New "Publish What You Pay" Rules Adopted by SEC for Resource Extraction Sector

The SEC has adopted final rules requiring mining, oil and natural gas companies that are required to file an annual report with the SEC to provide detailed disclosure of payments they make to governments.

What You Need to Know

  • Payments made to a foreign government of any level, or to a company that is majority-owned by a foreign government, or to the U.S. federal government must be disclosed (payments to U.S. governments below the federal level may be excluded).
  • The new rules do not provide exemptions to foreign private issuers and provide no exemptions based on size, ownership, or the extent of operations constituting commercial development of oil, natural gas, or minerals.
  • The rules are substantially similar to those under Canada’s Extractive Sector Transparency Measures Act (ESTMA), and Canadian cross-border companies will be permitted to file their ESTMA reports with the SEC in satisfaction of the U.S. rules.

Key Provisions of the SEC Rules

  • Reportable payments, whether a single payment or a series of related payments, are those equal to or exceeding US$100,000 during the most recent fiscal year that are made to further the commercial development of oil, natural gas or minerals.
  • Reportable payment types include taxes, royalties, license and other fees, production entitlements, bonuses, dividends, community and social responsibility payments (if required by law or contract) and payments for infrastructure improvements.
  • Information required to be disclosed includes the amount of payments made on a per-project and per-government basis, the type of payment, the applicable project’s geographic location, the fiscal year such payment was made, and the government that received the payment.
  • To protect confidential information about new resource discoveries, disclosure of payments relating to exploratory activities may be delayed for one year.
  • A Form SD must be filed annually within 150 days of fiscal year end, beginning with fiscal year ending on or after September 30, 2018. Therefore, for companies with December 31 year ends, the first reports on Form SD will be due by May 30, 2019.
  • Companies that have acquired or otherwise obtain control over a company whose resource extraction payments are required to be disclosed, and that has not previously been obligated to provide such disclosure under these new rules or another “substantially similar” jurisdiction’s requirements in its last full fiscal year, do not need to commence reporting payment information for the acquired company until the Form SD filing for the fiscal year immediately following the acquisition.

Alternative Reporting

If a company is subject to a substantially similar regulatory regime, the company (or a government, industry group or trade association) may apply to have the SEC recognize that regime. The SEC has already recognized Canada’s ESTMA and the EU Accounting and Transparency Directives, so companies subject to those regimes may file those reports with the SEC, under cover of Form SD, to satisfy the U.S. rules. The U.S. Extractive Industries Transparency Initiative has also been recognized, but only in respect of payments to the U.S. government, so a company complying with that regime must supplement their Form SD with additional disclosures.

Please see the following SEC publications for the complete text of the new rules: Disclosure of Payments by Resource Extraction Issuers and Order Recognizing the Resource Extraction Payment Disclosure Requirements of the European Union, Canada and the U.S. Extractive Industries Transparency Initiative as Substantially Similar to the Requirements of Rule 13q-1 under the Securities Exchange Act of 1934.

For information about Canada's ESTMA, please see our bulletins New "Publish What You Pay" Guidance from Natural Resources Canada and Reminder: June 30 Deadline to Enrol under the Extractive Sector Transparency Measures Act.

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This publication is a general discussion of certain legal and related developments and should not be relied upon as legal advice. If you require legal advice, we would be pleased to discuss the issues in this publication with you, in the context of your particular circumstances.

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