Washington, D.C., Dec. 15, 2010 — The Securities and Exchange Commission today voted to propose rules mandated by the Dodd-Frank Act to require resource extraction issuers to disclose payments made to the U.S. or foreign governments.
Under the proposed rules, any resource extraction issuer would be required to disclose payments made to governments if the issuer:
The rules would apply to domestic and foreign issuers and to smaller reporting companies that meet the definition of resource extraction issuer.
Public comments on the proposed rules should be received by the Commission by Jan. 31, 2011.
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Under the proposed rules, a resource extraction issuer would be required to disclose certain payments made to a foreign government, including subnational governments, or the U.S. federal government.
In addition, a resource extraction issuer would be required to disclose payments made by a subsidiary or another entity controlled by the issuer. A resource extraction issuer would need to make a factual determination as to whether it has control of an entity based on a consideration of all relevant facts and circumstances. At a minimum, the resource extraction issuer would be subject to disclosure if it otherwise must provide consolidated financial information for the subsidiary or other entity in its financial statements included in its Exchange Act reports.
A resource extraction issuer would be required to disclose payments that are made to further the commercial development of oil, natural gas, or minerals and that are not de minimis. The proposed rules define commercial development of oil, natural gas, or minerals to include 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 must be disclosed include:
Taxes
Royalties
Fees (including license fees)
Production Entitlements
Bonuses
These types of payments generally are consistent with the types of payments that the Extractive Industries Transparency Initiative, which was referenced in the statutory definition of payment, suggests should be disclosed.
The rules would require a resource extraction issuer to provide the following information about payments made to further the commercial development of oil, natural gas, or minerals:
Type and total amount of payments made for each project.
Type and total amount of payments 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.
A resource extraction issuer would be required to provide the information annually in its Exchange Act annual report. The information would be included in two exhibits — one exhibit that would be filed in text format, which would enable investors to easily read the disclosure about payment information without additional computer programs or software, and another exhibit filed in eXtensible Business Reporting Language (XBRL) format that would be readable through a viewer.
The Commission is seeking public comments on the proposed rules that should be received by Jan. 31, 2011. The Commission will review the comments it receives and consider those comments in determining whether to adopt the proposed rules.