SEC Final Rule: Disclosure of Payments by Resource Extraction Issuers (2016)

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Gavel.png FINAL RULE: The final rule from September 2012 was vacated by court order July 2, 2013 and reproposed in December 2015. The SEC announced on June 27th, 2016 that it adopted rules for resource extraction issuers.
Timeline - Resource Extraction, SEC
VACATED BY COURT ORDER Rule Reproposed Final Rule Adopted Compliance Dates
July 2, 2013 December 11, 2015 June 27th, 2016 Fiscal years ending on or after September 30, 2018

On June 27th, 2016, the SEC said it had adopted rules that require any domestic issuer of resource extraction to disclose payments made to governments if the issuer is an SEC filer and engages in the commercial development of oil, natural gas, or minerals.<ref>SEC Adopts Rules Requiring Payment Disclosures by Resource Extraction Issuers. SEC. Retrieved on September 12, 2012.</ref> <ref>SEC Adopts Rules for Resource Extraction Issuers Under Dodd-Frank Act. SEC. Retrieved on June 28, 2016.</ref> The rule is mandated by Title XV of the Dodd-Frank Act.

The disclosure will be made at the project level similar to the approach adopted in the European Union and proposed in Canada. The disclosure required by the rules will be filed publicly with the Commission annually on Form SD.


On August 22, 2012, the SEC approved a final rule requiring resource extraction issuers to disclose certain payments made to the U.S. government or foreign governments.

However, on July 2, 2013, a U.S. District Court judge threw out the ruling in a suit filed by trade groups such as the American Petroleum Institute and U.S. Chamber of Commerce. The groups alleged the SEC misinterpreted the law by forcing the public disclosure of detailed data on payments, and failed to include common-sense exemptions by forcing disclosure of payments to countries like China and Angola, where such disclosures are illegal.<ref>U.S. judge tosses SEC's resource payment disclosure rule. Reuters. Retrieved on September 4, 2013.</ref>

On September 4, 2013, the SEC said that, rather than contest the ruling, it would re-propose the rule.<ref>U.S. SEC won't appeal ruling vs disclosing payments abroad. Reuters. Retrieved on September 4, 2013.</ref>

On December 11, 2015, the SEC proposed rules that would require resource extraction issuers to disclose payments made to the U.S. federal government or foreign governments for the commercial development of oil, natural gas or minerals.

Summary of the Rule[edit]

The final rules require a domestic or foreign issuer to disclose payments made to governments if:

  • The issuer is required to file an annual report with the Commission under the Securities Exchange Act (Exchange Act);
  • The issuer engages in the commercial development of oil, natural gas, or minerals; and
  • Payments exceed a de minimis threshold of $100,000 in a fiscal year.

Payments made by subsidiaries will also require disclosure.

Resource extraction issuers will need to disclose payments that are made to further the commercial development of oil, natural gas, or minerals, including exploration, extraction, processing, and export, or the acquisition of a license for any such activity.

The types of payments related to commercial development activities that will need to be disclosed include:

  • taxes;
  • royalties;
  • fees (including license fees);
  • production entitlements;
  • bonuses;
  • dividends; and
  • payments for infrastructure improvements.

This list of payment types will be consistent with the requirements of the European Union, Canada, and the Extractive Industries Transparency Initiative.

The information required to be disclosed includes:

  • Type and total amount of such payments made for each project of the resource extraction issuer relating to the commercial development of oil, natural gas, or minerals.
  • Type and total amount of such payments for all projects made to each government.
  • Total amounts of the payments by category.
  • Currency used to make the payments.
  • Financial period in which the payments were made.
  • Business segment of the resource extraction issuer that made the payments.
  • The government that received the payments, and the country in which the government is located.
  • The project of the resource extraction issuer to which the payments relate.
  • The particular resource that is the subject of commercial development.
  • The subnational geographic location of the project.

The rules define “project” using an approach that is focused on the legal agreement that forms the basis for payment liabilities with a government. This definition could also include operational activities governed by multiple legal agreements.

The Commission could provide exemptive relief from the requirements of the rules on a case-by-case basis using its existing authority under the Exchange Act. Also, in light of international developments, as well as the progress made by the U.S. Extractive Industries Transparency Initiative (USEITI), the rules allow issuers to use a report prepared for foreign regulatory purposes or for the USEITI to comply with the rules if the Commission determines the requirements are substantially similar to the rules.

The public disclosures will be filed annually using Form SD, no later than 150 days after the end of its fiscal year.

Related Document: Final Rule[edit]



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