SEC Re-Proposes Rule Requiring Resource Extraction Issuers to Disclose Payments to Governments

February 2020

In December 2019, the SEC re-proposed rules that would require resource extraction issuers to disclose information about certain payments made to United States and foreign governments for the commercial development of oil, natural gas, and minerals. The proposed rules reflect the SEC’s third attempt to implement Exchange Act Rule 13q-1, which was mandated by Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The SEC first adopted rules on resource extraction payments disclosure in 2012, but those rules were vacated after they were challenged in a federal court. The Commission subsequently adopted new rules in 2016, but they were disapproved by a joint resolution of Congress pursuant to the Congressional Review Act (and therefore, were not effective).

The latest proposed rules include several changes to the vacated 2016 rules.1 The most significant of these changes would:
  • Change the definition of the term “project” to require disclosure at the national and major subnational political jurisdiction, as opposed to the contract level;
  • Change the definition of “not de minimis” to include both a project threshold and an individual payment threshold;
  • Require the reports to be “furnished,” not filed;  
  • Add an exemption for smaller reporting companies and emerging growth companies;
  • Add conditional exemptions for foreign law conflicts and pre-adoption contracts that prohibit disclosure;
  • Provide transitional relief for those issuers that have recently completed their initial public offerings; and
  • Extend the deadline for furnishing the payment disclosures.
The proposed rules would apply to “resource extraction issuers,” defined as domestic and foreign issuers that are required to file an annual report under the Exchange Act and engaged in the commercial development of oil, natural gas, or minerals. The activities that constitute “commercial development of oil, natural gas, or minerals” include exploration, extraction, processing, export, and other significant actions relating to oil, natural gas, or minerals, or the acquisition of a license for any such activity.
The proposal would require issuers to disclose any payment (or series of related payments) to the U.S. government or foreign governments, including majority-owned entities of a foreign government, that is not de minimis (defined as an amount that equals or exceeds $150,000 during a fiscal year, subject to the condition that payment disclosure for a project is only required if the total project payments equal or exceed $750,000) and has been made to further the commercial development of oil, natural gas, or minerals.
The proposed location of the disclosures is substantially the same as the prior rules adopted in 2016.  The disclosures would be filed annually in an XBRL-formatted exhibit to Form SD.2 For issuers with fiscal years ending on or before June 30, the disclosures would be due no later than March 31 in the following calendar year. For issuers with fiscal years ending after June 30, the disclosures would be due no later than March 31 in the second calendar year following their most recent fiscal year. The proposed disclosures may be reported on a cash basis and would not need to be audited3 or subject to officer certifications.


1 Further information on the 2016 proposal can be found in BDO’s SEC Flash Report.   
2 Form SD was created for the purpose of reporting the information required by Rule 13q-1 and the conflict minerals rules.
3 Moreover, since Form SD does not include audited financial statements, auditors would not need to read the disclosures and consider whether they are materially inconsistent with the audited financial statements.