JOHN D. BATES, United States District Judge
Acting pursuant to a provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act, § 1504, Pub. L. No. 111-203, 124 Stat. 1376, 2220 (2010), the Securities and Exchange Commission promulgated a Rule requiring certain companies to disclose payments made to foreign governments in connection with the commercial development of oil, natural gas, or minerals. Plaintiffs—associations of oil, natural gas, and mining companies whose members are subject to the Rule—raise a host of challenges to the Rule and contest both the Rule and the underlying statute on First Amendment grounds. After a sojourn to the D.C. Circuit, which held that jurisdiction over plaintiffs' challenge lay in this Court, the parties have filed cross-motions for summary judgment. For the reasons set forth below, the Court will grant plaintiffs' motion, vacate the Rule, and remand to the Commission for further proceedings.
The Dodd-Frank Act adds section 13(q), codified at 15 U.S.C. § 78m(q), to the Securities Exchange Act of 1934. Section 13(q) addresses a phenomenon known as the "resource curse, " whereby "oil, gas reserves, and minerals . . . can be a bane, not a blessing, for poor countries, leading to corruption, wasteful spending, military adventurism, and instability" when "oil money intended for a nation's poor ends up lining the pockets of the rich or is squandered on showcase projects instead of productive investments." 156 Cong. Rec. S3816 (May 17, 2010) (statement of Sen. Lugar); see also Am. Petroleum Inst, v. SEC. 714 F.3d 1329, 1331 (D.C. Cir. 2013). As a result, many of the world's "most wealthy mineral countries are the poorest countries" in terms of their citizens' quality of life. 156 Cong. Rec. S5872 (July 15, 2010) (statement of Sen. Cardin).
Before section 13(q) was enacted, key players in extractive industries developed the Extractive Industries Transparency Initiative ("EITI") to help address this concern through increased transparency. A voluntary international initiative, the EITI provides information about payments that extractive industry companies make to governments. See Joint Appendix [Docket Entry 30] at 30 (May 10, 2013) ("J.A."). Under the EITI, each country works with civil and industry groups to establish a protocol for reporting payments. Companies and host governments submit payment information confidentially to an independent reconciler who compiles the information and publishes a publicly accessible report, which can have varying levels of specificity. See Id . at 60-62; see also SEC Br. [Docket Entry 31] at 8-9 (May 10, 2013). The EITI seeks to achieve greater transparency, while "respecting] . . . existing contracts and laws" and "balancing] the presumption of disclosure . . . with the concern of companies regarding commercial confidentiality." J.A. 62.
Unsatisfied with the EITI regime alone, Congress passed section 13(q), which directs the Commission to "issue final rules that require each resource extraction issuer"—a company listed on a U.S. stock exchange that "engages in the commercial development of oil, natural gas, or minerals, " 15 U.S.C. § 78m(q)(1)(D)—"to include in an annual report of the resource extraction issuer information relating to any payment made ... to a foreign government or the [U.S.] Government for the purpose of the commercial development of oil, natural gas, or minerals." 15 U.S.C. § 78m(q)(2)(A). In this report, the issuers must disclose the type and total amount of payments made for each project and to each government. Id. The information must "be submitted in an interactive data format, " which includes "electronic tags" identifying certain information such as the total amount of payments, the currency used, and the project to which the payments relate. 15 U.S.C. § 78m(q)(2)(C), (D). In a separate subsection entitled "Public availability of information, " section 13(q) directs that, "[t]o the extent practicable, the Commission shall make available online, to the public, a compilation of the information required to be submitted [in the annual report]." 15 U.S.C. § 78m(q)(3). And in a subsection called "International transparency efforts, " section 13(q) specifies that "[t]o the extent practicable, " the Commission's rules requiring payment disclosure "shall support the commitment of the Federal Government to international transparency promotion efforts relating to the commercial development of oil, natural gas, or minerals." 15 U.S.C. § 78m(q)(2)(E).
In light of these requirements, the Commission has now promulgated a final rule. See Disclosure of Payments by Resource Extraction Issuers, 77 Fed. Reg. 56365 (Sept. 12, 2012) ("Rule"). The Rule spells out information that issuers must provide in the annual reports, and directs that the disclosures be made via a new form, "Form SD, " rather than in an existing Exchange Act annual report. See id. at 56390; see also id. at 56417. During the rulemaking, some commentators had argued that the annual reports should be filed confidentially with the Commission, and the Commission should make public only a compilation of the disclosed information. Rejecting those arguments because it was not persuaded "that the statute allows" confidential disclosure,
Id . at 56391, the Commission required public filing of the annual reports via its online "EDGAR" system. Id. at 56418. See generally U.S. Sec. & Exch. Comm'n, Important Information About EDGAR, http://www.sec.gov/edgar/aboutedgar.htm (last visited June 21, 2013). In the Adopting Release, the Commission explained that it "ha[s] not yet determined the content, form, or frequency of any . . . compilation" that would be available online, but noted "that users of the information will be able to compile the information in a manner that is most useful to them by using the electronically-tagged data filed by resource extraction issuers" in the annual reports themselves. 77 Fed. Reg. at 56394.
Before adopting the final Rule, the Commission conducted a cost-benefit analysis, both as to costs it ascribed to "the statutory mandate" and as to those stemming from the Commission's "exercise of discretion." See id. at 56398. It calculated that "the total initial cost of compliance for all issuers is approximately $1 billion and the ongoing cost of compliance is between $200 million and $400 million." Id. The Commission also found that "the rules will impose a burden on competition, but [the Commission] believe[s] that any such burden that may result is necessary in furtherance of the purposes of Exchange Act Section 13(q)." Id.
Several commentators asked the Commission to exercise its exemptive authority to waive disclosure requirements for four countries—Angola, Cameroon, China, and Qatar—which prohibit disclosure of payment information. Id. at 56370. These commentators argued that, absent an exemption, they may be forced to withdraw from those countries, losing tens of billions of dollars. Id. at 56402. Assuming (without conclusively determining) that the listed countries prohibit payment disclosure, the Commission analyzed the likely impact on three of the fifty-one issuers operating there, finding that "commentators' concerns that the impact of such host country laws could add billions of dollars of costs to affected issuers, and hence have a significant impact on their profitability and competitive position, appear warranted." Id. at 56412. The Commission declined to adopt an exemption for foreign law prohibitions, however, explaining "that adopting such an exemption would be inconsistent with the structure and language of Section 13(q), " and that it "could undermine the statute by encouraging countries to adopt laws, or interpret existing laws, specifically prohibiting the disclosure required under the final rules." Id. at 56372-73.
Plaintiffs filed a complaint in this Court "[o]ut of an abundance of caution" and simultaneously filed a petition for review in the D.C. Circuit, the court that both the plaintiffs and the Commission believed held original jurisdiction. See Am. Petroleum Inst., 714 F.3d at 1330 (internal quotation marks omitted). Pursuant to the parties' request, this Court stayed all proceedings in the case until the D.C. Circuit issued its final order. See December 5, 2012, Order. Disagreeing with both plaintiffs and the Commission (and agreeing with intervenor Oxfam America, Inc.), on April 26, 2013, the D.C. Circuit held that original jurisdiction lies in the district court, dismissing the petition for review "without prejudice to petitioners' suit in the district court." Am. Petroleum Inst., 714 F.3d at 1337.
To accelerate the proceedings, plaintiffs and the Commission requested that their motions for summary judgment be decided based on the D.C. Circuit briefs. The Court granted the request, lifting the stay and allowing the parties to file their D.C. Circuit briefs and Joint Appendix. The Court also permitted Oxfam to intervene as a defendant, and to make a brief supplemental filing. Several amici filed briefs in support of the Commission. After the parties submitted their cross-motions for summary judgment, the Court held a motions hearing on June 7, 2013.
STANDARD OF REVIEW
Under Federal Rule of Civil Procedure 56(a), summary judgment is appropriate when the pleadings and the evidence demonstrate that "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). This standard governs plaintiffs' First Amendment challenge.
In a case involving review of a final agency action under the Administrative Procedure Act, 5 U.S.C. § 706, by contrast, the standard set forth in Rule 56(a) does not apply because of a court's limited role in reviewing the administrative record. See Loma Linda Univ. Med. Ctr. v. Sebelius, 684 F.Supp.2d 42, 52 (D.D.C. 2010), affd, 408 F.App'x 383 (D.C. Cir.); see also Am. Bioscience, Inc. v. Thompson, 269 F.3d 1077, 1083 (D.C. Cir. 2001) ("[W]hen a party seeks review of agency action under the APA, the district judge sits as an appellate tribunal. The entire case on review is a question of law." (footnote and internal quotation marks omitted)). Under the APA, a court must "hold unlawful and set aside agency action, findings, and conclusions" that are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law, " 5 U.S.C. § 706(2)(A), in excess of statutory authority, 5 U.S.C. § 706(2)(C), or "without observance of procedure required by law, " 5 U.S.C. § 706(2)(D). Summary judgment thus serves as the mechanism for deciding, as a matter of law, whether the agency action is supported by the administrative record and otherwise consistent with the APA standard of review. See Richard v. INS, 554 F.2d 1173, 1177 & n.28 (D.C. Cir. 1977); see also Fla. Power & Light Co. v. Lorion. 470 U.S. 729, 743-44 (1985) ("The task of the reviewing court is to apply the appropriate APA standard of review, 5 U.S.C. § 706, to the agency decision based on the record the agency presents to the reviewing court.").
Plaintiffs argue that section 13(q) and the Rule compel speech in violation of the First Amendment. They also present various APA challenges, arguing that the Commission erroneously read the statute as requiring public disclosure of the reports, that it was arbitrary and capricious in declining to grant an exemption for countries that prohibit disclosure, that the Commission's cost-benefit analysis was flawed, that it was required to solicit additional comments before relying on a particular set of data, and that it arbitrarily declined to define the word "project." The Court will not reach plaintiffs' First Amendment challenge or most of their APA arguments because two substantial errors require vacatur: the Commission misread the statute to mandate public disclosure of the reports, and its decision to deny any exemption was, given the limited explanation provided, arbitrary and capricious.
I. Statutory Ambiguity As to Scope of Public Disclosure
In subsection (2)(A), section 13(q) provides:
(A) Information required
Not later than 270 days after July 21, 2010, the Commission shall issue final rules that require each resource extraction issuer to include in an annual report of the resource extraction issuer information relating to any payment made by the resource extraction issuer, a subsidiary of the resource extraction issuer, or an entity under the control of the resource extraction issuer to a foreign government or the Federal Government for the purpose of the commercial development of oil, natural gas, or minerals, including—
(i) the type and total amount of such payments made for each project of the resource extraction issuer relating to the commercial development ...