US Judge dismisses oil payments disclosure rule

A federal judge in the United States has rejected a securities rule that asked oil and gas companies to disclose payments made to foreign companies from projects.

In a victory for oil companies, the judge said Congress did not need companies to make the information public.

The rule was made to implement the 2010 Dodd-Frank financial disclosure law in order to solve the ‘resource curse’ where oil and mineral revenue in resource-rich countries trickles to government officials and the upper class instead of the poor.

Under the Dodd-Frank law, oil and gas companies listed in the US every year have to reveal to the Securities and Exchange Commission royalties, fees and other payments made to the US and foreign governments for extracting oil, gas and minerals.

Companies have to reveal total money paid to a foreign government by payment category and project

Oil companies countered the rule forced them to reveal secret business information, giving competitive companies an upper hand, The Wall Street Journal reported.

Australian Mining reported on Publish What You Pay, where a coalition of organisations and individuals asked Australian mining giants to make mining payments to governments more transparent.

They asked Australian mining companies based here and listed on the ASX to report all payments to governments in the countries in which they operate.

Publish What You Pay Australia coordinator Claire Spoors is disappointed by today’s development but said it is just a ‘bump in the road’ in the fight for payment transparency in the oil and gas sector.

She added mining companies have not supported the verdict.

She told Australian Mining once the situation in the US is resolved, the companies cross listed there will also have to disclose payments.

U.S. District Judge John D. Bates handed a verdict on Tuesday saying the SEC did not need companies to reveal all its payments that is reported to the agency.

“The commission fundamentally miscalculated the scope of its discretion,” the judge wrote in his 30-page verdict.

The judge added the SEC could not substantiate its decision to refuse company demands for exemptions from revealing payments to countries – such as Angola, Cameroon, China and Qatar.

These countries forbid the revelation of payment information.

The SEC will modify the rule so that the Dodd-Frank law can be enforced.

Partner at law firm Mayer Brown LLP Marc Folladori said the judge’s decision gives companies breathing time to comply but does not rule out the law coming into effect.

"The big victory is where you can slow down the process and get the government grinding ever more slowly," said Mr. Folladori, who wasn't involved in the case.

The American Petroleum Institute, which represents America’s biggest oil companies, initiated the lawsuit.

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