On December 11, 2015, the U.S. Securities and Exchange Commission (the “SEC,” or the “Commission”) issued re-proposed rules (the “Proposed Rules”), as authorized under Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”). Originally enacted in 2010, Section 1504 instructed the Commission to adopt rules requiring every SEC-registered public oil, natural gas and mining company to submit an annual report disclosing information about payments they made to the U.S. federal government or any foreign government for the purpose of developing hydrocarbons or minerals.
The adopted amendments by The Securities and Exchange Commission on June 27, 2016 put forth newly adopted amendments to Exchange Act Rule 13q-1 and Form SD, which requires 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 adopted amendments are the result of a federal challenge to the rules. With the implementation of Section 1504 finalized and issued by the SEC in 2012 (the “Former Rules”), the rules were shortly afterwards invalidated by a U.S. federal court in July 2013. Then the U.S. District Court for the District of Columbia vacated Rule 13q-1 in American Petroleum Institute, et al. v. Securities and Exchange Commission and Oxfam America, Inc. (“API”), and remanded the matter to the SEC for further proceedings. In its memorandum opinion on API, the D.C. District Court found that the SEC may have misread Section 13(q) as to the degree of detail about resource extraction issuers’ payments that are required to be publicly disclosed, and that it had acted arbitrarily in failing to consider any exemption from the rules’ operation.
In response, the SEC rewrote the requirements. The rule applies to “resource extraction issuers,” defined as domestic and foreign issuers that are engaged in the commercial development of oil, natural gas, or minerals and required to file an annual report under the Exchange Act. The activities that constitute “commercial development of oil, natural gas, or minerals” include exploration, extraction, processing, export, or the acquisition of a license for any such activity. A copy of the Final Ruling can be downloaded here.
