In previous posts, we discussed the potential impact of the SEC’s Resource Extraction Payment Disclosure (Rule 13q-1), including possible FCPA implications and the development of an appropriate compliance plan. After the election, much attention has been given by Congress to the so-called “midnight” agency rules that were adopted in the final months of the Obama Administration, including Rule 13q-1. And, Congress wasted no time disapproving Rule 13q-1.
Rule 13q-1 requires issuers involved in the commercial development of oil, natural gas and minerals to disclose payments they made to the U.S. federal government and to non-U.S. governments in connection with their resource extraction activities. It took effect on September 26, 2016.
On February 1, 2017, however, the U.S. House of Representatives passed, under the Congressional Review Act (CRA), a resolution that would disapprove Rule 13q-1 and its disclosure requirements. On February 3, 2017, the U.S. Senate approved the disapproval resolution passed by the House. It appears that the President is likely to sign the resolution in the coming days.
If this resolution of disapproval is signed by the President, then, under the CRA, Rule 13q-1 is effectively nullified. Moreover, Rule 13q-1 cannot be reissued in the same form barring authorization from Congress. 5 U.S.C. § 801(b)(2). Further, any new variation that is “substantially the same” as Rule 13q-1 is also prohibited. Id.
However, where, as here, Congress has rejected a rule that the SEC is required to issue, then the SEC will be given an automatic one year extension to attempt to fashion a different rule to satisfy that requirement. Id. at § 801.
While it is unclear what the SEC’s new rule will look like, it is important to note that other countries, such as the UK and Canada, as well as the EU, have enacted rules similar to Rule 13q-1, and covered companies are already required and have begun to make disclosures regarding covered payments.
We will continue to monitor these developments and update you accordingly.