On December 16, 2020, the SEC adopted rules intended to achieve the statutory objective of increasing the transparency of payments to governments for the purpose of the commercial development of their oil, natural gas, and minerals by enforcing Section 13(q) of the Exchange Act. Added to the Exchange Act in 2010 by Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Section 13(q) instructed the SEC to issue final rules that require resource extraction issuers (entities such as oil, natural gas, and mining companies that are required to file reports under Section 13 or 15(d) of the Securities Exchange Act of 1934) annually to file a Form SD that includes information about payments that are made to the federal government or a foreign government related to the commercial development of oil, natural gas, or minerals.
The adopted rules will:
add a provisional exemption for smaller reporting companies and emerging growth companies
mandate public reporting of company-specific, project-level payment information
define the term “project” to require disclosure at the national and major subnational political jurisdiction, as opposed to the contract, level, recognizing that more granular contract-level disclosure could be used to meet the conditions of the rule
incorporate two new provisional exemptions for circumstances in which a foreign law or a pre-existing contract prohibits the required disclosure
define “control” to exclude entities or operations in which an issuer has a proportionate interest
limit the liability for the required disclosure by determining the payment information to be furnished to the SEC but not filed with the agency
include relief for issuers that have recently completed their U.S. initial public offerings
extend the deadline for providing the payment disclosures
A resource extraction issuer must also submit payment information in XBRL using a taxonomy of defined reporting elements. As per the new rule, these tags apply to any payment required to be disclosed, including for example:
the project of the resource extraction issuer to which the payments relate
the financial period during which the payments were made
the total amounts of the payments, by payment type
the currency used to make the payments
the business segment of the resource extraction issuer that made the payments
the government that received the payments, and the country in which the government is located
Rule 13(q)(1) will go into effect 60 days following publication in the Federal Register. After a two-year transition period, an issuer must annually submit Form SD within 270 days after the end of its most recently completed fiscal year. For example, if the rules become effective on March 1, 2021, the compliance date for an issuer with a December 31 fiscal year-end would be Monday, September 30, 2024 (which is 270 days following its fiscal year end of December 31, 2023).
For more information regarding the new rules, contact Elliot Staffin, Special Counsel, Office of Rulemaking, Division of Corporation Finance, by phone at (202) 551-3430 or by mail at US Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549.
Please note that Novaworks is intending on supporting the new XBRL changes for Form SD. For more information, check back here at the blog at novaworkssoftware.com or contact support.