SEC Disclosure Requirements for “Resource Extraction Issuers”

January 20, 2016

As we noted in a previous client bulletin, on July 2, 2013, the U.S. District Court for the District of Columbia vacated the United States Securities and Exchange Commission’s (the “SEC”) disclosure rules applicable to “resource extraction issuers” that the SEC adopted on August 22, 2012. In vacating the August 2012 disclosure rules, the district court directed the SEC to promulgate a new set of rules.

On December 11, 2015, the SEC issued new proposed rules that are substantially similar to the 2012 rules, together with a press release and fact sheet pertaining to the proposed rules. This Bulletin discusses the newly proposed rules.

Who is Covered

The disclosure requirements under the currently proposed rules would apply to “resource extraction issuers,” defined as issuers that (i) are required to file Form 10-K or Form 20-F annual reports with the SEC, and (ii) are engaged in the “commercial development” of oil, natural gas, or minerals. The term “commercial development” includes exploration, extraction, processing, and export of oil, natural gas, or minerals, or the acquisition of a license for any such activity.

Scope of Disclosure

The proposed rules would require a resource extraction issuer to disclose any “payment” (or series of related payments) made by such issuer (or a subsidiary or other entity controlled by the issuer) to the United States federal government or a foreign government (whether national or subnational, and including a department, agency, or instrumentality thereof, or a company at least majority owned thereby). “Payment” means an amount that (i) is made to further the commercial development of oil, natural gas, or minerals; (ii) is “not de minimis”; and (iii) is one or more of the following: taxes, royalties, fees (including license fees), production entitlements, bonuses, dividends, and payments for infrastructure improvements. A “not de minimis” payment is one that equals or exceeds $100,000 during the resource extraction issuer’s latest fiscal year.

The proposed rules would require payment disclosure on a project-level basis. “Project” means 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 rules would require a resource extraction issuer to disclose the following information about covered payments:

  • 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 particular resource that is the subject of commercial development; and
  • the subnational geographic location of the project.

Method and Timing of Disclosure

The proposed rules would require resource extraction issuers to file annually a report on new Form SD, prepared in the form of an exhibit and electronically tagged in the SEC’s “eXtensible Business Reporting Language” format (XBRL). As we noted in our previous bulletin dated February 12, 2014, certain issuers are already subject to the SEC’s reporting requirements on Form SD pertaining to disclosure relating to sources of “conflict minerals” contained in products that a reporting issuer manufactures or contracts to manufacture. The proposed rules would amend the current Form SD to add a new Section 2 to the form, titled “Resource Extraction Issuer Disclosure.”

Under the proposed rules, a resource extraction issuer would be obligated to file a Form SD within 150 days after the end of the issuer’s fiscal year, beginning with the fiscal year ending no earlier than one year after the effective date of the adopted rules. For example, if the effective date of the new rules were in June 2016, an issuer with a December 31 fiscal year end would be required to file a Form SD within 150 days of December 31, 2017.


The proposed rules would allow the SEC to provide exemptive relief from the disclosure requirements on a case-by-case basis. Additionally, the proposed rules would permit resource extraction issuers to use certain reports prepared for foreign regulatory purposes to satisfy their disclosure obligations without the filing of a Form SD if the SEC determines that the requirements of the foreign regulatory reports are substantially similar to those required by the SEC’s rules.

Request for Comments

The SEC has requested comments on the proposed rules. Initial comments to the proposed rules are due by January 25, 2016. Reply comments, which may respond only to issues raised in the initial comment period, are due by February 16, 2016.

If you have questions about the SEC’s proposed disclosure rules applicable to resource extraction issuers, please contact your Seward & Kissel attorney.