Last week President Trump approved a joint resolution of the House of Representatives and Senate to repeal the resource extraction issuer payment disclosure rule of the U.S. Securities and Exchange Commission (“SEC”).1 The nullification occurred pursuant to the 1996 Congressional Review Act, which allows Congress to invalidate certain recently issued federal agency rules. A rule invalidated under the Congressional Review Act is treated as not having taken effect and congressional nullification of a regulation is not subject to judicial review.
The resource extraction issuer payment disclosure rule was adopted by the SEC on June 27, 2016 and was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). Beginning in fiscal years ending on or after September 30, 2018, the rule would have required an issuer to disclose payments made to the U.S. federal government or a foreign government if the issuer was a reporting company under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that engaged in the commercial development of oil, natural gas, or minerals.
The resource extraction issuer payment disclosure rule adopted in June 2016 was the second attempt by the SEC to implement the rule as mandated by Dodd-Frank. The original version of the rule was adopted in August 2012, but was vacated in July 2013 by the U.S. District Court for the District of Columbia after an industry challenge.
While a requirement for the SEC to issue a rule on resource extraction disclosure remains on the books under Section 13(q) of the Exchange Act, the Congressional Review Act forbids any new rulemaking that is “substantially the same” as the voided rule absent additional statutory authorization. Therefore, we believe it is unlikely that the SEC will seek to adopt a revised resource extraction issuer payment disclosure rule as required under Dodd-Frank until further statutory authorization is provided. The elimination of the resource extraction issuer payment disclosure rule marks the first action by Congress to roll back regulations implementing parts of Dodd-Frank. While it is difficult to predict what the regulatory landscape will look like going forward, we expect that there will be additional changes to the rules that were promulgated pursuant to Dodd-Frank.