Lara Covington is an attorney Washington, D.C., office
On January 25, House Majority Leader Kevin McCarthy (R-Calif.) revealed plans for the House to "ax" Rule 13q-1, the disclosure rule issued by the Securities and Exchange Commission (SEC) under the Obama Administration that requires oil, natural gas and mining companies to provide detailed reports of payments made to foreign and domestic governments for the commercial development of oil, natural gas or minerals. The SEC issued the rule to advance the U.S. foreign policy objective of combatting global corruption, promoting accountability and improving governance in resource-rich countries around the world. The rule is similar to initiatives adopted by the European Union, Canada and the Extractive Industries Transparency Initiative. It was published in the Federal Register on July 27, 2016, and went into effect on September 26, 2016.
Rep. McCarthy explained the House's plan in an opinion piece for the Wall Street Journal in which he outlined "structural and specific reforms" the House would take to "strip power from the bureaucracy." Specifically, Rep. McCarthy said Rule 13q-1 adds an "unreasonable compliance burden on American energy companies that isn't applied to their foreign competitors. This rule, which closely mimics a regulation already struck down by the courts, would put American businesses at a competitive disadvantage." As Rep. McCarthy noted, one of the chief concerns for many oil and gas companies is the public reporting of project-level data and the potential for competitive harm. Both the American Petroleum Institute and the U.S. Chamber of Commerce challenged the rule.
The House plans to repeal Rule 13q-1 using the Congressional Review Act (CRA), which requires federal government agencies to give Congress notice of new regulations and allows lawmakers to repeal those regulations within 60 days. (See 5 U.S.C. § 801.) The CRA's 60-day period begins on the later of either the date the rule was published in the Federal Register or the date Congress received notice of the rule from the relevant federal agency. For rules passed in the last 60 legislative days before Congress adjourns a session, as is the case with Rule 13q-1, the rule is treated as if it was published in the Federal Register on the 15th legislative day of the new session. For Rule 13q-1, therefore, the 60-day clock is due to start on Feb. 1, 2017. To overturn 13q-1, Congress must secure a majority vote in both houses for a joint resolution of disapproval; the repeal would then become effective with President Trump's signature. If successful, Rule 13q-1 in its current form would perish as the CRA prohibits rules from being reissued in substantially the same form. To date, Congress has used the CRA only once successfully, and that was in 2001.
Holland & Knight's Energy Team will continue to monitor developments relating to Rule 13q-1, as well as other news related to energy and natural resource regulation.
For more on Rule 13q-1, read our prior alerts on SEC Rules for Resource Extraction Issuers Could Lead to Increased FCPA Scrutiny, Disclosures and SEC Reporting Rule Poses FCPA Concerns for Oil and Natural Gas Companies.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
