By Sarah N. Lynch and Timothy Gardner
WASHINGTON, Jan 10 (Reuters) - The State Department on
Thursday waded into the debate over a controversial rule to
force energy companies to disclose payments made to foreign
governments, saying it "directly advances our foreign policy
interests" in curbing corruption.
The so-called "resource extraction" rule, which was adopted
by the U.S. Securities and Exchange Commission in August 2012,
stems from a requirement in the 2010 Dodd-Frank Wall Street
It would force certain companies to disclose any payments
made to further the exploration, extraction, processing and
export of oil, natural gas or minerals, as well as any payments
to acquire a license for those activities.
But the rule is tied up in a legal challenge with four
business groups, including the U.S. Chamber of Commerce and the
American Petroleum Institute, which sued to block it in October
saying the SEC failed to properly weigh its benefits and costs.
Thursday marked the first time the State Department's
sentiments about the SEC's rule have been publicized since the
lawsuit was filed.
Secretary of State Hillary Clinton "has called corruption a
national security issue, and has called increasing transparency
a key tool to combat this challenge," a State Department
The Dodd-Frank law and the SEC rule "provide transparency by
ensuring that a sufficiently detailed level of information
concerning payments from the extractive industry ... will soon
be made public and accessible to civil society and investors,"
the spokesman said.
The business groups' argument against the rule concerning
the lack of a proper cost-benefit analysis has been used often
in recent years to successfully combat SEC regulations in court.
The challenge is being headed by Gibson Dunn attorney Eugene
Scalia, the son of Supreme Court Justice Antonin Scalia.
He has a strong track record in knocking down other SEC
regulations, such the SEC's proxy access rule that would
empower shareholders to nominate directors to corporate boards.
The resource extraction rule has been one of the most
controversial provisions in Dodd-Frank. It is championed by
human-rights groups who say it will help reduce corruption.
The business groups argue it is too costly and would give
rivals sensitive business information.
The case is slated for oral argument sometime this year in
the U.S. Court of Appeals for the District of Columbia Circuit.
In a Jan. 2 letter, the SEC asked for the argument to be set
sometime after Feb. 20.
The spokesman would not comment on whether the department
plans to file a brief with the court in support of the SEC's
Federal lawmakers who backed the provision in Dodd-Frank,
however, have already signaled to the court they will file
briefs in support of the SEC.
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