SEC Proposes Disclosure Rules for Resource Extraction Issuers

The SEC voted to propose new 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.

Proposed Securities Exchange Act Rule 13q-1 and an amendment to Form SD (Specialized Disclosure Report) are intended to implement Section 13(q) of the Securities Exchange Act, which was adopted by Section 1504 (Disclosure of Payments by Resource Extraction Issuers) of the Dodd-Frank Act.

The proposed rules would require a domestic or foreign issuer to disclose payments made to governments which equal or exceeds $100,000, if: (i) the issuer is required to file an annual report with the SEC under the Securities Exchange Act; and (ii) the issuer engages in the commercial development of oil, natural gas, or minerals. In addition, a resource extraction issuer would be required to disclose payments made by a subsidiary or another entity controlled by the issuer.

Under the proposed rules, a resource extraction issuer would be required to discuss certain payments made to a foreign government, including foreign subnational governments, or the U.S. federal government. The types of payments related to commercial development activities that would need to be disclosed include: (i) taxes; (ii) royalties; (iii) fees (including license fees); (iv) production entitlements; (v) bonuses; (vi) dividends; and (vii) payments for infrastructure improvements. The proposed rules would require a resource extraction issuer to publicly disclose the information annually using Form SD no later than 150 days after the end of its fiscal year.

According to the SEC, initial comments on the proposed rules must be submitted by January 25, 2016 and reply comments, which may respond to issues raised in the initial comment period, must be submitted by February 16, 2016.