The Securities and Exchange Commission (“SEC”) has
finally released the rules for the transparency provision, Section 1504, of the
Dodd-Frank Act.
Section 1504 requires oil, gas and mining companies
listed on US stock exchanges to publicly report, by project, the payments made
to US and foreign governments for access to natural resources in all countries
of operation. Sound familiar? Yes, that is pretty much the same as the EU rules
for extractives companies.
The irony is that the Dodd-Frank Act actually
pre-dates the EU rules, but a series of delays, including lawsuits and counter
lawsuits, have taken six years to resolve.
The rules require resource extraction companies to
disclose payments that are made to further the commercial development of
oil, natural gas, or minerals. This means exploration, extraction, processing,
and export (or the acquisition of a license for any such activity).
The rules include a de minimis defined as a single
payment or a series of related payments, less than $100,000 during the same
fiscal year.
Companies must be disclose, on a project-by-project
basis:
- Taxes;
- Royalties;
- Fees (including license fees);
- Production entitlements;
- Bonuses;
- Dividends;
- Payments for infrastructure improvements; and
- If required by law or contract, community and social responsibility payments.
Those who have followed this debate closely, and
particularly the EU rules, will appreciate that the definition of “project” has
been the cause of much debate. Suffice to say here that the SEC has attempted
to align the Dodd-Frank definition with that in the EU and Canada requirements.
The rules allow a one year delay for disclosure of
resource exploration payments. There is also a concession to delay disclosure
for newly acquired companies.
Similar to the EU rules, there is no requirement for
the numbers to be audited.
“I am pleased that the Commission has completed these final rules, which will provide enhanced transparency to further the statutory goal.”
With so many similar, but uncoordinated transparency
requirements now in operation, there is also a concession to allow companies to
file disclosures they prepare for other regimes provided the SEC deems them
equivalent to their own rules. This will include the EU, Canada, and U.S.
Extractive Industries Transparency Initiative disclosures, for example.
These rules apply for fiscal years ending on or before
30 September 2018, and disclosures must be made by 150 days after the year-end.
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