On December 16, 2020, the Securities and Exchange Commission adopted a final rule under Section 13 and 15(d) the Securities Exchange Act of 1934, that will require resource extraction issuers to file annual reports related to any payments made to a foreign government or the US federal government in connection with the commercial development of oil, natural gas, or minerals. The purpose of the rule is to increase the transparency of payments made to governments by those in the commercial oil, natural gas and mineral industries, while still complying with the Congressional Review Act (CRA). More specifically, Section 13(q) of the Exchange Act requires all commercial oil, gas and mineral extractors, both foreign and domestic, including subsidiaries or entities under the control of a US or foreign government, to disclose the following to the SEC:
• The total amounts of the payments, sorted by category;
• The currency used to make the payments;
• The financial period in which the payments were made;
• The department or business segment that made the payment;
• The country and government that received the payment; and
• The projects to which the payments relate.
Section 13 also requires that the information in the reports be provided using an interactive data format established by the Commission, and requires the Commission to make the reported information available to the public online. The rule will also include, among other things, certain conditional exemptions in cases where disclosures are prohibited by foreign laws or pre-existing contracts; exceptions for smaller reporting companies and emerging growth companies; relief for issuers with recent US initial public offerings, and deadline extensions for certain payment disclosures.
The SEC also issued an order acknowledging that payment reports made by resource extraction issuers to the European Union, the United Kingdom, Norway and Canada, will satisfy the new disclosure obligations, as long as the reports satisfy the transparency objectives of Section 13(q) of the Exchange Act.
The final rule will take effect 60 days after publication in the Federal Register, and following a two-year transition period, will require annual reports no later than 270 days after the end of its most recent fiscal year.