On Friday, December 11th, the Securities and Exchange Commission (SEC) voted to repropose Rule 13q-1 to require disclosure of certain payments made by resource extraction companies to the U.S. or other governments. The reproposed rule, mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act), would require resource extraction companies to annually disclose any payment in a fiscal year of $100,000 or greater made to the U.S. federal government or a foreign government in connection with resource extraction activity. The rule defines "payment" to include taxes, royalties, fees, production entitlements, bonuses, dividends and payments for infrastructure improvements. The SEC also proposed to amend Form SD, which presently covers conflict minerals disclosures, to include the disclosures required by reproposed Rule 13q-1. Unlike conflict minerals reporting, which is due on May 31st after the end of each calendar year, Form SD reporting under Rule 13q-1 would be due 150 days after the end of a resource extraction issuer’s fiscal year.

The requirements will extend to any reporting company under the Exchange Act, along with any subsidiary included in a reporting company’s consolidated financial filings, which is significantly engaged in the commercial development of oil, gas or minerals.

The required disclosures regarding the payments, with XBRL tags, would include such information as the type of payment, amount and currency used, the financial period in which the payments were made, the specific business segment(s) which made the payment, identification of the government that received the payment, the country in which such government was located and the subnational geographic location of the project. The reproposed rule also permits a resource extraction issuer to use an alternate reporting regime which the SEC deems substantially similar to the rule.

The new disclosures represent a second attempt by the SEC to meet its rulemaking obligations under Section 1504 of the Dodd-Frank Act, now Section 13(q) of the Exchange Act. The United States District Court for the District of Columbia invalidated the SEC’s original Rule 13q-1 in 2013. The court based its decision on two findings: first, that the SEC misread Section 13(q) to compel the public disclosure of the issuers’ reports; and second, the SEC’s explanation for not granting an exemption for when disclosure is prohibited by foreign governments was arbitrary and capricious. On September 2, 2015 the United States District Court for the District of Massachusetts ordered the SEC to file an expedited schedule for the adoption of a new rule to implement Section 1504 of the Dodd-Frank Act. In the reproposed rule, the SEC addresses the second issue by providing resource extraction issuers with the ability to apply for exemptive relief on a case-by-case basis. However, the Form SD would be publicly filed and available. As such, it seems likely that further court challenges will be made to the reproposed rule, if adopted by the SEC.

In support of the reproposed Rule 13q-1, the SEC cited similar regulatory frameworks in Canada and the European Union, as well as the Principles of the Extractive Industries Transparency Initiative.

Public comments are due by January 25, 2016, and responsive comments are due February 26, 2016.