The Securities and Exchange Commission adopted rules Monday requiring energy companies to publicly disclose payments to governments, in accordance with provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The rule requires “extraction issuers,” or any company engaged in the extraction or development of oil, natural gas, or minerals to make public any payments made to the U.S. government or to a foreign government. The rule gives “payment” an expansive definition, capturing taxes, fees, royalties, licensing costs, dividends, bonuses, production entitlements, and social responsibility programs. Payments under $100,000 need not be disclosed. (RELATED: SEC Commissioner: Dodd Frank ‘Goes Too Far’)
The new rule comes three years after a previous version was vacated by the U.S. District Court in the District of Columbia.
The SEC said it will allow companies to file disclosure reports using the same disclosure forms issued by Canada and the European Union.
The agency provided some exemptions to the requirements. Energy companies will not have to make financial disclosures related to their exploratory activities for one year. The Commission can also use existing authority to issue exemption on a case to case basis.
“I am pleased that the Commission has completed these final rules, which will provide enhanced transparency to further the statutory goal,” said a statement from SEC Chair Mary Jo White.
The American Petroleum Industry, an industry-aligned interest group, said the new rule would make American energy companies less competitive, saying it “fails to strike the right balance between informing foreign citizens of government revenues and protecting the competitiveness of American companies.” Officials added there appeared to be little difference between the new rule the 2012 version that was struck down by the D.C. district court.
API has not yet decided if it will fight the new rule in court, but did say they would assess its impact on industry activities in the near future.
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