On August 22, the Securities and Exchange Commission adopted final rules to implement Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act), which added Section 13(q) to the Securities Exchange Act of 1934. The new rules will require SEC registrants that are engaged in the development of oil, natural gas or minerals (resource extraction issuers) to report payments made to foreign governments, including sub-national governments, or to the US federal government of taxes, royalties, fees (including license fees), production entitlements, bonuses, dividends and infrastructure improvements on a new Form SD. A payment may be excluded if it (or any series of related payments) is less than $100,000 during the most recent fiscal year of the issuer. Disclosable payments include payments made by a subsidiary or other entity controlled by the issuer. The payments required to be disclosed include, for each “project,” payments in connection with exploration, extracting, processing, export or the acquisition of a license for any such activity.

Detailed information is required about such payments, including the type and total amounts for each product, amounts paid to each government, the currency used, the government entity that received payments and the project of the resource extraction issuer to which the payments relate.

A resource extraction issuer would be required to comply with the new rules for fiscal years ending after September 30, 2013. For a calendar year issuer, the first such report would be required to be “filed” (not “furnished”) on the SEC’s EDGAR system (and thus publicly accessible) by May 30, 2014, and may include a partial report for payments made from September 30, 2013 to December 31, 2013.

Chairman Shapiro recused herself from the vote on the new rules and Commissioner Gallagher, in a lengthy dissent, stated that the SEC “just isn’t the right tool for this type of social policy exercise” and further argued that requiring disclosure on a company-by-company basis will create a huge competitive disadvantage for US registrants, pointing out that national oil companies in Russia, China, Iran and Venezuela will not be required to publicly disclose their cost structures and financial arrangements with host country governments. In his view the congressional mandate contained in the Dodd-Frank Act does not require that resource extraction issuer information provided to the SEC be released publicly in the form provided; he advocated that the social policy objectives of Congress could be accomplished if the SEC aggregated the information and publicly released it on a country-by-country basis rather than a company-by-company basis.

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