WASHINGTON (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 reform law.
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 spokesman said.
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 January 2 letter, the SEC asked for the argument to be set sometime after February 20.
The spokesman would not comment on whether the department plans to file a brief with the court in support of the SEC’s rule.
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.
Reporting By Sarah N. Lynch and Timothy Gardner; Editing by Leslie Adler and Andre Grenon