s original resource extraction issuers rule, contained exemptions and granted other exceptions on a case-by-case basis, and applied to payments that were “not de minimis,” or, exceeded $100,000.

In its press release rejecting the Rule, the White House characterized the Rule as “burdening American extraction companies,” pointing to the SEC’s upper bound cost estimate of $600 million. The rejection of the Rule comes after President Trump’s pledge to “dismantle” the Dodd-Frank Act. The joint resolution’s author cited the regulatory burden the Rule posed, “putting U.S. companies at a competitive disadvantage on the global stage.”

The SEC was given the authority to require specialized disclosures by resource extraction issuers regarding payments to foreign or domestic governments by Dodd-Frank Act Section 1504. Although the SEC will likely begin drafting a new rule, this may prove challenging as the Congressional Review Act, which made the rule eligible for a second review by Congress, prohibits a new rule that is “substantially the same form” as the previous rule.

If you have any questions or concerns about the SEC’s Resource Extraction Issuers Rule, please contact one of the attorneys listed below.