WASHINGTON, Jan 13(Reuters) - A key U.S. securities regulator is expressing tentative support for an alternative plan to force oil, gas and mining companies to reveal how much money they pay foreign governments for resource projects, after the courts struck down the original rule.
“If we did a rulemaking that made sense and didn’t impose too many burdens ... then maybe I can get on board with it,” Daniel Gallagher, a Republican member of the U.S. Securities and Exchange Commission, said in an interview with Reuters late last week.
Gallagher previously voted against a strict version of the SEC’s “resource extraction” rule, which forced energy companies to disclose detailed information about how much money they pay foreign governments.
The SEC was required to write the rule as part of the 2010 Dodd-Frank Wall Street reform law. Human rights groups championed the reform, saying it would help combat corruption and wasteful spending in resource-rich nations.
The rule was subsequently shot down by a federal court last year after the American Petroleum Institute (API) and other industry trade groups filed a legal challenge. They argued the SEC drafted the rule in a way that was too costly and would force companies to disclose secret, proprietary information that could harm their bottom line and violate state secrets laws in countries like China.
In his ruling, U.S. District Judge John Bates agreed with the API. He said the SEC erred in forcing companies to publicly disclose their payments and noted that the SEC had failed to exercise its discretion to grant reasonable, targeted exemptions.
Following the court victory, API in November submitted a new plan to the SEC suggesting how the agency should re-write the rule. The proposal calls for compiling and aggregating the data from all the companies at the project level.
This aggregated data would then be disclosed so that the investing public could see which activities are taking place in various geographic regions “without being so granular as to reveal proprietary commercial information,” API wrote.
In an interview with Reuters, Gallagher said API’s alternative plan seems promising. “I think what they have come back with makes sense and I think it is workable,” he said.
Whether it has a chance of becoming the new rule on the books remains to be seen.
Of the five current SEC commissioners, only two - Gallagher and Democrat Luis Aguilar - were serving at the time that the original resource extraction rule was finalized in 2012. That makes it hard to gauge how the other three commissioners might vote on a new rule.
Moreover, the SEC is facing pressure from human rights groups and other advocates to redraft the rule in a way that would still require granular disclosures. (Reporting by Sarah N. Lynch; Editing by Karey Van Hall and Leslie Adler)