SEC Reproposes Resource Extraction Disclosure Rule

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By Rob Tricchinelli

Dec. 11 — The Securities and Exchange Commission took another crack at a resource extraction disclosure rule Dec. 11, reproposing the Dodd-Frank measure that would require companies to disclose payments made to governments in connection with oil, natural gas or mineral development.

The rule was first adopted in 2012 but was struck down by a D.C. federal district court in July 2013 after the American Petroleum Institute and other industry groups sued to block it (128 SLD, 7/3/13). The court said the SEC rule improperly required public disclosures and didn't create any exemptions.

The Dec. 11 proposal would allow for companies to get an exemption from making the disclosure on a “case-by-case basis.” It was proposed by a 3-1 vote, with Commissioner Michael Piwowar dissenting.


Companies would have to disclose any payments made to governments to help further their commercial development activity in oil, natural gas or minerals, including exploration, extraction, processing and export. Any payment more than $100,000 would have to be disclosed, and each disclosure would include the project it relates to.

The rule is required by Section 1504 of the Dodd-Frank Act. Initial comments on the proposal will be due Jan. 25, and reply comments are due Feb. 16.


In 2013, the U.S. District Court for the District of Columbia said the SEC's rule was flawed because it didn't create exemptions for issuers that operate in countries barring such disclosures.

The proposal would allow the SEC to use its general authority under the 1934 Securities Exchange Act to exempt issuers, but SEC staff said the exact process for an issuer to get an exemption hasn't yet been determined.

There is little evidence that such prohibitive laws exist in other countries. The agency previously flagged four countries in which laws might affect such disclosures—China, Angola, Qatar and Cameroon—but several companies with operations in those countries have voluntarily disclosed payments to those governments.

“I do not believe that seeking an exemption will become standard practice,” Kimberley R. Anderson, a partner at Dorsey & Whitney LLP in Seattle, told Bloomberg BNA. “For many companies, there is enough movement toward public disclosure of these payments.”


The reproposal comes in the wake of court action to prod the agency along. In a lawsuit filed by Oxfam America Inc., a federal judge held in September that the final rule was being “unlawfully withheld” and ordered the SEC to craft an expedited schedule (171 SLD, 9/3/15).

Oxfam cheered the proposal.

“There's been a lot of movement in the international arena since the SEC passed its final rule in 2012, so we believe that the SEC's job is much easier this time around to put forward a strong, final rule,” Ian Gary, a senior policy manager in Oxfam America's extractive industries program, told Bloomberg BNA.

Most companies would still have to make such disclosures, Gary said, and attempts to skirt the rule based on foreign law aren't likely to succeed. “It's like a game of whack-a-mole,” he said. “But we're winning.”

International Developments

Since the first attempt at the rule, “significant developments have occurred in global efforts to promote the transparency of resource extraction payments,” Chairman Mary Jo White said.

The E.U. and Canada have adopted similar rules, and the SEC's reproposal would allow reporting companies to submit to the SEC their disclosures from other jurisdictions, provided those jurisdictions have substantially similar rules to the SEC's.

The proposal is “consistent with the emerging global consensus to fight corruption through enhanced disclosure of resource extraction payments to governments,” Commissioner Luis Aguilar said.

The substituted compliance could allow many companies to file only one disclosure report, rather than having to prepare several for multiple jurisdictions, Anderson said.

“That drastically cuts back on some compliance concerns and I think it's a welcome change,” she added.

Waste of Time?

Commissioner Michael Piwowar trashed the proposal as a waste of the SEC's time when it could be focusing on such pending rulemakings as derivatives regulation under Title VII of Dodd-Frank.

“Our disclosure regime must serve investors, not special interests,” he said. “Provisions such as Section 1504 have nothing to do with helping investors.”

Oxfam pushed back on this characterization, saying that investors with roughly a combined $6 trillion under management have supported a rule.

“To pigeonhole this provision as a pet project of a few non-profits would not be correct,” Gary told Bloomberg BNA.

To contact the reporter on this story: Rob Tricchinelli in Washington at

To contact the editor responsible for this story: Phyllis Diamond at

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