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Big regulatory news for the natural resources sector last Friday. With the U.S. Securities and Exchange Commission (SEC) releasing a new draft of a controversial set of disclosure rules for the industry.
The new SEC policy requires mining and petroleum companies working internationally to report payments made to governments in the course of project development. Potentially including license payments, taxes, royalties, signature bonuses, and any other fees incurred as part of business.
The SEC gave the same policy a try back in 2013. But the rule was thrown out by a D.C. court following a challenge from the American Petroleum Institute (API) — which claimed the rules would put U.S. firms at a disadvantage in doing business globally.
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Oxfam subsequently sued the SEC and won an order this September that a new draft of the rules must be finalized soon. And so the Commission has put forward this new draft — with the stated aim of finalizing it by June 27.
So what’s new in this draft? The SEC has softened the rule a little — allowing companies to apply for relief from reporting on a case-by-case basis. Companies would also be allowed to use payment reports prepared for foreign regulatory purposes, in some cases.
API was quick to jump on the new draft. Saying that the forced disclosure of payment information like taxes and royalties could hurt oil and gas companies by “potentially giving their competitors an upper hand when bidding for future energy contracts”.
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It’s unclear if API will once again sue to stop the rules. Whatever the case, this is an important development for all international resource operators to keep an eye on.
The SEC is accepting comments and replies on the new rules up until February 16, 2016. Watch after that for indications on how this critical policy is likely to proceed.
Here’s to policy and progress
By Dave Forest
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Dave is Managing Geologist of the Pierce Points Daily E-Letter.