SEC proposes a weaker version of 2016 rule requiring disclosure of payments to governments relating to commercial development of oil, natural gas or minerals

Almost three years after the controversial resource extraction payments disclosure rule was repealed by Congress, the US Securities and Exchange Commission (the “SEC”) has re-proposed a less-demanding version of the rule that would, among other things:

  • only require the disclosure of payments if they are at least $750,000 in the aggregate for a project;
  • allow reports to be “furnished” to, rather than “filed” with, the SEC, which would subject the disclosures to a lower level of liability;
  • permit greater aggregation of payments at the major subnational level and at lower government levels; and
  • exempt emerging growth companies and smaller reporting companies (but not foreign private issuers) from the disclosure requirements.

The SEC is also requesting comment on whether it should adopt the alternative approach of permitting resource extraction issuers to submit their disclosures (in the form of annual reports on Form SD) to the SEC confidentially.

Comments are due 60 days after the proposed amendments are published in the Federal Register.


Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) directed the SEC to issue a rule requiring a “resource extraction issuer” to include in an annual report information relating to payments made to a foreign government or the US federal government for the purpose of the commercial development of oil, natural gas or minerals (“resource extraction payments”). The legislation requires these issuers to provide information about the type and total amount of payments made for each of their projects related to the commercial development of oil, natural gas or minerals, and the type and total amount of payments made to each government.

The SEC issued a rule implementing Section 1504 in 2016 (the “2016 rule”), but before it could become effective, the US Senate and House of Representatives voted to issue a joint resolution of disapproval of the rule under the Congressional Review Act (the “CRA”), which permits Congress to rescind agency rules that have been recently adopted. The CRA provides that a rule disapproved in such a manner may not be reissued in substantially the same form, unless the reissued or new rule is specifically authorized by a law enacted after the date of the joint resolution disapproving the original rule. Congress did not, however, repeal or amend Section 1504, so the Dodd-Frank Act mandate to the SEC to issue a resource extraction payment disclosure rule is still outstanding.

Overview of proposed rule

Under the proposed rule, a “resource extraction issuer” is any issuer that is required to file annual reports on Forms 10-K, 20-F or 40-F, and engages in the commercial development of oil, natural gas, or minerals. A resource extraction issuer would be required to make annual disclosures on Form SD regarding its resource extraction payments.

As with the 2016 rule, the proposed rule would define payments to include taxes, royalties, fees (including license fees), production entitlements, bonuses and other material benefits, that the SEC, consistent with the Extractive Industries Transparency Initiative’s guidelines, determines are part of the commonly recognized revenue stream for the commercial development of oil, natural gas or minerals, as well as community and social responsibility payments that are required by law or contract, payments of certain dividends and payments for infrastructure.

The disclosures must be publicly available on the SEC’s EDGAR system and the payment information must be tagged using the extensible Business Reporting Language (“XBRL”) electronic format.

Key changes

To comply with the CRA’s requirement that the new rule not be “substantially the same” as the 2016 version, the proposed rule makes a number of substantial changes, which would generally reduce the disclosure burden on companies.

The key changes include the following:

  2016 Rule Proposed Rule
“Project” definition Disclosures are required on a per-project basis, with “project” defined to mean operational activities that are governed by a single contract, license, lease, concession, or similar legal agreement, which form the basis for payment liabilities with a government.

The proposed rule would use a broader definition of “project,” which would be based on three criteria: (1) the type of resource being commercially developed; (2) the method of extraction; and (3) the major subnational political jurisdiction where the commercial development of the resource is taking place.


The broader definition of project means that payments are aggregated at a higher level. There would be fewer individual data points that have to be electronically tagged and reported, which should make it easier to disclose the payment information.

“Not de minimis” definition The disclosure of payments of $100,000 or more is required, whether made as a single payment or series of related payments. The proposed rule would establish a threshold value of $150,000 per individual payment and $750,000 per project. Thus, an issuer would not be required to provide disclosure if the aggregate payments for an individual project are below $750,000. If aggregate payments for an individual project total $750,000 or more, only payments that equal or exceed $150,000 as a single payment or a series of related payments would need to be reported. Thus, if no single payment or series of related payments of the same type is $150,000 or more for an individual project, even if the aggregate payments for that project are $750,000 or more, no payment disclosures would be required for that project.
Control definition An issuer is deemed to have “control” of another entity (and thus be obliged to make disclosures about its resource extraction payments) when it is required by US GAAP or International Financial Reporting Standards (“IFRS”) to consolidate or proportionately consolidate the financial results of that entity. An issuer is not required to disclose payments made by entities that it only proportionately consolidates.
Aggregation of payments With one exception, no aggregation of payments is permitted beyond contract level.

For purposes of identifying the foreign governments that received payments at a level below the major subnational government level, the proposed rules would permit an issuer to aggregate all of its payments of a particular payment type without having to identify the particular subnational government payee. The issuer would only be required to identify the type of administrative or political level of subnational government that received the payments. For example, an issuer could aggregate payments by payment type made to multiple counties and municipalities (the level below major subnational government level) and disclose the aggregate amount without having to identify the particular subnational government payee. The issuer would instead generically identify the subnational government payee (e.g., as “county,” “municipality” or some combination of subnational governments).


The aggregated disclosure is intended to reduce the potential for competitive harm that could result from the overly granular disclosure that was required under the 2016 rule.

Exemption due to conflict with foreign laws or contract terms There is no express exemption for conflicts with foreign law or contract terms, but issuers can apply for exemptive relief from the SEC on a case-by-case basis. There would be express exemptions from disclosure if the disclosure is prohibited by foreign law or preexisting contract terms, providing certain conditions are met (including disclosure about the conflict and obtaining a legal opinion that there is a conflict).
Exemptions based on issuer status There are no exemptions based on issuer status. Emerging growth companies and smaller reporting companies are exempt, but foreign private issuers (that are not emerging growth companies or smaller reporting companies) are required to comply.
Liability Form SD must be “filed” with the SEC, meaning disclosures are subject to liability under Section 18 of the Securities Exchange Act of 1934. Form SD may be” furnished” to the SEC and thus are not subject to Section 18 liability.
Timing of disclosure The Form SD must be filed annually, no later than 150 days after the end of the issuer’s fiscal year.

For issuers with fiscal years ending on or before June 30, Form SD must be furnished no later than March 31 in the following calendar year.


For issuers with fiscal years ending after June 30, Form SD must be furnished no later than March 31 in the second calendar year following their most recent fiscal year.

IPO transitional relief The rule provides no IPO transitional relief. The rule allows an issuer to delay furnishing a report until the first fiscal year following the fiscal year in which it completed its IPO.

Alternative reporting

One key element that the proposed rule would retain from the 2016 rule is the acceptance of alternative reporting. The proposed provision would allow an issuer subject to similar disclosure requirements in a foreign jurisdiction to submit the report it prepared under those foreign requirements in lieu of Form SD.

The proposed rule would permit this alternative reporting only if the SEC has determined that the foreign reporting regime requires disclosure that satisfies the transparency objectives of Section 1504. In doing so, the SEC will likely consider the following criteria: (1) the types of activities that trigger disclosure; (2) the types of payments that are required to be disclosed; and (3) whether project-level disclosure is required and how “project” is defined.

Further, the issuer would have to:

  • disclose in the body of its Form SD that it is relying on the accommodation and identify the alternative reporting regime for which the report was prepared;
  • tag the alternative report using XBRL; and
  • provide a fair and accurate English translation of the entire report (not just a summary) if the report is not in English.

The issuer would be permitted to follow the submission deadline of an approved alternative jurisdiction if it submits a notice on or before the due date of its Form SD indicating its intent to submit the alternative report using the alternative jurisdiction’s deadline.

Requesting comment on an alternative approach

The Dodd-Frank Act provides the SEC with the discretion to require public disclosure of payments by resource extraction issuers or to permit confidential filings. In adopting the 2016 rule, the SEC said that requiring public disclosure of each issuer’s specific filings (including all the payment information) would best accomplish the purpose of the statute.

Although the proposed rule also requires public disclosure of each issuer’s Form SD, the SEC is requesting comment on whether it should adopt an alternative approach that would allow for confidential filing and would release information only through an anonymized, aggregated compilation.

Although the proposed rule is a significant improvement over the 2016 version in terms of reducing the disclosure burden on companies, we hope that the SEC seriously considers the approach of allowing confidential disclosure and a public release of aggregated information.

We will continue to monitor developments in this area and welcome any queries you may have.