On September 2, 2015, a federal judge ordered the SEC to file, by October 2, 2015, an “expedited schedule” for issuing the final resource extraction payment rule (which was required by Section 1504 of Dodd-Frank).
This order is added to an already complicated setting of: increased regulation from the US, states and other countries requiring diligence and disclosure on specific issues involving sourcing and supply chain, reluctance on the part of the SEC to spend its resources issuing and implementing regulations in pursuit of social goals, increased activism (and supply chain disclosure litigation), and the court decision on the First Amendment challenge to the conflict minerals rule (a companion rule to the resource extraction payment rule).
Of course, every step of the resource extraction payment rule case is being actively watched by mining and resource companies. But, just in case you need the basics:
- The Dodd-Frank Act becomes law in July 2010. Section 1504 of Dodd-Frank requires the SEC to issue rules requiring resource extraction companies to make annual disclosures to the SEC about payments made to foreign governments or the US government for the commercial development of oil, natural gas, or minerals.
- On August 22, 2012, the SEC issues the rule (Rule 13q-1). The resource extraction payment rule is issued on the same day as the SEC’s conflict minerals rule. In connection with those rules, the SEC creates the Form SD which is intended to house the extraction payments disclosure and the conflict minerals rule disclosure. The form is modified in January 2015 to remove the exhibit that would have held the resource extraction payment disclosure.
- On October 10, 2012, the American Petroleum Institute and others file a lawsuit in U.S. District Court challenging the resource extraction payment rule and asking for it to be vacated.
- On July 2, 2013, the district court vacates the rule and remands it to the SEC to “reformulate” it and provide an adequate justification for choices it makes in developing the rule. The district court gives 2 reasons for vacating the rule: (1) the SEC was in error when it said that the section of Dodd-Frank required full public disclosure of the annual reports submitted to the SEC, and (2) the SEC’s unwillingness to give an exemption to the requirement where disclosure about such payments was prohibited by the foreign government was arbitrary and capricious.
- Time passes. NGO’s and others object to the fact that no new rule is yet issued. Industry weighs in as well, voicing its objection to the rule and advocating that the SEC take into account other industry-related actions that have taken place since the first final rule was issued.
- On September 18, 2014, Oxfam files an action to compel the SEC to promulgate a final resource extraction payments rule. Specifically, Oxfam asks the court to impose a schedule on the SEC to issue the proposed rule by August 1, 2015, allow a 45-day notice period for comments, and require a final rule by November 1, 2015.
- Initially, the SEC announces a projected date for the revised proposed rule of March 2015 but that date is pushed back. As of early September 2015, the SEC indicates that it plans to “consider a revised proposed rule by October 2015” but does not announce a projected timeline for the issuance of the revised proposed rule.
- In the SEC’s response to Oxfam, it argues that its response and timeliness regarding the issuing of the revised rule are reasonable under the circumstances, citing an “unprecedented volume of rulemaking” and competing priorities with other rulemakings that are required by Congress. And, interestingly, the SEC takes the opportunity to underscore that the SEC’s duty is to protect investors and the markets – again expressing (even if indirectly) that the SEC Chair Mary Jo White is disinclined to spend SEC time and resources on rules that promote social policy rather than on those that protect investors’ investment decisions.
Interestingly, the original district court decision that vacated the rule in 2013 did not reach any conclusions about whether the SEC’s economic analysis of the impact of the rule was sound or whether the requirements of the rule violate companies’ First Amendment rights (an issue being thoroughly litigated now through the conflict minerals rule challenge and the meat “country of origin” labeling case). Those two issues could be raised in later proceedings on the second “final” rule after it is ultimately issued by the SEC.
When the SEC’s expedited schedule is filed, we will post it here.