On December 11, 2015, the SEC issued proposed rules that would implement disclosure requirements for resource extraction issuers, as required under Section 13(q) of the Exchange Act. Section 13(q), enacted as part of the Dodd-Frank Act, requires the SEC to adopt rules requiring certain disclosure by reporting companies in commercial development of oil, natural gas or minerals.

The SEC had adopted Rule 13q-1, the resource extraction rule, in August 2012, but, soon after, associations of oil, natural gas and mining companies filed suit challenging the final rule on various grounds. In July 2013, the US District Court for the District of Columbia vacated the rule and remanded it to the SEC, ordering the agency to reformulate the rule. On September 18, 2014, following several postponements of an anticipated SEC rulemaking timeline, Oxfam America, Inc. sued the SEC to compel it to implement Section 13(q) of the Exchange Act. On September 2, 2015, the Massachusetts District Court held that the SEC's delay in adopting a final resource extraction rule constitutes unlawful withholding of the rule in violation of the Administrative Procedure Act and ordered the SEC to file with the court an expedited schedule for this rulemaking within 30 days. The SEC filed its expedited schedule with the court in October 2015.

The proposed rules would require a company to disclose payments made to governments if it both:

In addition to the payments it makes directly, an issuer would be required to disclose payments made by its subsidiaries or other entities under its control. Payments included in the issuer's consolidated financial statements that are made by entities that are consolidated or proportionately consolidated, as determined by applicable accounting principles, would fall under this requirement.

The company would be required to disclose any payment that is:

The proposal would require resource extraction issuers to disclose the following information about payments made to further the commercial development of oil, natural gas, or minerals:

The proposal would define "project" using an approach that focuses on the legal agreement that forms the basis for payment liabilities with a government. This definition could also include operational activities governed by multiple legal agreements.

The company would be required to disclose information about these payments on Form SD no later than 150 days after the end of its fiscal year. Form SD would require issuers to include a brief statement directing users to detailed payment information provided in an exhibit and electronically tagged using eXtensible Business Reporting Language (XBRL) format.

Issuers generally would be required to comply with the rules starting with their fiscal year ending no earlier than one year after the effective date of the final rules.

Under the proposal, the SEC could provide exemptive relief from the requirements of the proposed rules on a case-by-case basis using its existing authority under the Exchange Act. In addition, as a result of international developments and the progress made by the USEITI, the proposal would allow issuers to use a report prepared for foreign regulatory purposes or for the USEITI to comply with the proposed rules if the SEC determines that the requirements are substantially similar to the proposed rules.

The SEC is accepting initial comments on the proposal until January 25, 2016. Reply comments, which may respond only to issues raised in the initial comment period, will be due on February 16, 2016.

Update: On January 21, 2016, the SEC extended the initial comment period until February 16, 2016. Reply comments will be due on March 8, 2016.

For more information about Section 13(q) of the Exchange Act and the related rulemaking and litigation, see Practice Note, Summary of the Dodd-Frank Act: SEC Authority and Selected Securities Act and Exchange Act Provisions.