SEC Adopts Resource Extraction Disclosure Rule

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By Rob Tricchinelli

June 27 — The Securities and Exchange Commission adopted its long-embattled resource extraction disclosure rule June 27, requiring companies to reveal the payments they make to governments as part of their attempts to develop oil, gas and minerals.

The rule requires project-level disclosures of payments of $100,000 or more during a fiscal year, including production entitlements, taxes, royalties, fees and infrastructure improvements.

The agency faced a June 27 adoption deadline after Oxfam America Inc. sued to speed up the rulemaking and a federal judge in September ordered the SEC to create an expedited rule schedule (171 SLD, 9/3/15).

Litigious History

The rule, required by Section 1504 of the Dodd-Frank Act, has had a litigious history. It was first adopted in August 2012 but was struck down the following year in a suit by the American Petroleum Institute.

The trade group claimed the SEC didn't do an adequate cost-benefit analysis and that the mandatory disclosure was compelled speech that violated companies' First Amendment rights (128 SLD, 7/3/13).

The rule was reproposed in December 2015, the timing forced by another lawsuit, this time by Oxfam (239 SLD, 12/14/15).

The API torched the reproposal as unconstitutional in a February comment letter and hinted that further legal action could follow. The trade group warned that the proposal violated the First Amendment, deviated from its authorizing statute and imposed heavy costs on extractive industries (33 SLD, 2/19/16).

Exemptions

The newly adopted rule has exemptions—disclosure of resource exploration payments can wait a year, and companies acquiring other companies can also delay their reporting for the acquired company.

Companies subject to the rule may also file disclosures they prepare for other jurisdictions provided the SEC determines that the requirements of those jurisdictions are substantially similar to the SEC's own rules. The SEC said that the EU and Canada, as well as the U.S. Extractive Industries Transparency Initiative, are substantially similar.

Companies must comply Comply with the rule for fiscal years ending on or before Sept. 30, 2018.

To contact the reporter on this story: Rob Tricchinelli in Washington at rtricchinelli@bna.com

To contact the editor responsible for this story: Phyllis Diamond at pdiamond@bna.com

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