Monday 25 July 2016

Dodd-Frank 1504: Six years in the making


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.” 
SEC Chair Mary Jo White








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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