* Chamber, API say SEC failed to weigh costs, benefits
* SEC rule was called for in Dodd-Frank law
* Rule covers oil, mining and gas companies
* Requires companies to disclose payments to governments
* Attorney Scalia to argue the case for the industry
* SEC says its economic analysis is sound
(Adds API statement, more details on legal arguments)
By Sarah N. Lynch
WASHINGTON, Oct 10 (Reuters) - Four business groups onWednesday filed a lawsuit against the U.S. Securities andExchange Commission's new rule requiring oil, mining and gascompanies to disclose payments they make to foreign governments.
The lawsuit marks the latest in a string of legal challengesagainst regulators still struggling to finalize dozens of rulesincluded in the 2010 Dodd-Frank Wall Street reform law.
A key argument in the suit - filed by the U.S. Chamber ofCommerce, the American Petroleum Institute, and two other groups- is that the SEC failed to adequately weigh the rule's costsand benefits.
Problems with economic analysis have proven to be asuccessful tool for the industry in combating prior SEC rules,including its "proxy access" rule that would have empoweredshareholders to nominate directors to corporate boards.
"The rule as written would impose enormous costs on U.S.firms and put them at a competitive disadvantage againstgovernment-owned oil giants not subject to the rule," said APIChief Executive Officer Jack Gerard in a statement lateWednesday.
"Not only will the rule hurt the millions of Americans whoown shares in oil and natural gas companies, it will also costjobs and damage America's energy security by making it moredifficult for U.S. firms to gain access to resources abroad."
SEC spokesman John Nester said the agency is still reviewingthe lawsuit, but that the SEC thinks it is on solid legalground.
"We believe our legal interpretation and economic analysisare sound and we look forward to defending the rule thatCongress directed us to write," Nester said.
The SEC's resource extraction rule is one of the mostcontroversial Dodd-Frank requirements.
Championed by humanitarian organizations, the rule aims tocombat bribery abroad by U.S. energy companies. But industrygroups have argued the rule is far too costly and would giverivals sensitive business information.
The challenge to the SEC's rule is being headed up by GibsonDunn attorney Eugene Scalia, the son of Supreme Court JusticeAntonin Scalia. He has a winning-streak in knocking down otherSEC regulations, such as the proxy access rule last year.
Late last month, Scalia also helped other trade groups win acourt battle against the Commodity Futures Trading Commissionover another Dodd-Frank rule that would have imposed "positionlimits" on commodity speculators.
In addition to challenging the rule on the basis of flawedeconomic analysis, Wednesday's lawsuit deploys three other legalarguments.
It alleges, for instance, that the SEC "grosslymisinterpreted its statutory mandate" in claiming thatDodd-Frank gave the agency no choice but to adopt the rule inthe form that it did.
The groups say the law only requires companies to provide a"compilation" of the payment data - and not a detailed list ofevery payment, as the SEC's final rule calls for.
Scalia used a similar type of argument that helped him winthe position limit case last month, after a federal districtcourt judge ruled that the CFTC could not simply claimDodd-Frank mandated position limits without first showing whythey were necessary.
Wednesday's lawsuit also says the SEC is violatingcompanies' First Amendment rights because the forced disclosurewould be "in violation of their contractual and legalcommitments."
The disclosure required by the rule "does not further theinvestor protection purposes of the securities laws," it says.
A First Amendment argument was similarly waged in the battleagainst proxy access, but the Washington D.C. circuit court didnot take it up and based its decision to strike down the ruleon the cost-benefit argument.
In addition, the Chamber and API's case makes use of a legalargument not used in recent challenges to SEC rules - that theagency could have used its discretion to provide an exemptionfrom its rule and failed to consider it.
"The commission arbitrarily rejected any exemption from therule's disclosure requirements," the suit says.
The SEC adopted the resource extraction rule in August in a2-1 vote, with Republican Commissioner Daniel Gallagher votingno and two other commissioners recused from participating.
In his dissent, Gallagher said the SEC had failed todetermine the benefits of the rule and disregarded the"significant costs" to companies and shareholders.
The other two groups to challenge the rule on Wednesday werethe Independent Petroleum Association of America and theNational Foreign Trade Council.
The case was filed in both the District Court for theDistrict of Columbia and the United States Court of Appeals forthe District of Columbia until it can be determined which courtwill have jurisdiction to hear the case.
(Reporting By Sarah N. Lynch; additional reporting by ArunaViswanatha; Editing by Bernard Orr and Carol Bishopric)