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API files court challenge against costly, anti-competitive SEC rule

WASHINGTON, October 10, 2012 – The American Petroleum Institute (API), along with a coalition of concerned business groups, sued the U.S. Securities and Exchange Commission (SEC) in federal court to challenge the SEC’s implementation of Section 1504 of the Dodd-Frank Act because the SEC disregarded its clear legal obligations to limit the costs and anti-competitive harm of the rule.

“The oil and natural gas industry strongly supports payment transparency,” said API President and CEO Jack Gerard. “We’ve been working hard to increase transparency for a decade, but this rule could interfere with ongoing efforts by making U.S. firms less competitive against state owned firms in China and Russia that have no interest in transparency.”

Gerard said the industry is working with civil society groups and the Obama administration to implement the Extractive Industries Transparency Initiative (EITI), a program that would more effectively increase transparency without harming competitiveness. The initiative has already been established in 36 countries and continues to grow.

“The rule as written would impose enormous costs on U.S. firms and put them at a competitive disadvantage against government-owned oil giants not subject to the rule,” Gerard said. Not only will the rule hurt the millions of Americans who own shares in oil and natural gas companies, it will also cost jobs and damage America’s energy security by making it more difficult for U.S. firms to gain access to resources abroad. ”

The SEC rule requires publicly traded energy firms to release commercially sensitive, detailed payment information about foreign and U.S. projects, according to API. Under this requirement, firms would have to reveal extensive data about how much they pay in licenses, taxes, royalties and other fees – giving their competitors an upper hand when bidding for energy contracts. By the SEC’s own estimate, developing and operating the systems to gather, validate and report this extraordinarily detailed information will cost industry $1 billion up front and hundreds of millions of dollars more in the future.

“With reasonable changes, the SEC could have achieved the goal of increased transparency while also remaining faithful to its core mission to protect American investors,” Gerard said. “The rule should allow our companies to report their payments confidentially to the SEC and allow the agency to aggregate that information and publicly report payments by country.”

Gerard also said the rule should contain a reporting exception for payments to governments that prohibit disclosure.

Members of the coalition also include the U.S. Chamber of Commerce, the National Foreign Trade Council (NFTC), and the Independent Petroleum Association of America (IPAA).

API is a national trade association that represents all segments of America’s technology-driven oil and natural gas industry. Its more than 500 members – including large integrated companies, exploration and production, refining, marketing, pipeline, and marine businesses, and service and supply firms – provide most of the nation’s energy. The industry also supports 9.2 million U.S. jobs and 7.7 percent of the U.S. economy, delivers $86 million a day in revenue to our government, and, since 2000, has invested over $2 trillion in U.S. capital projects to advance all forms of energy, including alternatives.
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