Regulatory rollbacks became the “it” topic and came into full swing with Congress ramping up the process of rolling back multiple regulations, including a recent Securities and Exchange Commission requirement for oil, gas and mining companies to disclose payments that they make to foreign governments for access to extract natural resources.
House Majority Leader Kevin McCarthy brought specific attention to recent resource extraction disclosure requirements, stating, “The House will also take the ax to the Securities and Exchange Commission’s disclosure rule for resource extraction.”
It’s been a bumpy start for the SEC’s Resource Extraction Disclosure initiative. The Cardin-Lugar amendment became law in 2010 as Section 1504 of the Dodd-Frank Act. Originally adopted in 2012 alongside the conflict minerals rule, the Resource Extraction requirements faced almost immediate challenges and litigation, culminating with the U.S. District Court of Washington D.C. vacating the 2012 rules citing that the SEC had “misread” the Dodd-Frank mandate.
The SEC relaunched the rule making process resulting in the June 27, 2016 final rule 13q-1 stipulating that all “resource extraction issuers” publicly report on all payments to foreign governments equal to or exceeding $100,000 annually, and made “to further the commercial development of oil, natural gas or minerals.”
Impacted issuers were to make their first annual filings pursuant to rule 13q-1 no later than 150 days from their first fiscal year end on or after September 30, 2018 on designated Form SD.
To date, there have been no examples of issuers making this type of disclosure on Form SD. However, issuers have covered off on the topic in recent Management Discussion and Analysis disclosure in both the 10-Q and 10-K, gently touching on the possibility of the disclosure topic.
With Resource Extraction Disclosure specifically being called out as part of the regulation rollback drumbeat, will we actually see this type of reporting, or will we be taking a last look at one of the first rules felled by deregulation? If so, this could herald a move towards less transparency for oil and gas companies in an area of reporting already in play and overseen by regulators in Canada and Europe. Will the future of Resource Extraction Disclosure also bring current Conflict Minerals reporting into question?