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CALIFORNIA CORPORATE & SECURITIES LAW

There’s Still Time For Congress To Void The SEC’s Resource Extraction Rule

Last June, the Securities and Exchange Commission belatedly adopted a rule requiring disclosure of resource extraction payments by issuers.  As I wrote at the time:

Congress had ordered the SEC to adopt a rule by April 17, 2011.  After belatedly adopting a rule, the U.S. District Court vacated the rule and sent it back to the SEC.  American Petroleum Institute v. SEC, 953 F. Supp. 2d 5 (D. D.C. 2013).  Oxfam America then successfully sued the SEC to force it to do what Congress had long ago ordered it to do. Oxfam Am., Inc. v. United States SEC, 2015 U.S. Dist. LEXIS 116982 (D. Mass. Sept. 2, 2015).  The SEC then promised to have a vote on a proposed rule by June 27, 2016.  Whether from petulance, chagrin or expediency, the SEC adopted the rule on the very last day without holding a public meeting.  For the record, the SEC missed Congress’ deadline by five years, two months and ten days.

Although the rule took effect on September 26, 2016, resource extraction issuers must comply with the final rule and form for fiscal years ending on or after September 30, 2018.  However, Congress and the President could still void the rule pursuant to the Congressional Review Act.  When I first floated this possibility four years ago, it seemed extremely improbable given the then existing political realities.  The recent election has changed those realities and perhaps the likelihood of Congressional and Presidential action.

Under the CRA, Congress and the President can void a rule adopted by a federal agency. For this to happen, both houses must pass a resolution disapproving the rule and either 
the 
President
 signs the resolution or
 
both
 houses 
override
 a
 
veto.  If this happens, the agency may not republish the rule in the same form without Congressional approval.  I understand that this has happened only once during President George W. Bush’s administration when he signed PL 107-5 which disapproved of ergonomic rules adopted by the Department of Labor.

The tricky part is determining the timeline for Congress to act.  According to an unofficial estimate that I obtained from the Congressional Research Service, it would be possible to introduce and consider a joint resolution of disapproval anytime during the remainder of this session of the 114th Congress.  Importantly, it may even be possible for the next Congress to disapprove the rule.  According to the CRS:

 [B]ecause this rule is likely to have been submitted within 60 legislative or session days of sine die adjournment, it seems likely that the rules will be subject to additional periods of CRA review next year.  If so, this additional review period, which begins on the 15th day of Senate session and the 15th  House legislative day in in 2017, would last for approximately 60 days of Senate session thereafter.  So generally speaking, if the rule does qualify for the additional review periods, it seems likely that the Senate would be able to consider a disapproval resolution aimed at this rule under the special CRA “fast track” procedures until sometime around late April or early May, 2017.

The CRS emphasized that these are estimates and the Senate and House parliamentarians are the final arbiters of these questions.

 

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