Joe Mont
The U.S. Chamber of Commerce has joined with associations representing the oil industry over the Security and Exchange Commission's to legally challenge a regulatory mandate to disclose payments made to governments for extraction rights. As the Chamber did in scoring a legal victory against a “proxy access” rule last July, concerns over an inadequate cost-benefit analysis have been made the cornerstone of their challenge.
In August, the SEC voted to implement a rule that requires registered oil, gas and mining companies to disclose any payment, or series of related payments, totaling $100,000 or more that are made during the course of a fiscal year to the U.S. or foreign governments in exchange for extracting resources. The rulemaking was required by the Dodd-Frank Act.
On Thursday morning, the Chamber of Commerce, which represents 3 million businesses, the American Petroleum Institute, the Independent Petroleum Association of America, and the National Foreign Trade Council, announced they had filed a complaint with the U.S. District Court for the District of Columbia and a petition for review with the U.S. Court of Appeals for the D.C. Circuit.
Those filings, made on Oct. 10, charge that the new rule violates the First Amendment, the Administrative Procedure Act (on the grounds that it is “arbitrary and capricious”), and the Exchange Act of 1934. The lawsuits make the case that the SEC failed to conduct an adequate cost-benefit analysis, as required by law, and that the SEC “grossly misinterpreted its statutory mandate to make a compilation of information available to the public. They additionally claim the regulation is “incompatible with the First Amendment.”
The SEC's industry-wide cost of compliance was estimated at between $44 million and $1 billion; ongoing costs were pegged at between $200 million to $400 million a year. The plaintiffs say that the rule could actually cost billions of dollars in additional costs “through the loss of trade secrets and business opportunities.” The suit adds that: “While the Commission did not quantify how many ‘billions of dollars' more its rule might cost U.S. businesses, it acknowledged that American companies may be forced to ‘sell their assets in the host countries at fire sale prices,' or else keep existing assets idle and ‘not use them in other projects.'”
Bolstering its claim that an appropriate cost-benefit analysis was not conducted, the lawsuit references the dissent of Commissioner Daniel Gallagher and his critique of that review.
“We are not at liberty to ignore selectively the longstanding congressional mandate to consider the impact our rulemaking is likely to have on competition,” he said at the time. “We are not entitled merely to assume that the rules we adopt will ‘promote efficiency, competition, and capital formation.' Nor, for some rulemaking efforts, are we free to assume, first, the benefits themselves, then that they outweigh any costs entailed by the actions we may take. There is no legal basis for doing that. Congress has never said we should. The courts have been emphatic that we should not.”
“American oil and natural gas companies must compete against foreign, state owned oil companies for access to resources around the world,” Karen Harbert, president and CEO of the U.S. Chamber's Institute for 21st Century Energy, said in a statement. “The SEC's ‘extraction rule' will require them to turn over their playbooks for how they bid and compete. Their competitors are under no such obligation to do so.”