On August 22, 2012, the SEC adopted rules mandated by Dodd-Frank Wall Street Reform and Consumer Protection Act, which added a new section Section 13(q) to the Exchange Act.

The new rules require each issuer that is required to file an annual report with the SEC and is engaged in the development of oil, natural gas or minerals to disclose certain payments made to the U.S. government or foreign governments by filing a new Form SD.

Under the new rule, each such issuer must disclose payments that are:

  • made to further the commercial development of oil, natural gas, or minerals, which includes exploration, extraction, processing and export or the acquisition of a license for any such activity
  • "not deminimis": any payment, whether single or in a series, that equals or exceeds $100,000 during the most recent fiscal year
  • within the types of payments specified in the rules

The rules require disclosure of the following types of fees:

  • taxes
  • royalties
  • fees(including license fees)
  • production entitlements
  • bonuses
  • dividends
  • infrastructure improvements  

The new rules require each resource extraction issuer required to file annual reports with the SEC to provide the following type of information about reported fees:

  • 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  

The rules do not define "project" but the release provides guidance on the SEC's view of what would constitute a project. The new form SD and accompanying exhibits must be filed within 150 days after the end of the issuer's fiscal year. Issuers must comply with the new rules for fiscal years ending after September 30, 2013. For the first such disclosure, most issuers may file a partial report disclosing only those payments made after September 30, 2013.