AXPC Calls on SEC to Reconsider Climate Proposal that Discourages Investment in American Energy

WASHINGTON –  In comments to the Securities and Exchange Commission (SEC) filed today, the American Exploration and Production Council (AXPC) explained ways the SEC should reconsider its burdensome climate disclosure proposal that, if implemented without needed reforms, would risk unintended consequences, increased confusion for investors, and discourage financial institutions and investors from investing in American energy companies.

“At a time of record high inflation and increasing energy costs, the Biden Administration should be looking for ways to encourage capital investments in American energy production – not proposing overly burdensome regulations that will create confusion for investors and discourage investments in American energy. The Biden Administration should direct the SEC to do away with its unnecessarily complex and largely unworkable proposal and instead ensure that any climate-related financial reporting for the oil and gas industry is practically feasible, only includes material disclosures, and avoids confusing and overwhelming investors and disrupting capital markets,” said AXPC CEO Anne Bradbury.

AXPC’s comments recognize the importance of SEC’s mission to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. The comments explain that AXPC is concerned that the proposed rule does not strike the right balance, including some unworkable provisions that will overwhelm investors with information that is not decision-useful. In response, AXPC’s comments provide constructive feedback to the proposed rule, focusing on key themes around feasibility, reasonable comparability, appropriate timelines, as well as considerations regarding cost and impacts to the industry. The main priorities of the comments are:

    • SEC should not create new financial accounting disclosures covering climate change: AXPC stated that the proposed requirements related to Regulation S-X go far beyond what is warranted to respond to calls for climate-related disclosures that would inform a reasonable investor. Rather, the proposed rule would transform SEC reporting from filings that center on financial and operational performance of companies into filings that, in notable respects, blur the lines between environmental reporting and financial reporting and do not align with SEC’s directed mission and authority to maintain fair markets and facilitate capital formation.
    • SEC should view materiality with respect to climate in the same manner that it has traditionally done in other areas, and as the concept is generally understood: By calling for the disclosure of granular climate-related information that is subjective to categorize, difficult to quantify, and is often immaterial under the traditional standard of materiality, as it has been interpreted by the US Supreme Court, the SEC proposal is deviating from the longstanding concept of materiality that has, for many years, advanced interests of investors, encouraged capital formation, and helped ensure the integrity of capital markets.
    • SEC should not require the reporting of Scope 3 emissions: SEC should recognize the inherent difficulties, overlaps, and inconsistencies with reporting of comparable Scope 3 emissions and forgo any requirement Scope 3 emissions reporting. Scope 3 emissions estimates are often calculated based on inconsistent assumptions, are largely beyond a company’s control, and result in large-scale double and triple counting of emissions across product and service value chains. Mandated reporting of Scope 3 emission information is likely to be unhelpful at best and potentially misleading to the reasonable investor.
    • SEC should not impose an attestation requirement; attestation of climate information should be voluntary (or only required if material): The proposed attestation requirements pose significant implementation and workability challenges. Although AXPC understands the value of third-party verification, the timeline of the proposed rule is impractical for compliance by registrants. Requiring third-party attestors in the proposed timeframe is truly unworkable due to a lack of expertise and/or adequate labor pool to perform the service under the timeframe proposed.
    • SEC’s proposal needs to be workable along with other federal emissions reporting requirements: The US Environmental Protection Agency (EPA) is the recognized federal agency expert regarding emissions reporting and regulation and their Greenhouse Gas Reporting Program (GHGRP) is the most consistent, comparable emission dataset available today. EPA’s authority over air quality has resulted in a much more appropriate program for any emissions reporting requirements. SEC should not direct registrants to use a separate reporting methodology that may result in conflicting emissions reporting, confusion, and less comparability of disclosures for investors.

The SEC voted to propose climate disclosure rules that, if finalized, would require publicly listed companies to disclose extensive and often subjective information related to climate risk and assessments including how extreme weather events and the transition to a lower-carbon economy might affect their business in existing SEC filing forms.  In the proposal the SEC deviates from its traditional stance of allowing companies to determine materiality based on industry and individual company risk instead dictating materiality on a specific topic. And, the proposal also requires companies to provide emission data within SEC financial filings and more details about how a company would achieve emissions reductions goals and will result in companies needing to overhaul enterprise risk management and financial accounting systems in order to comply with the proposed disclosure requirements. 

About the American Exploration and Production Council:
AXPC is a national trade association representing the largest independent oil and natural gas exploration and production companies in the United States. We lead the world in the cleanest and safest onshore production of oil and gas, while supporting millions of Americans in high-paying jobs and investing a wealth of resources in our communities. Learn more at


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