The Securities and Exchange Commission (the "SEC") adopted final rules on August 22, 2012, to implement the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") relating to disclosure of payments by resource extraction issuers. Congress included this new disclosure requirement in the Dodd-Frank Act with the goal of increasing the transparency of payments to governments related to natural resources extraction. Under these new rules, reporting companies engaged in commercial development of oil, natural gas or minerals will be obligated to publicly disclose, on an annual basis, certain payments they make to governmental entities. View the adopting release.

Companies will be required to comply with the new rules for fiscal years ending after September 30, 2013, with the disclosures to be provided on a new specialized disclosure form, Form SD, that will be due 150 days after the end of each fiscal year. Those companies that will need to file should consider instituting internal tracking mechanisms to facilitate the collection of this information, so that they can more easily prepare the required reports for filing.


The rules apply to all reporting issuers engaged in commercial development of oil, natural gas or minerals, regardless of the size of the company, its home jurisdiction, or the location or scope of its oil and gas or mining activities.

Two key definitions from the Dodd-Frank Act incorporated into the final rules are:

  • "Resource extraction issuer" is an issuer that (i) is required to file an annual report with the SEC and (ii) engages in the commercial development of oil, natural gas or minerals.
  • "Commercial development of oil, natural gas or minerals" includes exploration, extraction, processing, and export of oil, natural gas or minerals, or the acquisition of a license for any such activity.

The SEC has made it clear that the rules were intended to capture a broad segment of the oil and gas and mining industries, intentionally failing to provide for any exemption from the disclosure requirement based on the type or size of a company. As a result, smaller reporting issuers, foreign private issuers, and any other companies that are required to file reports under the Securities Exchange Act of 1934 (the "Exchange Act") and that are engaged in the commercial development of oil, natural gas or minerals will be obligated to file annual reports on Form SD disclosing their payments to governments. Furthermore, the SEC did not provide for any situational exemption from the disclosure requirement that would permit companies to limit disclosure based on non-disclosure agreements, foreign law restrictions, the safety and security of employees or any other basis.

The scope of activities that are considered "commercial development of oil, natural gas or minerals" under the new rules is also expansive although subject to some limits. The SEC stated that it intended to capture only activities that are directly related to the commercial development of oil, natural gas and minerals, but not activities that are ancillary or preparatory to development. According to the adopting release for the final rules, a company engaged in the manufacture of equipment (such as drill bits) used in oil and gas development is not engaged in the commercial development of oil, natural gas or minerals. Similarly, a company that engages in intra-country transportation (presumably by either vehicle or pipeline) of oil, natural gas or minerals to a refinery or smelter, or for additional purposes other than export, is not engaged in commercial development. However, the analysis shifts if the transportation is related to export, so companies that transport oil, gas and minerals across international borders should prepare for this new disclosure. In addition, a company that conducts field processing activities, such as removing impurities from natural gas after extraction but prior to transport, or processing raw ore prior to smelting, would be engaged in commercial development. Refining or smelting, on the other hand, would not be considered "processing" for purposes of the final rules.

Companies involved in the natural resources industry should evaluate the scope of their activities to determine whether they meet the definition of a resource extraction issuer so that they can begin to prepare to make the filings required by these new rules.


Any payment that is made to a government to further the commercial development of oil, natural gas or minerals that is not de minimis must be disclosed. This includes taxes, royalties, fees (including license fees) and production entitlements. The Dodd-Frank Act gave the SEC authority to identify other material benefits that are part of the commonly recognized revenue stream for commercial development of oil, natural gas or minerals, but the SEC declined to supplement the statutory definition with additional material benefits. The SEC did clarify that bonuses, dividends and payments for infrastructure improvements (such as roads required to gain access to resources) also count as payments that must be reported. Social and community payments, on the other hand, including funds devoted to hospital or school construction, need not be disclosed.

In a shift from the proposed rules, the SEC elected to define what constitutes a "not de minimis" payment in the final rules. A payment is "not de minimis" if it equals or exceeds $100,000 as a single payment or series of related payments during the most recent fiscal year.

The final rules clarify that payments made to the United States federal government and any foreign government must be disclosed. The final rules stayed very close to the definition of "foreign government" from the Dodd-Frank Act, which includes a foreign national government, and a foreign subnational government (such as a county, state, or province), along with companies that are majority-owned by a foreign government. It is noteworthy that companies must disclose payments made to foreign subnational governments but not subnational governments inside the United States.

Companies must disclose the payments made to governments for each project. The final rules do not define the term "project," allowing issuers to determine the scope of a project based on the business context.

Issuers are obligated to provide disclosure of payments made by the issuer itself, a subsidiary of the issuer or an entity under the control of the issuer. The SEC directs issuers to look to the definition of "control" and "subsidiary" under Exchange Act Rule 12b-2.


The report of payments to governments for commercial development of oil, natural gas, and minerals must be made on the newly-adopted Form SD. In the proposed rules, the SEC had contemplated that the disclosure would be made as part of the annual report, generally on Form 10-K or 20-F. During the rulemaking process, the SEC determined to use a separate form both because this new disclosure does not relate entirely to items that are typically required in an annual report and also to make it easier for interested parties to find the disclosure. The Form SD will be publicly filed on EDGAR. In an exhibit to the Form SD, issuers must disclose the following information on payments they have made:

  • the type and total amount of payments for each project;
  • the type and total amount of payments to each government;
  • the total amounts of payments, by category of payment type;
  • the currency in which the payment was made;
  • the financial reporting period during which the payment was made;
  • the business segment of the company that made the payment;
  • the government that received the payment (and the country in which it is located); and
  • the project to which the payments relate.

The disclosures described above must be provided using the eXtensible Business Reporting Language (XBRL) interactive data standard. In the adopting release, the SEC indicated that it expects that the new XBRL taxonomy with respect to these disclosures will be published for comment soon.

Form SD will be considered "filed" for purposes of the liability provisions of Section 18 of the Exchange Act. However, as a result of the disclosures being provided in the new Form SD rather than in the company's annual report, the disclosures will not be subject to the CEO and CFO certifications that accompany annual reports. In addition, the disclosures made on Form SD will not be incorporated by reference into filings under the Securities Act of 1933 or the Exchange Act.

When completing Form SD, it will be important for companies to be mindful of the anti-evasion provision included with the final rules. The SEC added an instruction to Form SD following comments on the proposed rules to prevent circumvention of the disclosure requirement. The instruction requires disclosure of payments made to a government for any activities related to the commercial development of oil, natural gas or minerals, which payments or activities are not, in form or characterization, one of the payments or activities enumerated by the rules, but which are part of a plan or scheme to evade the new disclosure requirements.


Issuers will only have to report payments made on or after October 1, 2013. The Form SD reports are required annually for all payments made during a company's fiscal year. For the first reporting year, a company whose fiscal years began prior to September 30, 2013 may file a partial year report, which includes payments made on or after October 1, 2013 until the end of that company's fiscal year. The Form SD must be filed within 150 days after the end of a company's fiscal year.