The regulatory soap opera that is the Securities and Exchange Commission’s extractive payments rule is, once again, nearing its conclusion with the issuance of a rewritten proposal on Friday.

The rule would implement Section 1504 or the “Cardin-Lugar” provision of the Dodd-Frank Act. It requires public companies involved in the extraction of natural resources to annually report payments they, subsidiaries, and entities they control make to governments for the commercial development of oil, natural gas, or minerals.

The SEC previously adopted rules to implement the mandate back in 2012, but they were subsequently vacated after a successful lawsuit by the American Petroleum Institute. Fast forward to September 2015 and Oxfam America prevailed with a lawsuit of its own, demanding that the SEC make good on its promise to redraft the rules. Complying with the resulting court order, the SEC agreed to an expedited schedule for filing and approving one.

The proposed rules would require domestic and foreign issuers to disclose government payments at the project level, similar to the approach adopted in the European Union and proposed in Canada. The public disclosures will be filed annually with the Commission on Form SD and electronically tagged using the eXtensible Business Reporting Language (XBRL) format. Companies would be required to file Form SD no later than 150 days after the end of their fiscal year.

Payments that must be disclosed include those made to further the commercial development of oil, natural gas, or minerals and are “not de minimis.”Commercial development is defined as exploration, extraction, processing, and export, or the acquisition of a license for any such activity.  “Not de minimis” is defined as any payment, whether a single payment or a series of related payments, which equals or exceeds $100,000 during the same fiscal year. Payments that need to be disclosed include: taxes; royalties; fees (including license fees); production entitlements; bonuses; dividends; and payments for infrastructure improvements.

The proposal also requires the following information:

The type and total amount of such payments made for each project of the resource extraction issuer relating to the commercial development of oil, natural gas, or minerals.

Type and total amount of such payments for all projects made to each government.

Total amounts of the payments by category.

Currency used to make the payments.

Financial period in which the payments were made.

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.

The project of the resource extraction issuer to which the payments relate.

The particular resource that is the subject of commercial development.

The sub-national geographic location of the project.

The proposed rules define “project” using an approach that is focused 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 proposing release notes that the Commission could provide exemptive relief from these requirements on a case-by-case basis.  

Initial comments on the proposed rule will be due on January 25, 2016.  Reply comments, which may respond only to issues raised in the initial comment period, will be due on February 16, 2016.

SEC Chairman Mary Jo White said she was particularly interested in views about how smaller reporting companies would be affected by the recommendations. This rulemaking is being conducted under an expedited schedule submitted to the court, and I urge interested parties to submit their views promptly.

“The rules being re-proposed today fulfill the Commission’s Congressional mandate, meet the conditions of the District Court’s order, and are consistent with the emerging global consensus to fight corruption through enhanced disclosure of resource extraction payments to governments,” Commissioner Luis Aguilar said.

While it was easy to predict that Michael Piwowar, currently the lone Republican on the short-handed Commission, would be against the rule based on his past commentary. Less predictable was his use of rapper Eminem’s “Lose Yourself” to preface that dissent: “Look, if you had, one shot, or one opportunity/to seize everything you ever wanted, in one moment/would you capture it, or just let it slip?”

“That pretty much sums up the efforts of the special interest groups behind this proposal, he said prior to voting against the proposed rule. “There is a reason that the resource extraction provision of the Dodd-Frank Act was inserted at the last minute into Title XV…That fateful decision turned Dodd-Frank into a so-called Christmas tree bill, with gifts aplenty for Democratic members and their special-interest supporters in exchange for their votes and nothing more than a Scrooge-like “Bah! Humbug!” for American investors.”

The proposal, Piwowar warned, singles out publicly-traded companies for compliance and disclosure and could put publicly-traded companies at a competitive disadvantage compared to private companies and foreign companies that are not subject to Commission reporting requirements. He also objected to the disclosure of project-level payment information that “might be used by third-party actors, including non-profit and non-governmental organizations, as a means to extract their own payments in return for not opposing various projects throughout the world.”

A more positive view of the rule came from Oxfam America.

“While we’re still reviewing the details, it’s clear that the SEC has made a positive step forward. We are pleased to see that the SEC is proposing rules that generally align with those in other markets, by requiring public, company by company, project-level reporting with no categorical exemptions,” said Ian Gary, associate policy director for fueling development at Oxfam America.

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