SEC approves drilling, mining disclosure rules

The Securities and Exchange Commission this afternoon voted to approve rules requiring publicly traded companies to disclose payments to the U.S. government and foreign counterparts.

The rules, mandated by the 2010 Dodd-Frank financial reform law, passed by a vote of 2 to 1. SEC Chairwoman Mary Schapiro (D) and Commissioner Troy Paredes (R) recused themselves from the vote and debate.

Soon roughly 11,000 companies like Exxon Mobil Corp. and Newmont Mining Corp. will have to disclose project-specific payments including taxes, royalties and bonuses. The goal is to reduce corruption and inform investors, particularly in resource-rich but cash-poor countries.

Commissioner Elisse Walter said the rules, voted on after "extensive public input," would encourage an "improved investment climate that transparency promotes."

Business groups such as the National Mining Association and the American Petroleum Institute have been lobbying hard against strong disclosure requirements. They would rather release payment information by country rather than specific projects.

API Chief Economist John Felmy said the disclosure requirements would "harm U.S. competitiveness and jobs" by revealing "commercially sensitive, detailed payment information about every foreign and U.S. project."

Republican SEC Commissioner Daniel Gallagher agreed and voted no. "Let's be clear, we are talking about real competition," he said in remarks today.

"I am talking about national oil companies in Russia, China, Iran, Venezuela and others," Gallagher said. "They will reap competitive advantage through today's rules."

Business groups wanted the SEC to follow the lead of the global Extractive Industries Transparency Initiative, which the United States joined last year.

Supportive SEC commissioners and staff said they crafted the rule to conform with EITI but made it stricter when appropriate. They said the Dodd-Frank act "clearly requires project-level reporting." And while recognizing the competitive and cost strains, Walter said "any such burden that may result is necessary" to comply with the law.

Groups that have been pressing the SEC to release the long-delayed rules are holding judgment. "While we welcome the SEC's rules that will finally bring section 1504 into effect, the devil is in the details," Oxfam America senior policy manager Ian Gary said in a statement, referring to the section of the Dodd-Frank law calling for the disclosure rules.

"We're in the process of thoroughly analyzing the rules to determine whether they adhere to the statutory requirements and congressional intent," he said.

But Gallagher said that Congress had saddled the SEC with rulemaking that was not part of its core mission of protecting investors. "The SEC is not the right type of tool for this social exercise," he said.

He said the same goes for another rule that commissioners approved today on a party-line 3-2 vote that requires companies to disclose their use of certain resources from the Democratic Republic of Congo. The purpose is to crack down on so-called conflict minerals that help finance wars in central Africa.

But critics, including some human rights advocates, say the rules, also promulgated as part of the Dodd-Frank law, could hurt people who rely on mining by discouraging companies from buying resources like gold and tin from the region. The SEC puts industry compliance costs in the billions of dollars.