80978 Federal Register / Vol. 75, No. 246 / Thursday, December 23, 2010 / Proposed Rules 

1Proposed 17 CFR 229.105. 

2 17 CFR 229.10 et al. 

3 17 CFR 229.601. 

4 17 CFR 249.310. 

5 17 CFR 249.220f. 

6 17 CFR 249.240f. 

7 15 U.S.C. 78a et seq. 

8Public Law 111–203 (July 21, 2010). To facilitate 

public input on the Act, the Commission has 

provided a series of e-mail links, organized by 

topic, on its Web site at http://www.sec.gov/

spotlight/regreformcomments.shtml. The public 

comments we received are available on our Web 

site at http://www.sec.gov/comments/df-title-xv/

specialized-disclosures/specializeddisclosures.shtml. 

9See proposed Regulation S–K Item 105 [17 CFR 

229.105]. 

10See proposed Regulation S–K Item 601(b)(97) 

and (98) [17 CFR 229.601(b)(97) and (98)]. 

11See proposed Item 16I under Part II of Form 

20–F, and proposed paragraph (17) to General 

Instruction B of Form 40–F. 

SECURITIES AND EXCHANGE 

COMMISSION 

17 CFR Parts 229 and 249 

[Release No. 34–63549; File No. S7–42–10] 

RIN 3235–AK85 

Disclosure of Payments by Resource 

Extraction Issuers 

AGENCY: Securities and Exchange 

Commission. 

ACTION: Proposed rule. 

SUMMARY: We are proposing 

amendments to our rules pursuant to 

Section 1504 of the Dodd-Frank Wall 

Street Reform and Consumer Protection 

Act relating to disclosure of payments 

by resource extraction issuers. Section 

1504 added Section 13(q) to the 

Securities Exchange Act of 1934, which 

requires the Commission to issue rules 

requiring resource extraction issuers to 

include in an annual report information 

relating to any payment made by the 

issuer, or by a subsidiary or another 

entity controlled by the issuer, to a 

foreign government or the Federal 

Government for the purpose of the 

commercial development of oil, natural 

gas, or minerals. Section 13(q) requires 

a resource extraction issuer to provide 

information about the type and total 

amount of payments made for each 

project related to the commercial 

development of oil, natural gas, or 

minerals, and the type and total amount 

of payments made to each government. 

In addition, Section 13(q) requires a 

resource extraction issuer to provide 

certain information regarding those 

payments in an interactive data format, 

as specified by the Commission. 

DATES: Comments should be received on 

or before January 31, 2011. 

ADDRESSES: Comments may be 

submitted by any of the following 

methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/

rules/proposed.shtml); 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number S7–42–10 on the subject line; 

or 

• Use the Federal eRulemaking Portal 

(http://www.regulations.gov). Follow the 

instructions for submitting comments. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, U.S. 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

• All submissions should refer to File 

Number S7–42–10. This file number 

should be included on the subject line 

if e-mail is used. 

To help us process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/

rules/proposed.shtml). Comments also 

are available for Web site viewing and 

copying in the Commission’s Public 

Reference Room, 100 F Street, NE., 

Washington, DC 20549, on official 

business days between the hours of 10 

a.m. and 3 p.m. All comments received 

will be posted without change; we do 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. 

FOR FURTHER INFORMATION CONTACT: 

Tamara Brightwell, Senior Special 

Counsel, Division of Corporation 

Finance, or Elliot Staffin, Special 

Counsel in the Office of International 

Corporate Finance, Division of 

Corporation Finance, at (202) 551–3290, 

U.S. Securities and Exchange 

Commission, 100 F Street, NE., 

Washington, DC 20549–4553. 

SUPPLEMENTARY INFORMATION: We are 

proposing new Item 105 1 of Regulation 

S–K,2 an amendment to Item 601 of 

Regulation S–K,3 and amendments to 

Forms 10–K,4 20–F,5 and 40–F 6 under 

the Securities Exchange Act of 1934 

(‘‘Exchange Act’’).7

Table of Contents 

I. Background 

II. Proposed Rules Under Section 13(q) 

A. Summary 

B. Definition of ‘‘Resource Extraction 

Issuer’’ 

C. Definition of ‘‘Commercial Development 

of Oil, Natural Gas, or Minerals’’ 

D. Definition of ‘‘Payment’’ 

1. Types of Payments 

2. The ‘‘Not De Minimis’’ Requirement 

3. The ‘‘Project’’ Requirement 

4. Payments by ‘‘a Subsidiary * * * or an 

Entity Under the Control of the Resource 

Extraction Issuer’’ 

5. Other Matters 

E. Definition of ‘‘Foreign Government’’ 

F. Disclosure Required and Form of 

Disclosure 

1. Annual Report Requirement 

2. Exhibits and Interactive Data Format 

Requirement 

3. Treatment for Purposes of the Securities 

Act and the Exchange Act 

G. Effective Date 

H. General Request for Comment 

III. Paperwork Reduction Act 

A. Background 

B. Burden and Cost Estimates Related to 

the Proposed Amendments 

1. Form 10–K 

2. Regulation S–K 

3. Form 20–F 

4. Form 40–F 

C. Summary of Proposed Changes to 

Annual Compliance Burden in 

Collection of Information 

D. Solicitation of Comment 

IV. Cost-Benefit Analysis 

A. Benefits 

B. Costs 

V. Consideration of Burden on Competition 

and Promotion of Efficiency, 

Competition and Capital Formation 

VI. Initial Regulatory Flexibility Analysis 

A. Reasons for, and Objectives of, the 

Proposed Action 

B. Legal Basis 

C. Small Entities Subject to the Proposed 

Amendments 

D. Reporting, Recordkeeping, and Other 

Compliance Requirements 

E. Duplicative, Overlapping, or Conflicting 

Federal Rules 

F. Significant Alternatives 

G. Solicitation of Comment 

VII. Small Business Regulatory Enforcement 

Fairness Act 

VIII. Statutory Authority and Text of 

Proposed Rule and Form Amendments 

I. Background 

This release is one of several we are 

required to issue to implement 

provisions of the Dodd-Frank Wall 

Street Reform and Consumer Protection 

Act of 2010 (the ‘‘Act’’).8 This release 

proposes a new rule 9 and certain rule 10

and form amendments 11 to implement 

Section 13(q) of the Exchange Act, 

which was added by Section 1504 of the 

Act. New Section 13(q) requires the 

Commission to ‘‘issue final rules that 

require each resource extraction issuer 

to include in an annual report of the 

resource extraction issuer information 

relating to any payment made by the 

resource extraction issuer, a subsidiary 

of the resource extraction issuer, or an 

entity under the control of the resource 

extraction issuer to a foreign 

government or the Federal Government 

mstockstill on DSKH9S0YB1PROD with PROPOSALS4

Federal Register / Vol. 75, No. 246 / Thursday, December 23, 2010 / Proposed Rules 80979 

12 15 U.S.C. 78m(q)(2)(A). 

13 15 U.S.C. 78m(q)(1)(D). 

14 15 U.S.C. 78m(q)(1)(A). 

15 15 U.S.C. 78m(q)(1)(B). 

16 15 U.S.C. 78m(q)(1)(C). 

17 15 U.S.C. 78m(q)(2)(E). 

18The EITI was announced by former UK Prime 

Minister Tony Blair at the World Summit on 

Sustainable Development in Johannesburg in 

September 2002. See http://www.eiti.org/eiti/ 

history. The World Bank Group officially endorsed 

the EITI in 2003. See Implementing the Extractive 

Industries Transparency Initiative (2008) 

(‘‘Implementing the EITI’’) (available at http:// 

eiti.org/document/implementingtheeiti). The EITI is 

a voluntary coalition of oil, natural gas, and mining 

companies, foreign governments, investor groups, 

and other international organizations dedicated to 

fostering and improving transparency and 

accountability in countries rich in oil, natural gas, 

and minerals through the publication and 

verification of company payments and government 

revenues from oil, natural gas, and mining. See 

Implementing the EITI. According to the EITI, ‘‘[b]y 

encouraging greater transparency and 

accountability in countries dependent on the 

revenues from oil, gas and mining, the potential 

negative impacts of mismanaged revenues can be 

mitigated, and these revenues can instead become 

an important engine for long-term economic growth 

that contributes to sustainable development and 

poverty reduction.’’ EITI Source Book (2005) at p. 

4 (available at http://eiti.org/files/document/

sourcebookmarch05.pdf). 

Currently five countries—Liberia, Azerbaijan, 

Timor Leste, Ghana, and Mongolia—have achieved 

‘‘EITI compliant’’ status by completing a validation 

process in which company payments are matched 

with government revenues by an independent 

auditor (available at http://eiti.org/countries/ 

compliant). Some 27 other countries are EITI 

candidates in good standing and are in the process 

of complying with EITI standards (available at 

http://eiti.org/candidatecountries). Several other 

countries have indicated their intent to implement 

the EITI (available at http://eiti.org/othercountries). 

Implementation of the EITI varies across 

countries—the EITI provides criteria and a 

framework for implementation, but allows countries 

to make key decisions on the scope of its program 

(e.g. degree of aggregation of data, inclusion of 

subnational or social or community payments). See 

Source Book, pp. 23–24. 

19See, e.g., statement by Senator Lugar, one of the 

authors of Section 1504 (‘‘This domestic action will 

complement multilateral transparency efforts such 

as the Extractive Industries Transparency 

Initiative—the EITI—under which some countries 

are beginning to require all extractive companies 

operating in their territories to publicly report their 

payments.’’), 111 Cong. Rec. S3816 (daily ed. May 

17, 2010). Other examples of international 

transparency efforts include the recent amendments 

of the Hong Kong Stock Exchange listing rules for 

mineral companies and the London Stock Exchange 

AIM rules for extractive companies. See 

Amendments to the GEM Listing Rules of the Hong 

Kong Stock Exchange, Chapter 18A.05(6)(c) 

(effective June 3, 2010) (available at http://

www.hkex.com.hk/eng/rulesreg/listrules/

gemrulesup/Documents/gem34_miner.pdf) 

(requiring a mineral company to include in its 

listing document, if relevant and material to the 

company’s business operations, information 

regarding its compliance with host country laws, 

regulations and permits, and payments made to 

host country governments in respect of tax, 

royalties and other significant payments on a 

country by country basis) and Note for Mining and 

Oil & Gas Companies—June 2009 (available at 

http://www.londonstockexchange.com/companiesand-advisors/aim/advisers/rules/guidancenote.pdf) (requiring disclosure in the initial listing 

of ‘‘any payments aggregating over £10,000 made to 

any government or regulatory authority or similar 

body made by the applicant or on behalf of it, in 

regards to the acquisition of, or maintenance of its 

assets.’’). 

20See the list of EITI supporting countries at 

http://eiti.org/supporters/countries. 

21 15 U.S.C. 78m(q)(2)(C). 

22 15 U.S.C. 78m(q)(2)(D). 

23 15 U.S.C. 78m(q)(1)(E). 

24 15 U.S.C. 78m(q)(1)(F). 

25 15 U.S.C. 78m(q)(2)(D)(i). 

26 15 U.S.C. 78m(q)(2)(D)(ii). 

27 15 U.S.C. 78m(q)(2)(D)(ii). 

28 15 U.S.C. 78m(q)(2)(F). 

29 15 U.S.C. 78m(q)(3). 

for the purpose of the commercial 

development of oil, natural gas, or 

minerals, including—(i) 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, and (ii) the type and total 

amount of such payments made to each 

government.’’ 12

Section 13(q) provides the following 

definitions and descriptions of several 

key terms: 

• ‘‘Resource extraction issuer’’ means 

an issuer that is required to file an 

annual report with the Commission and 

engages in the commercial development 

of oil, natural gas, or minerals; 13

• ‘‘Commercial development of oil, 

natural gas, or minerals’’ includes 

exploration, extraction, processing, 

export, and other significant actions 

relating to oil, natural gas, or minerals, 

or the acquisition of a license for any 

such activity, as determined by the 

Commission;14

• ‘‘Foreign government’’ means a 

foreign government, a department, 

agency or instrumentality of a foreign 

government, or a company owned by a 

foreign government, as determined by 

the Commission;15 and 

• ‘‘Payment’’ means a payment that: 

• Is made to further the commercial 

development of oil, natural gas, or 

minerals; 

• Is not de minimis; and 

• Includes taxes, royalties, fees 

(including license fees), production 

entitlements, bonuses, and other 

material benefits, that the Commission, 

consistent with the guidelines of the 

Extractive Industries Transparency 

Initiative (to the extent practicable), 

determines are part of the commonly 

recognized revenue stream for the 

commercial development of oil, natural 

gas, or minerals.16

Section 13(q) specifies that ‘‘[t]o the 

extent practicable, the rules issued 

under [the section] shall support the 

commitment of the Federal Government 

to international transparency promotion 

efforts relating to the commercial 

development of oil, natural gas, or 

minerals.’’ 17 As noted above, the statute 

explicitly refers to one international 

initiative, the Extractive Industries 

Transparency Initiative (‘‘EITI’’),18 in the 

definition of ‘‘payment.’’ Although the 

provision regarding international 

transparency efforts does not explicitly 

mention the EITI, the legislative history 

indicates that the EITI was considered 

in connection with the new statutory 

provision.19 The United States is one of 

several countries that support the 

EITI.20

The Commission’s rules under 

Section 13(q) must require a resource 

extraction issuer to submit the payment 

information included in an annual 

report in an interactive data format 21

using an interactive data standard 

established by the Commission.22

Section 13(q) defines ‘‘interactive data 

format’’ to mean an electronic data 

format in which pieces of information 

are identified using an interactive data 

standard.23 The section also defines 

‘‘interactive data standard’’ as a 

standardized list of electronic tags that 

mark information included in the 

annual report of a resource extraction 

issuer.24 The rules issued pursuant to 

Section 13(q) 25 must include electronic 

tags that identify: 

• The total amount of payments, by 

category; 

• The currency used to make the 

payments; 

• The financial period in which the 

payments were made; 

• the 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; and 

• The project of the resource 

extraction issuer to which the payments 

relate.26 Section 13(q) further authorizes 

the Commission to require electronic 

tags for other information that it 

determines is necessary or appropriate 

in the public interest or for the 

protection of investors.27

Section 13(q) provides that the final 

rules ‘‘shall take effect on the date on 

which the resource extraction issuer is 

required to submit an annual report 

relating to the fiscal year * * * that 

ends not earlier than 1 year after the 

date on which the Commission issues 

final rules[.]’’ 28

Finally, Section 13(q) requires the 

Commission to make publicly available 

online, to the extent practicable, a 

compilation of the information required 

to be submitted by resource extraction 

issuers under the new rules.29 The 

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80980 Federal Register / Vol. 75, No. 246 / Thursday, December 23, 2010 / Proposed Rules 

30See proposed Item 105 of Regulation S–K. 

31See proposed Items 601(b)(97) and (98) of 

Regulation S–K. 

32See proposed Item 4(c) under Part I of Form 

10–K. 

33See proposed Item 105(a) and Items 601(b)(97) 

and (b)(98) of Regulation S–K. 

34While Form 20–F may be used by any foreign 

private issuer, Form 40–F is only available to a 

Canadian issuer that is eligible to participate in the 

U.S.-Canadian Multijurisdictional Disclosure 

System (‘‘MJDS’’). 

35See proposed Item 16I under Part II of Form 

20–F and proposed paragraph (17) to General 

Instruction B of Form 40–F. 

36See proposed Item 105(b)(4) of Regulation S– 

K, proposed Item 16I.B.(4) under Part II of Form 20– 

F, and proposed paragraph B.(17)(b)(4) under the 

General Instructions of Form 40–F. 

37A commentator requested that the Commission 

consider an exemption to allow foreign private 

issuers to follow their home country rules and 

disclose in their Form 20–F the required home 

country disclosure. The commentator expressed 

concern that foreign private issuers will be required 

to provide multiple payment disclosures in their 

Form 20–F to satisfy U.S., UK, and EU 

requirements. See letter from Royal Dutch Shell plc 

(‘‘RDS’’) (October 25, 2010). 

38See the definition of ‘‘smaller reporting 

company’’ in Exchange Act Rule 12b–2 [17 CFR 

240.12b–2] and the definition of ‘‘foreign private 

issuer’’ in Exchange Act Rule 3b-4 [17 CFR 240.3b– 

4]. 39Cf., Statement of Senator Cardin in support of 

Amendment No. 3732 to Restoring American 

Financial Stability Act (S. 3217) (indicating the 

legislation was intended to cover foreign private 

issuers by stating that ‘‘The provisions of this 

amendment would apply to all oil, gas, and mining 

companies required to file periodic reports with the 

SEC; namely, 90 percent of the major 

internationally operating oil companies and 8 out 

of the 10 largest mining companies in the world— 

only 2 of which are U.S. companies. We are talking 

about foreign-owned companies, not U.S. 

companies, by and large. Of the top 50 oil and gas 

companies by proven oil reserves, 20 are national 

oil companies that do not usually operate 

internationally. These companies are not registered 

with the SEC and * * * do not compete with 

internationally operating companies. Of the 

remaining 30 companies that do operate 

internationally, 27 would be covered by this 

legislation—27 of the 30. These include Canadian, 

European, Russian, Chinese, Brazilian, and other 

international companies.’’), 111 Cong. Rec. S3316 

(daily ed. May 6, 2010). See also letter from Senator 

Cardin (December 1, 2010) (‘‘Senator Cardin’’) 

(stating that, with respect to the meaning of 

resource extraction issuer, ‘‘the intent was to 

include all issuers, including foreign issuers, which 

have a reporting requirement to the SEC.’’). 

statute does not dictate a particular form 

or content for that compilation. 

II. Proposed Rules Under Section 13(q) 

A. Summary 

As discussed in detail below, we are 

proposing amendments to Form 10–K, 

Form 20–F, and Form 40–F to require 

the disclosures mandated by Section 

13(q). The disclosure requirements for 

Form 10–K would be set forth in new 

Item 105 of Regulation S–K,30 which 

would require a resource extraction 

issuer to provide information relating to 

any payment made by it, a subsidiary, 

or an entity under its control to a foreign 

government or the U.S. Federal 

Government during the fiscal year 

covered by the annual report for the 

purpose of the commercial development 

of oil, natural gas, or minerals. The item 

would specify that this information 

would be set forth in two exhibits to the 

filing—one exhibit filed in HyperText 

Markup Language (‘‘HTML’’) or 

American Standard Code for 

Information Interchange (‘‘ASCII’’) 

format and another exhibit filed in 

eXtensible Business Reporting Language 

(‘‘XBRL’’) format. We are proposing to 

amend Item 601 of Regulation S–K to 

add these new exhibits to Form 10–K for 

the disclosure.31 We also propose to add 

new Item 4(c) to Form 10–K to require 

a resource extraction issuer to provide 

disclosure in Part I of Form 10–K noting 

that the information required by Section 

13(q) and new Item 105 of Regulation S– 

K is included in exhibits to the filing.32

An issuer would be required to include 

in the proposed exhibits the type and 

total amount of payments made for each 

project, as well as the type and total 

amount of payments made to each 

government, relating to the commercial 

development of oil, natural gas, or 

minerals.33 The proposed rules also 

would require a resource extraction 

issuer to include certain detailed 

information about the payments made. 

Section 13(q) applies to any issuer 

that is required to file an annual report 

with the Commission and that engages 

in the commercial development of oil, 

natural gas, or minerals, which includes 

foreign private issuers that file annual 

reports on Forms 20–F and 40–F.34

Because Regulation S–K does not apply 

to those forms, we propose to amend 

Forms 20–F and 40–F to include the 

same disclosure requirements as those 

proposed for resource extraction issuers 

that are not foreign private issuers.35

As noted above, Section 13(q) requires 

the Commission to issue rules requiring 

the payment information to be 

submitted in an interactive data format. 

We propose to require a resource 

extraction issuer to submit the 

information in an exhibit using the 

interactive data standard known as 

XBRL. 

B. Definition of ‘‘Resource Extraction 

Issuer’’ 

Under the proposed rule and form 

amendments, ‘‘resource extraction 

issuer’’ would be defined as it is under 

Section 13(q). Specifically, a resource 

extraction issuer would be defined as an 

issuer that: 

• Is required to file an annual report 

with the Commission; and 

• Engages in the commercial 

development of oil, natural gas, or 

minerals.36

Section 13(q) specifically applies to 

issuers that are required to file an 

annual report with the Commission and 

that engage in the commercial 

development of oil, natural gas, or 

minerals. The provision does not 

indicate that the Commission, in 

adopting implementing rules, should 

provide different standards for different 

issuers or should exempt any issuers 

from the new requirements.37 Thus, 

under the proposal, all U.S. companies 

and foreign companies that are engaged 

in the commercial development of oil, 

natural gas, or minerals, and that are 

required to file annual reports with the 

Commission, regardless of size or the 

extent of business operations 

constituting commercial development of 

oil, natural gas, or minerals, would be 

subject to Section 13(q). Likewise, the 

proposed rules would apply equally to 

companies that fall within this 

definition whether or not they are 

owned or controlled by governments. 

Request for Comment 

1. Should the Commission exempt 

certain categories of issuers, such as 

smaller reporting companies or foreign 

private issuers,38 from the proposed 

rules? If so, which ones and why? If not, 

why not? Would providing an 

exemption for certain issuers be 

consistent with the statute? 39 If we do 

not provide such an exemption when 

adopting final rules, would foreign 

private issuers or any other issuers 

deregister to avoid the disclosure 

requirement? 

2. Would our proposed rules present 

undue costs to smaller reporting 

companies? If so, how could we mitigate 

those costs? Also, if our proposed rules 

present undue costs to smaller reporting 

companies, do the benefits of making 

their resource extraction payment 

information publicly available justify 

these costs? Should our rules provide 

more limited disclosure and reporting 

obligations for smaller reporting 

companies? If so, what should these 

limited requirements entail? Should our 

rules provide for a delayed 

implementation date for smaller 

reporting companies in order to provide 

them additional time to prepare for the 

requirement and the benefit of observing 

how larger companies comply? 

3. Should the Commission provide an 

exemption to allow foreign private 

issuers to follow their home country 

rules and disclose in their Form 20–F 

the required home country disclosure? 

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Federal Register / Vol. 75, No. 246 / Thursday, December 23, 2010 / Proposed Rules 80981 

40See Section I. above and 15 U.S.C. 

78m(q)(1)(A). 

41See proposed Item 105(b)(1) of Regulation S– 

K, proposed Item 16I.B.(1) under Part II of Form 20– 

F, and proposed paragraph B.(17)(b)(1) under the 

General Instructions of Form 40–F. 

42See, e.g., Implementing the EITI at p. 24. 

Exploration and production activities often are 

referred to as ‘‘upstream activities.’’ Id. We note, 

however, that at least one EITI program has 

included the disclosure of payments made in 

connection with or following processing activities, 

such as excise and export taxes, in addition to those 

relating to exploration and production activities. 

See Liberian Extractive Industries Transparency 

Initiative Secretariat, Final Report of the 

Administrators of the Second LEITI Reconciliation, 

Annex 2 (February 2010) (‘‘Liberian Final Report’’) 

(available at http://leiti.org.lr/doc/ 

LEITI2ndReconciliationFinalReport.pdf). 

43See also letter from Senator Cardin, stating that 

‘‘ * * * EITI is a minimum reporting standard, and 

the intent of Sec. 1504 was to go beyond these 

requirements.’’). 

44 In this regard, we have received a letter 

suggesting that we clarify whether selling 

equipment to a resource extraction company, which 

is then used to explore for oil, natural gas, or 

minerals, is a significant action relating to oil, 

natural gas, or minerals. See letter from Mike 

Koehler, Assistant Professor of Business Law, Butler 

University (September 3, 2010). 

45 In this regard, we have received a letter 

suggesting that we interpret the statutory definition 

of commercial development to include ‘‘upstream’’ 

activities involved in the exploration and 

production of resources, ‘‘midstream’’ activities 

involved in the trading and transport of resources, 

and ‘‘downstream’’ activities involved in the 

refining, ore processing and marketing of resources. 

See the letter from Calvert Investments and Social 

Investment Forum (‘‘Calvert and SIF’’) (November 

15, 2010). 

46See Implementing the EITI at p. 35. 

47Some commentators support limiting the 

definition of commercial development to 

‘‘upstream’’ activities only. See letters from 

American Petroleum Institute (‘‘API’’) (October 12, 

2010); National Mining Association (‘‘NMA’’) 

(November 16, 2010) (submitted as a ‘‘White 

Paper’’); and RDS. In contrast, other commentators 

support a definition of commercial development 

that covers ‘‘upstream,’’ ‘‘midstream,’’ and 

‘‘downstream’’ activities. See letters from Calvert 

and SIF and Publish What You Pay United States 

(‘‘PWYP’’) (November 22, 2010). 

48See letter from API, which suggests this 

approach. 

49We believe the term ‘‘extraction’’ would include 

the production of oil and natural gas as well as the 

extraction of minerals. The EITI appears to use the 

terms ‘‘extraction’’ and ‘‘production’’ 

interchangeably. For example, the EITI recognizes 

that ‘‘the benefits of resource extraction occur as 

revenue streams over many years * * *.’’ EITI 

Source Book at p. 8. However, when discussing 

various aspects of benefit streams, such as their 

materiality, the EITI refers to a company’s or host 

government’s estimated total production value. See 

EITI Source Book, p. 27. 

50We have received a request to specify that other 

significant actions ‘‘includes the transport of oil, 

natural gas or ores, such as in pipelines or other 

mechanisms’’ and ‘‘may include, but not be limited 

to, contracting for services such as security 

operations that may be necessary to the operation 

of a particular element of the resource extraction 

life cycle.’’ Letter from PWYP. 

4. Should the rules apply to issuers 

that are owned or controlled by 

governments, as proposed? If so, why? 

If not, why not? Should the disclosure 

requirements be varied for such entities? 

5. General Instructions I and J to Form 

10–K contain special provisions for the 

omission of certain information by 

wholly-owned subsidiaries and assetbacked issuers. Should either or both of 

these types of registrants be permitted to 

omit the proposed resource extraction 

payment disclosure in the annual 

reports on Form 10–K? 

C. Definition of ‘‘Commercial 

Development of Oil, Natural Gas, or 

Minerals’’ 

As noted above, Section 13(q) defines 

‘‘commercial development of oil, natural 

gas, or minerals’’ for purposes of the 

section.40 Consistent with Section 13(q), 

we propose to define ‘‘commercial 

development of oil, natural gas, or 

minerals’’ to include the activities of 

exploration, extraction, processing, 

export and other significant actions 

relating to oil, natural gas, or minerals, 

or the acquisition of a license for any 

such activity.41 While Section 13(q) 

provides the Commission with 

flexibility to define commercial 

development, we believe it is 

appropriate to use the statutory 

direction in the proposed rules and to 

seek comment on the scope of activities 

included in the proposed definition. 

We understand that the EITI criteria 

primarily focus on exploration and 

production activities.42 Thus, the 

statutory language appears to include 

activities beyond what is currently 

contemplated by the EITI.43 However, 

because the statute sets forth a clear list 

of activities, we preliminarily believe 

that our rules should be consistent with 

that list. 

The proposed definition is intended 

to capture only activities that are 

directly related to the commercial 

development of oil, natural gas, or 

minerals. It is not intended to capture 

activities that are ancillary or 

preparatory to such commercial 

development. Accordingly, we would 

not consider a manufacturer of a 

product used in the commercial 

development of oil, natural gas, or 

minerals to be engaged in the 

commercial development of the 

resource.44 For example, a manufacturer 

of drill bits or other machinery used in 

the extraction of oil would not fall 

within the definition of commercial 

development. Similarly, transportation 

activities generally would not be 

included within the proposed 

definition. On the other hand, an issuer 

engaged in the removal of impurities, 

such as sulfur, carbon dioxide, and 

water, from natural gas after extraction 

but prior to its transport through the 

pipeline would be included in the 

definition of commercial development 

because such removal is generally 

considered to be a necessary part of the 

processing of natural gas in order to 

prevent corrosion of the pipeline. 

Request for Comment 

6. Should we, as proposed, define 

‘‘commercial development of oil, natural 

gas, or minerals’’ as the term is 

described in the statute? Should it be 

defined differently (e.g. more broadly or 

more narrowly)? If we should define the 

term, what definition would be 

appropriate? 

7. Should the definition of 

‘‘commercial development of oil, natural 

gas, or minerals’’ include the activities 

of exploration, extraction, processing, 

and export, as proposed? 45 Should we 

exclude any of these activities? If so, 

which activities and why? If not, why 

not? Would excluding certain activities 

be consistent with the statute? 

• In this regard, we note that, as 

discussed above, disclosing payments 

beyond those related to exploration and 

production is not required by the EITI 

criteria, and other countries have 

focused on identifying, reporting and 

verifying revenue streams related to 

those activities only.46 Should the 

definition only include the activities of 

exploration and extraction, consistent 

with the EITI, and not include 

processing, export, and other significant 

actions? 47 Should the definition 

include the activities of exploration, 

extraction, and only some processing 

activities, such as those related to the 

upgrading of bitumen and heavy oil? 48

Should the definition explicitly include 

production, consistent with the use of 

that term by the EITI? 49 Does 

‘‘production’’ in the oil, natural gas, and 

mining industries include activities that 

are different than those covered by 

‘‘extraction’’ so that if we do not include 

production in the definition of 

commercial development, some 

payments may go unreported? 

8. Are there other significant activities 

that we should include in the 

definition? 50 Should we provide further 

guidance regarding activities that may 

not be covered by the list of activities, 

but could constitute a ‘‘significant 

action?’’ If so, what activities should be 

covered? 

9. As noted, we do not believe the 

proposed definition of ‘‘commercial 

development of oil natural gas, or 

minerals’’ would include transportation 

to the extent that the oil, natural gas, or 

minerals are transported for purposes 

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51 Implementing the EITI at p. 35. While 

transporting, processing, and refining are activities 

that are outside the scope of most EITI programs, 

the EITI has stated that ‘‘a country may find it useful 

to cover these ‘downstream’ oil, gas, and mining 

transactions in order to gain a better understanding 

of overall sector financial flows, and possibly to 

obtain a better understanding of the link between 

the value of downstream transactions and original, 

upstream transactions (exploration and productionrelated).’’ Implementing the EITI at pp. 35–36. 

52PWYP advocated including transportation 

under the definition of commercial development 

‘‘[g]iven the potential size of the payments involved, 

and the capacity of vertically integrated companies 

to substitute payments to governments at different 

levels * * *.’’ Letter from PWYP. 

53 15 U.S.C. 78m(q)(1)(C). 

54See proposed Item 105(b)(3) of Regulation S– 

K, proposed Item 16I.B.(3) under Part II of Form 20– 

F, and proposed paragraph B.(17)(b)(3) under the 

General Instructions of Form 40–F. 

55EITI Source Book, pp. 27–28. 

56Under the EITI, benefit streams are defined as 

being any potential source of economic benefit 

which a host government receives from an 

extractive industry. See EITI Source Book, p. 26. 

57 Dividends are not included in the list of 

payments identified in Section 13(q) and the 

proposed rules do not include dividends in the list 

of payments required to be disclosed. 

58Under our proposed rules, taxes include both 

profit taxes and taxes that the EITI suggests are 

significant benefits to host governments. We have 

not identified any other material benefits at this 

time. 

other than export, and we note that 

payments related to transportation 

activities generally are not included in 

EITI programs.51 Should the definition 

include transportation of oil, natural 

gas, or minerals? 52 Should compression 

of natural gas be treated as processing, 

and therefore subject to the proposed 

rules, or transportation, and therefore 

not subject to the proposed rules? 

10. Should the definition of 

‘‘commercial development of oil, natural 

gas, or minerals’’ explicitly exclude any 

other oil, natural gas, or mining 

activities? If so, please tell us what types 

of activities should be excluded and 

why. 

11. Should we provide any additional 

guidance regarding the types of 

activities that may be within or outside 

of the scope of the definition? 

D. Definition of ‘‘Payment’’ 

Section 13(q) defines ‘‘payment’’ to 

mean a payment that: 

• Is made to further the commercial 

development of oil, natural gas, or 

minerals; 

• Is not de minimis; and 

• Includes taxes, royalties, fees 

(including license fees), production 

entitlements, bonuses, and other 

material benefits, that the Commission, 

consistent with EITI’s guidelines (to the 

extent practicable), determines are part 

of the commonly recognized revenue 

stream for the commercial development 

of oil, natural gas, or minerals.53

We propose to define the term 

‘‘payment’’ in the proposed rule and 

form amendments using the definition 

provided in the statute.54

1. Types of Payments 

We interpret Section 13(q) to provide 

that the types of payments that are 

included in the statutory language 

should be subject to disclosure under 

our rules to the extent that the 

Commission determines that the types 

of payments and any ‘‘other material 

benefits’’ are part of the ‘‘commonly 

recognized revenue stream for the 

commercial development of oil, natural 

gas, or minerals.’’ Consistent with 

Section 13(q), we propose to require 

resource extraction issuers to disclose 

payments of the type identified in the 

statute because, as discussed below, we 

preliminarily believe that they are part 

of the ‘‘commonly recognized revenue 

stream for the commercial development 

of oil, natural gas, or minerals.’’ 

Therefore, we are proposing to include 

the statutory list as the list of payments 

covered by the rules. We note that the 

types of payments listed in the statute 

generally are consistent with the types 

of payments the EITI suggests should be 

disclosed, which we believe is evidence 

that the payment types are part of the 

commonly recognized revenue stream 

for this purpose. As noted above, the 

statute provides that our determination 

should be consistent with the EITI’s 

guidelines, to the extent practicable. 

Guidance for implementing the EITI 

suggests that a country’s disclosure 

requirements might include the 

following benefit streams: 55

Benefit Stream 56 Further description 

Host government’s production entitlement ..................... This is the host government’s share of the total production. This production entitlement can either be transferred directly to the host government or to the national state-owned company. Also, this stream can either be in kind and/or in cash. 

National state-owned company production entitlement This is the national state-owned company’s share of the total production. This production entitlement is derived from the national state-owned company’s equity interest. This stream can either be in kind and/or in 

cash. 

Profits taxes .................................................................... Taxes levied on the profits of a company’s upstream activities. 

Royalties ......................................................................... Royalty arrangements will differ between host government regimes. 

Royalty arrangements can include a company’s obligation to dispose of all production and pay over a proportion of the sales proceeds. 

On other occasions, the host government has a more direct interest in the underlying production and makes 

sales arrangements independently of the concession holder. These ‘‘royalties’’ are more akin to a host 

government’s production entitlement. 

Dividends 57 .................................................................... Dividends paid to the host government as shareholder of the national state-owned company in respect of 

shares and any profit distributions in respect of any form of capital other than debt or loan capital. 

Bonuses (such as signature, discovery, production) ..... Payments related to bonuses for and in consideration of: 

• Awards, grants and transfers of extraction rights; 

• Achievement of certain production levels or certain targets; and 

• Discovery of additional mineral reserves/deposits. 

Licence fees, rental fees, entry fees and other considerations for licences and/or concessions.Payments to the host government and/or national state-owned company for: 

• Receiving and/or commencing exploration and/or for the retention of a licence or concession (licence/ 

concession fee)[.] 

• Performing exploration work and/or collecting data (entry fees). These are likely to be made in the 

pre-production phase. 

• Leasing or renting the concession or licence area. 

Other significant benefits to host governments 58 .......... These benefit streams include tax that is levied on the income, production or profits of companies. These 

exclude tax that is levied on consumption, such as value-added taxes, personal income taxes or sales 

taxes. 

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59As noted above, the EITI includes in its 

suggested list of payments to be disclosed profits 

taxes and ‘‘other significant benefits,’’ which include 

taxes levied on the ‘‘income, production or profits 

of companies.’’ EITI Source Book at pp. 27–28. 

60See proposed Instruction to paragraph 

(b)(3)(iii)(A) of Regulation S–K Item 105, proposed 

Instruction 3 to Item 16I of Form 20–F, and 

proposed Note 3 to Instruction B.(17) of Form 40– 

F. 

61For example, the EITI permits the use of an ‘‘in 

kind’’ measure, such as the number of barrels or 

volume conveyed to the host government, instead 

of a cash value, for production entitlements and 

royalty arrangements that are similar to production 

entitlements. See EITI Source Book, p. 27. 

62One commentator requested that we define 

broadly other material benefits as governmental 

payments ‘‘relating to the execution of any aspect 

of covered operations in the relevant jurisdiction 

that a reasonable person would find material to the 

project’s net worth,’’ including but not limited to 

activities involved in the exploration and 

production of resources, the trading and transport 

of resources, and the refining and marketing of 

resources. Letter from PWYP. 

63Mining companies often make such payments 

either because, due to the poor level of 

development in a host country, infrastructure 

Continued 

We preliminary believe that a definition 

that is generally consistent with EITI 

guidance furthers the intent of the 

statute to support international 

transparency efforts. 

At this time we are not proposing to 

determine ‘‘other material benefits’’ that 

should be classified as payments subject 

to disclosure. We recognize that there 

may be other payments that should be 

included in, or excluded from, the list. 

In addition, it is possible that the nature 

of payments that are part of the 

commonly recognized revenue stream 

for the commercial development of oil, 

natural gas, or minerals may change 

over time, including in response to final 

rules promulgated under Section 13(q). 

We also recognize that it may be 

appropriate to provide more specific 

guidance about the particular payments 

that should be disclosed. Our requests 

for comment are intended to elicit 

detailed information about what types 

of payments should be included in, or 

excluded from, the rules; what 

additional guidance may be helpful or 

necessary; and whether there are ‘‘other 

material benefits’’ that should be 

specified in the list of payments subject 

to disclosure because they are part of 

the commonly recognized revenue 

stream for the commercial development 

of oil, natural gas, or minerals. 

Request for Comment 

12. Should the definition of 

‘‘payment’’ include the list of the types 

of payments from Section 13(q), as 

proposed? Are there additional types of 

payments that we should include in the 

definition of ‘‘payment?’’ Should the 

definition exclude certain types of 

payments? Are there certain payments, 

for example, specific types of taxes, fees, 

or benefits that we should include in, or 

exclude from, the list? Alternatively, 

should we provide guidance in our rules 

in the form of examples of payments 

that we believe resource extraction 

issuers would be required to disclose? 

13. As noted above, the definition of 

payment includes ‘‘taxes,’’ which is 

consistent with Section 13(q) and the 

EITI.59 In order to clarify the meaning of 

this term in a manner consistent with 

the EITI, we have included an 

instruction in our proposal noting that 

resource extraction issuers would be 

required to disclose taxes on corporate 

profits, corporate income, and 

production and would not be required 

to disclose taxies levied on 

consumption, such as value added 

taxes, personal income taxes, or sales 

taxes.60 Consistent with the EITI, we are 

not proposing to require disclosure of 

consumption taxes because we do not 

believe such taxes are part of the 

commonly recognized revenue stream 

for the commercial development of oil, 

natural gas, and minerals. Is our 

proposal regarding disclosure of taxes 

appropriate? Should the types of taxes 

listed as requiring disclosure, or not 

requiring disclosure, be revised? If so, 

how should they be revised? Are there 

other taxes that we should include in or 

exclude from the disclosure 

requirements? 

14. While the definition of ‘‘payment’’ 

in Section 13(q) does not address the 

means by which a payment may be 

made, we believe it would cover 

payments made in cash or in kind. 

Should a resource extraction issuer be 

required to disclose payments regardless 

of how the payment is made (e.g. in 

cash or in kind)? 61 Should the rule be 

revised to make clear that ‘‘payment’’ 

would include payments made in cash 

or in kind? 

15. The definition includes ‘‘fees 

(including license fees),’’ which is 

consistent with Section 13(q) and the 

EITI. As noted above, the EITI gives 

examples of the fees that should be 

disclosed, including concession fees, 

entry fees, and leasing and rental fees, 

which would likewise be covered under 

our proposal. In addition to license fees, 

should the rules specifically list other 

types of fees that would be subject to 

disclosure? 

16. Are there other fees that we 

should identify in the rules or in 

guidance? For example, should we 

specify that disclosure would be 

required for fees paid for environmental 

permits, water and surface use permits, 

and other land use permits; fees for 

construction and infrastructure 

planning permits, air quality and fire 

permits, additional environmental 

permits, customs duties, and trade 

levies? Would these types of fees be 

considered to fall within the categories 

of fees that we have identified as being 

subject to disclosure? 

17. Are there some types of fees that 

we should explicitly exclude from the 

definition? 

18. The definition includes ‘‘bonuses,’’ 

which is consistent with Section 13(q) 

and the EITI. ‘‘Bonuses’’ would include 

the examples of bonuses identified by 

the EITI as noted in the table above. 

Should we provide further guidance 

about the meaning of the term ‘‘bonus’’ 

for purposes of this disclosure? 

19. Are there types of bonuses that we 

should exclude from the definition of 

‘‘payment?’’ 

20. Are there ‘‘other material benefits’’ 

that we should specify as being 

included within the definition of 

‘‘payment?’’ In that regard, how should 

we determine what benefits ‘‘are part of 

the commonly recognized revenue 

stream for the commercial development 

of oil, natural gas, or minerals?’’ Should 

we include a broad, non-exclusive 

definition of ‘‘other material benefits,’’ 

such as benefits that are material to and 

directly result from or directly relate to 

the exploration, extraction, processing, 

or export of oil, natural gas, or 

minerals? 62 Or would including a broad 

definition be inconsistent with the 

statutory language directing us to 

identify other material benefits that ‘‘are 

part of the commonly recognized 

revenue stream for the commercial 

development of oil, natural gas, or 

minerals?’’ 

21. As noted, dividends are not 

included in the list of payments 

required to be disclosed under the 

proposed rules. Should we determine 

that dividends are ‘‘other material 

benefits’’ and require disclosure of 

dividends? Are dividends part of the 

commonly recognized revenue stream 

for the commercial development of oil, 

natural gas, or minerals? 

22. We do not believe the proposed 

definition of payment should include 

payments resource extraction issuers 

make for infrastructure improvements, 

even if they are a direct cost of engaging 

in the commercial development of oil, 

natural gas, or minerals because it is not 

clear that such payments would be 

covered by the specific list of items in 

the statute or otherwise would be a part 

of the commonly recognized revenue 

stream for the commercial development 

of oil, natural gas, or minerals.63 Should 

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80984 Federal Register / Vol. 75, No. 246 / Thursday, December 23, 2010 / Proposed Rules 

improvements are necessary to gain access to the 

host country’s minerals, or because the companies 

are contractually obligated to improve the host 

country’s roads as a condition of engaging in 

exploration or extraction activities. The EITI has 

acknowledged that the scope of an EITI program 

might have to be expanded to include such 

infrastructure payments. See Implementing the 

EITI, p. 25. 

64See Implementing the EITI, p. 24. See also 

letter from Senator Cardin (noting that many EITI 

implementing countries are considering reporting 

on social payments). One commentator has 

requested that we exclude payments relating to 

community development, including those 

pertaining to local purchasing or employment, from 

the disclosure requirements. See letter from NMA. 

65See letter from PWYP (supporting the inclusion 

of ‘‘social’’ payments under the definition of 

payment, which it defines as payments ‘‘made by 

extractive industry participants in order to reduce 

operational risk by improving the welfare of local 

communities, individual citizens and organizations 

in the villages, cities or countries where these 

companies work, or in order to obtain a ‘social 

license to operate’.’’). Cf. letter from NMA (opposing 

disclosure of payments ‘‘that provide only ‘indirect 

economic benefits’ such as construction of local 

infrastructure (like schools, roads, hospitals, and 

the like) that are not primarily used for extractive 

activities.’’). 

66Letter from PWYP. 

67 Implementing the EITI, p. 30. The EITI Source 

Book notes that a benefit stream is material ‘‘if its 

omission or misstatement could distort the final 

EITI report’’ for the country. EITI Source Book at p. 

26. 

68 In contrast, the definition of payment also 

includes the phrase ‘‘other material benefits.’’ 

69Merriam-Webster Dictionary (available at 

http://www.merriam-webster.com/dictionary/ 

deminimis). 

70For example, we could define ‘‘not de minimis’’ 

to be an amount that meets or exceeds the lesser 

of a dollar amount, such as $100,000, or a 

percentage, such as 1%, of an issuer’s expenses, 

revenues or some other amount for the year. 

71One commentator stated that ‘‘reporting only on 

material payments is contrary to Congress’s 

distinction between a de minimis standard applied 

to individual payments and a materiality standard 

applied to benefit streams.’’ See letter from Revenue 

Watch Institute (December 6, 2010) (‘‘RWI’’). 

72Some commentators have requested that we 

provide a definition of ‘‘not de minimis.’’ See letter 

from Calvert and SIF (stating such a definition is 

necessary ‘‘due to the lack of applicable precedent 

regarding the de minimis concept featured in 

Section 1504* * *’’); NMA; and PWYP. 

73Calvert and SIF have suggested that we set the 

‘‘de minimis threshold’’ at $15,000, which is similar 

to the level used by the London Stock Exchange’s 

Alternative Investment Market (‘‘AIM’’) listing rule 

that requires disclosure of any payment above 

£10,000 (approximately $15,000) made to any 

government or regulatory authority by an oil, gas or 

mining company. See letter from Calvert and SIF. 

PWYP has suggested both qualitative and 

quantitative definitions of de minimis. According to 

its qualitative definition, de minimis ‘‘means an 

item so insignificant that it is not relevant to a 

reasonable person in determining the net value of 

the project’s annual liabilities.’’ According to its 

quantitative definition, de minimis ‘‘means any 

payment that exceeds the equivalent of $1,000 or 

payments that, in the aggregate, exceed the 

equivalent of $15,000.’’ Letter from PWYP. 

our definition cover such payments? 

Would such payments be considered 

part of the commonly recognized 

revenue stream? Would these types of 

payments distort the disclosure of 

payments for extractive activities? 

23. ‘‘Social or community’’ payments 

generally include payments that relate 

to improvements of a host country’s 

schools or hospitals, or to contributions 

to a host country’s universities or funds 

to further resource research and 

development. As proposed, our rules 

would not expressly include social or 

community payments within the 

definition of ‘‘payment.’’ Some EITI 

programs include social or community 

payments while others do not.64 Are 

such payments part of the commonly 

recognized revenue stream for the 

commercial development of oil, natural 

gas, or minerals? Should we require 

disclosure of only certain ‘‘social or 

community’’ payments under the ‘‘other 

material benefits’’ provision, such as if 

those payments directly fulfill a 

condition to engaging in resource 

extraction activities in the host 

country? 65 Would such payments be 

considered part of the commonly 

recognized revenue stream? 

24. Are there other types of payments 

that we should include as ‘‘other 

material benefits?’’ For example, should 

we, as requested by one commentator, 

require disclosure of ‘‘ancillary 

payments made pursuant to the 

investment contract (including 

personnel training programs, local 

content, technology transfer and local 

supply requirements)’’ and payments 

‘‘related to any liabilities incurred 

(including penalties for violations of 

law or regulation, environmental and 

remediation liabilities, and bond 

guarantees entered into with the central 

banks or similar national or multinational entities, as well as costs arising 

in connection with any such bond 

guarantees)’’? 66

25. Should we provide additional 

guidance regarding the types of 

payments that resource extraction 

issuers should disclose? If additional 

guidance is appropriate, should we 

provide clarification in the rules or as 

interpretive guidance? 

2. The ‘‘Not De Minimis’’ Requirement 

Section 13(q) defines ‘‘payment,’’ in 

part, to be a payment that is ‘‘not de 

minimis,’’ without defining what would 

be considered ‘‘not de minimis.’’ If a 

payment is de minimis, it would not be 

subject to disclosure; if it is not de 

minimis, it could be subject to 

disclosure if the other standards for 

disclosure are present. 

Under the EITI, countries are free to 

establish a materiality level for 

disclosure. For example, countries may 

establish a materiality level based on the 

size of payments or the size of 

companies subject to disclosure.67 As 

noted, Section 13(q) established the 

threshold for payment disclosure as ‘‘not 

de minimis’’ rather than requiring 

disclosure of ‘‘material’’ payments.68

Given the use of the phrase ‘‘not de 

minimis,’’ we preliminarily do not 

believe that ‘‘not de minimis’’ equates to 

a materiality standard. The term ‘‘de 

minimis’’ is defined generally as 

something that is ‘‘lacking significance 

or importance’’ or ‘‘so minor as to merit 

disregard.’’ 69 We preliminarily believe 

the phrase ‘‘not de minimis’’ is 

sufficiently clear that further explication 

is unnecessary, and we do not propose 

to prescribe a standard for what 

amounts would be considered de 

minimis or not de minimis for purposes 

of the new disclosure requirement. 

We preliminarily believe it is more 

appropriate to define the term 

‘‘payment’’ consistent with the 

definition in Section 13(q) without 

specifically defining ‘‘not de minimis’’ 

for purposes of the requirement. 

However, we seek comment, as 

described below, on whether to define 

‘‘not de minimis.’’ We also are soliciting 

comment on several possible standards 

to include in our final rule, as necessary 

or appropriate, to provide additional 

certainty concerning what payments are 

required to be disclosed under these 

new rules. As described in more detail 

below, the possible standards could 

include an absolute dollar amount, a 

relative measure (e.g. a percentage of 

expenses, revenues or some other 

amount incurred per project or in total 

for the year covered by the annual 

report), or a combination of the two 

approaches.70

Request for Comment 

26. Section 13(q) establishes the 

threshold for payment disclosure as ‘‘not 

de minimis,’’ which we preliminarily 

believe is a standard different from a 

materiality standard.71 Is our 

interpretation that ‘‘not de minimis’’ is 

not the same as ‘‘material’’ correct? 

27. Should we define ‘‘not de 

minimis’’ for purposes of the proposed 

rules? Why or why not? 72 What would 

be the advantages or disadvantages of 

not defining that term? If the final rules 

do not provide a definition, should an 

issuer be required to disclose the basis 

and methodology it used in assessing 

whether a payment amount was ‘‘not de 

minimis?’’ 

28. If we should define ‘‘not de 

minimis,’’ what should that definition 

be? 73 Provide data to support your 

definition if you are able to do so. 

29. What would be the advantages or 

disadvantages of defining ‘‘not de 

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74See letter from Calvert and SIF and PWYP. 

75One commentator suggested a definition of ‘‘de 

minimis’’ that would require an issuer to disclose 

payments to a government if, in the aggregate, 

payments across all categories exceeded five 

percent or more of the issuer’s gross expenses. Once 

the aggregate amount of payments exceeded the 

specified threshold, ‘‘then all payments in that 

country otherwise meeting the definition in the Act 

would be reportable, even though each payment 

stream would not necessarily be material.’’ Letter 

from NMA. 

76Commentators have suggested such an 

approach, noting that this approach would be 

consistent with the EITI, which requires disclosure 

of material payments only. See letters from API and 

RDS. Under the EITI, countries can determine the 

appropriate threshold for materiality. See, e.g., EITI 

Source Book, p. 26. Cf. letter from Senator Cardin 

(stating that ‘‘[r]eporting under Sec. 1504 is 

designed to complement reporting done under the 

Extractive Industries Transparency Initiative (EITI), 

but does not mimic it, and purposefully requires 

reporting at the project level, disaggregated by 

payment stream.’’). 

77The legislative history does not provide an 

indication as to how we should define the term. 

78API suggested defining project to mean 

‘‘technical and commercial activities carried out 

within a particular geological basin or province to 

explore for, develop and produce oil, natural gas or 

minerals. These activities include, but are not 

limited to, acreage acquisition, exploration studies, 

seismic data acquisition, exploration drilling, 

reservoir engineering studies, facilities engineering 

design studies, commercial evaluation studies, 

development drilling, facilities construction, 

production operations, and abandonment. A project 

may consist of multiple phases or stages.’’ Letters 

from American Petroleum Institute (December 9, 

2010). PWYP has requested that we define project 

‘‘in relation to each lease, license and/or other 

concession-level arrangement entered into by a 

resource extraction issuer,’’ so as to ‘‘capture 

information related to the discrete, project-specific 

financial flows affiliated with extractive industry 

development activities.’’ Letter from PWYP. 

minimis’’ as ‘‘material?’’ Would such a 

reading be consistent with the language 

and intent of the statute? Would such a 

standard be a reasonable means of 

encouraging consistent disclosure? 

Would it be necessary for the 

Commission to provide additional 

guidance on how to determine 

materiality if a materiality standard 

governed this disclosure? If so, what 

guidance would be appropriate in the 

context of this information? 

30. Should we adopt a definition of 

‘‘not de minimis’’ that uses an absolute 

dollar amount as the threshold? If so, 

what would be the appropriate dollar 

amount? Should the ‘‘not de minimis’’ 

payment threshold be $100,000, an 

amount less than $100,000, such as 

$1,000, $10,000, $15,000,74 or $50,000, 

or an amount greater than $100,000, 

such as $200,000, $500,000, $1,000,000, 

or $10,000,000? Should some other 

dollar amount be used? 

31. The type and amount of payments 

made by resource extraction issuers may 

vary greatly, depending on the size of 

the issuer and the nature and size of a 

particular project. Should the rules 

account for variations in size of issuers 

and projects? Would doing so be 

consistent with Section 13(q)? 

32. Should a payment be considered 

‘‘not de minimis’’ if it meets or exceeds 

a percentage of expenses incurred per 

project for the year that is the subject of 

the annual report? Is a per project basis 

appropriate because Section 13(q) 

requires an issuer to disclose payment 

information for each project as well as 

for each government? Instead of a per 

project basis, should we base a 

definition of ‘‘not de minimis’’ on a 

threshold that uses a percentage of an 

issuer’s total expenses for the year or its 

total expenses incurred for all projects 

undertaken in a particular country for 

the year? 75 Should the percentage 

threshold be based on something else, 

such as revenues, profits or income? 

Would using a percentage threshold 

further the intent of the statute and help 

minimize the costs associated with 

providing the disclosure? 

33. If a percentage threshold should 

be used to define ‘‘not de minimis,’’ 

should the percentage be 1%, 2%, 3%, 

4%, 5%, or a higher percentage? Should 

the definition use a percentage lower 

than 1%, such as 0.1%, 0.2%, 0.3%, 

0.4%, or 0.5%? 

34. Should we adopt a definition of 

‘‘not de minimis’’ that uses the same 

dollar amount or the same percentage 

threshold for all resource extraction 

issuers, regardless of size? 

35. Should we adopt a definition of 

‘‘not de minimis’’ that depends on the 

size of a resource extraction issuer so 

that the dollar amount or percentage 

threshold would vary depending on the 

size of the issuer? For example, should 

the threshold be $1,000 for nonaccelerated filers, $10,000 for 

accelerated filers, and $100,000 for large 

accelerated filers? Should some other 

dollar amount be used for each filer 

category? If so, what amount? If we use 

a percentage threshold, should the 

threshold be 1% for non-accelerated 

filers, 2% for accelerated filers, and 3% 

for large accelerated filers? Should some 

other percentage be used for each filer 

category? If so, what percentage? 

36. Should we define ‘‘not de 

minimis’’ to be an amount that meets or 

exceeds the lesser of two measures, for 

example, a dollar amount, such as 

$100,000, or a percentage, such as 1%, 

of an issuer’s expenses, revenues or 

some other amount for the year? Would 

such an approach be appropriate to 

address variations in the size of resource 

extraction issuers? 

37. Should we define payments that 

are ‘‘not de minimis’’ to mean payments 

that are significant compared to the total 

expenses incurred by an issuer for a 

particular project, or with regard to a 

particular government for the year? 

38. We note that the phrase ‘‘not de 

minimis’’ is used only in the definition 

of the term ‘‘payment.’’ Would it be 

consistent with the statute to require 

disclosure of payments that are ‘‘not de 

minimis’’ only if they are related to 

material projects of a resource extraction 

issuer? 76

3. The ‘‘Project’’ Requirement 

While Section 13(q) requires a 

resource extraction issuer to disclose 

information regarding the type and total 

amount of payments made to a foreign 

government or the Federal Government 

for each project relating to the 

commercial development of oil, natural 

gas, or minerals, it does not define the 

term ‘‘project.’’ 77 We note the EITI does 

not provide for the disclosure of 

payments on a per project basis, and 

thus, does not define the term or 

provide guidance on how we should 

define the term. Our rules currently do 

not include a definition of ‘‘project,’’ 

although, as noted below, our rules 

include some references to the term 

‘‘project’’ that may be useful in 

considering the term. We understand 

that, depending upon the particular 

industry or business in which an issuer 

operates, and other factors such as the 

size of an issuer, ‘‘project’’ may be 

defined in a variety of ways. In light of 

the fact that neither Section 13(q) nor 

our current disclosure rules include a 

definition of the term and to provide 

flexibility in applying the term to 

different business contexts, we are not 

proposing a specific definition for the 

term. However, we are soliciting 

comment regarding whether we should 

define ‘‘project,’’ and, if so, what 

definition would be appropriate. 

Request for Comment 

39. Should we define ‘‘project’’ for 

purposes of this new disclosure 

requirement? If so, why? If not, why 

not? 

40. If we should define ‘‘project,’’ what 

definition would be appropriate? 78

Please be as specific as possible and 

discuss the basis for your 

recommendation. 

41. Should we define ‘‘project’’ to 

mean a project as that term is used by 

a resource extraction issuer in the 

ordinary course of business? What are 

the advantages and disadvantages of 

such an approach? If the final rules were 

to use such an approach, should an 

issuer be required to disclose the basis 

and methodology it used in defining 

what constitutes a project? 

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80986 Federal Register / Vol. 75, No. 246 / Thursday, December 23, 2010 / Proposed Rules 

79Under that rule, the term ‘‘development project’’ 

is defined as the ‘‘means by which petroleum 

resources are brought to the status of economically 

producible. As examples, the development of a 

single reservoir or field, an incremental 

development in a producing field, or the integrated 

development of a group of several fields and 

associated facilities with a common ownership may 

constitute a development project.’’ 17 CFR 210.4– 

10(a)(8). See also Compliance and Disclosure 

Interpretation (‘‘CDI’’) 108.01 under the Oil and Gas 

Rules issued by the Commission’s Division of 

Corporation Finance on October 26, 2009 (available 

at http://www.sec.gov/divisions/corpfin/guidance/

oilandgas-interp.htm). The CDI provides in relevant 

part that a ‘‘development project is typically a single 

engineering activity with a distinct beginning and 

end, which, when completed, results in the 

production, processing or transportation of crude 

oil or natural gas. A project typically has a definite 

cost estimate, time schedule and investment 

decision; is approved for funding by management; 

may include all classifications of reserves; and will 

be fully operational after the completion of the 

initial construction or development. The scope and 

scale of a project are such that, if a project were 

terminated before completion, for whatever reason, 

a significant portion of the previously invested 

capital would be lost.’’ 

80One commentator suggested the Commission 

could use this definition as a basis for defining 

project because it is well understood by the 

industry and investors. See letter from RDS. 

81See statement from Senator Cardin (explaining 

the need for the statute because existing disclosures 

are ‘‘not useful in determining the extent of a 

company’s operations in or its ongoing financial 

arrangements with a country.’’). 111 Cong. Rec. 

S3315 (daily ed. May 6, 2010). PWYP has suggested 

permitting an issuer to disclose certain payments on 

an entity level with respect to a particular 

jurisdiction but only when the payment, such as a 

corporate income tax, is calculated at the entity 

level rather than the project level. See letter from 

PWYP. 

82One commentator suggested that we define 

project to be ‘‘consistent with the concepts of 

operating segments and reporting units under 

which mining companies currently provide 

information.’’ The suggested definition would 

include preparation for, or exploitation of, mineral 

deposits in an identified geographic area, and 

‘‘would exclude activities such as prospecting, 

surveying and exploration, which are undertaken 

well before a ‘project’ has materialized.’’ Letter from 

NMA. 

83Some commentators have suggested defining 

project in this way. See letters from API; Cravath, 

Swaine & Moore LLP, Cleary Gottlieb Steen & 

Hamilton LLP, Davis Polk & Wardwell LLP, 

Shearman & Sterling LLP, Simpson Thacher & 

Bartlett LLP, Skadden, Arps, Slate, Meagher & Flom 

LLP, Sullivan & Cromwell LLP, and Wilmer Cutler 

Pickering Hale and Dorr LLP (November 5, 2010) 

(‘‘Eight Law Firms’’); and RDS. But see letter from 

RWI (stating that ‘‘* * * limiting reporting to 

material projects contravenes Congress’s intent to 

implement a level playing field through a projectby-project disclosure standard.’’). 

84See letter from API suggesting such an 

approach. In addition, the NMA has suggested 

permitting disclosure of payments at the country 

level for prospecting, surveying, and exploration 

activities, and for payments that constitute 

commercially sensitive information or are subject to 

reasonable host government confidentiality 

restrictions, in addition to payments, such as 

corporate income tax payments, that are calculated 

at the country level. Letter from NMA. Another 

commentator noted that some payments may be 

made at the entity level rather than at the project 

level, and that establishing systems to apportion 

entity level payments may be prohibitively 

expensive and that such apportionment could be 

somewhat arbitrary. The commentator suggested 

that compliance costs could be mitigated by 

allowing entity-level payments to be reported at the 

country level rather than the project level. See letter 

from RWI. See also letter from PWYP (‘‘Where 

* * * certain payments are made at an entity level 

rather than at the lease/license level * * * this fact 

should have no bearing on the definition of ‘project’ 

but, rather, may give rise to a limited reporting 

allowance whereby issuers could report at an entity 

level, rather than project-level, for that specific 

payment only.’’). 

42. Should we define ‘‘project’’ to 

mean a field, mining property, refinery 

or other processing plant, or pipeline or 

other mode of transport? Should we 

define ‘‘project’’ to permit the inclusion 

of more than one field, mining property, 

refinery or other processing plant, or 

pipeline or other mode of transport? 

43. Should we adopt a definition of 

‘‘project’’ that is substantially similar to 

the definition of ‘‘development project’’ 

under Rule 4–10(a)(8) of Regulation 

S–X? 79 Would reliance on that existing 

definition, with which oil and natural 

gas companies are already familiar, help 

to elicit appropriate payment disclosure 

under Section 13(q) without overburdening issuers? 80 Or is that 

definition unsuitable for purposes of 

Section 13(q) because it does not 

explicitly encompass other types of 

projects, such as exploration projects, 

and does not relate to mining activities? 

What modifications to the Regulation 

S–X definition of ‘‘development 

project,’’ if any, would be appropriate to 

provide a definition for ‘‘project’’ for it 

to be suitable for purposes of the 

disclosure required by Section 13(q)? 

• In particular, similar to Rule 4– 

10(a)(8) and staff guidance regarding the 

rule, should we define project as: 

• The means by which oil, natural 

gas, or mineral resources are brought to 

the status of being economically 

producible or commercially developed; 

• typically involving a single 

engineering activity with a distinct 

beginning and end; 

• having a definite cost estimate, time 

schedule, or investment decision, and 

approved for funding by management; 

• one that, when completed, results 

in the exploration, extraction or 

production, processing, transportation 

or export of oil, natural gas, or minerals; 

and 

• one that may involve a single 

reservoir, field or mine, the incremental 

development of a producing field or 

mine, or the integrated development of 

a group of several fields or mines and 

associated facilities with a common 

ownership? 

• Would it be appropriate to include 

or exclude any of the aspects listed 

above? Why or why not? 

• Should the definition of project 

include one that involves more than one 

engineering activity or an engineering 

activity that is open-ended? Would a 

definition that focuses on the level of 

engineering activity fail to elicit the 

disclosure of payments in connection 

with some projects, for example, an 

exploration project? 

• Would a project always have a 

definite cost estimate, time schedule, or 

investment decision, or be approved by 

management? Should any of these 

characteristics be excluded from any 

definition of project? Are there any 

additional characteristics that we 

should include in any definition of 

project? 

• Should any definition of project 

encompass only a single reservoir, field 

or mine? Why or why not? 

44. Should we permit issuers to treat 

operations in a country as a ‘‘project?’’ 

Would doing so be consistent with the 

statute? 81

45. We note that issuers currently use 

the concept of ‘‘reporting unit’’ for 

financial reporting purposes (e.g., an 

operating segment or one level below an 

operating segment). Should the 

definition of ‘‘project’’ be consistent with 

the ‘‘reporting unit’’ concept? 82 Is that 

definition consistent with the statute? 

Would using such a definition ease 

implementation of the disclosure 

requirements for resource extraction 

issuers given that payments currently 

may be tracked on that basis? What 

concerns, if any, are raised by using 

such a concept as the basis for defining 

‘‘project?’’ Are there other concepts, 

such as an ‘‘asset group’’ or ‘‘cash 

generating unit,’’ that would provide a 

more appropriate basis for the definition 

of ‘‘project?’’ 

46. Are there any other factors that we 

should include in the definition of 

‘‘project?’’ 

47. Should we define ‘‘project’’ to 

mean a material project? 83 If so, what 

should be the basis for determining 

whether a project is material for 

purposes of the resource extraction 

payment disclosure rules? Would 

defining project to mean a material 

project be consistent with Section 13(q)? 

48. Should we permit issuers to 

aggregate payments by country rather 

than project? 84 Would that be consistent 

with Section 13(q)? 

4. Payments by ‘‘a Subsidiary * * * or 

an Entity Under the Control of the 

Resource Extraction Issuer’’ 

Section 13(q) requires a resource 

extraction issuer to disclose payments 

made by a subsidiary or an entity under 

the control of the resource extraction 

issuer, in addition to its own payments, 

to a foreign government or the Federal 

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Federal Register / Vol. 75, No. 246 / Thursday, December 23, 2010 / Proposed Rules 80987 

85 15 U.S.C. 78m(q)(2)(A). 

86Under Exchange Act Rule 12b–2 [17 CFR 

240.12b–2] and Rule 1.02 of Regulation S–X [17 

CFR 210.1.02], ‘‘control’’ is defined to mean ‘‘the 

possession, direct or indirect, of the power to direct 

or cause the direction of the management and 

policies of a person, whether through the 

ownership of voting shares, by contract, or 

otherwise.’’ The rules also define ‘‘subsidiary’’ (‘‘A 

‘subsidiary’ of a specified person is an affiliate 

controlled by such person directly, or indirectly 

through one or more intermediaries. (See also 

‘majority-owned subsidiary,’ ‘significant 

subsidiary,’ and ‘totally-held subsidiary.’ ’’). 

87This would be the case whether the resource 

extraction issuer provides consolidated financial 

information under U.S. Generally Accepted 

Accounting Principles (‘‘GAAP’’) or International 

Financial Reporting Standards as issued by the 

International Accounting Standards Board (‘‘IFRS’’). 

See also letters from API; NMA; and RDS. Those 

commentators support limiting disclosure of 

payments made by a subsidiary or other entity to 

only those entities for which an issuer must 

consolidate financial information in its Exchange 

Act reports. 

88One commentator stated that ‘‘[d]isclosure of 

payment information with respect to 

unconsolidated equity investees and joint venture 

interests is crucial to fulfill the intent of the 

legislation as such information provides 

information necessary for analysts and investors to 

analyze issuer’s future production and assess equity 

valuation on a risk-adjusted basis. The definition of 

‘control’ must therefore be sufficiently broad to 

cover all relationships through which an issuer 

directly or indirectly exerts, or has the right to 

exert, significant influence, whether sole or shared, 

over an entity making extraction-related payments 

to a foreign government.’’ Letter from PWYP. 

89We note that, depending on the circumstances, 

a resource extraction issuer that is the operator of 

a joint venture may be deemed to control the joint 

venture, and therefore would be required to provide 

the payment disclosure for the joint venture 

pursuant to the disclosure requirements as 

proposed. 

90PWYP supports proportionate reporting with 

respect to unconsolidated equity investees and joint 

venture interests. See letter from PWYP. The NMA 

also supports proportional reporting when an issuer 

controls a venture but holds less than a 100 percent 

interest in the venture and further suggests that 

proportional reporting would be appropriate if an 

issuer does not wholly own an entity even though 

it fully consolidates the financial results of that 

entity. See letter from NMA. 

91 Modernization of Oil and Gas Reporting, 

Release No. 33–8995 (December 31, 2008), 74 FR 

2158 (January 14, 2009) (‘‘Oil and Gas Adopting 

Release’’). 

92See Item 1202(a)(2) of Regulation S–K [17 CFR 

1202(a)(2)]. 

93 Instruction 4 to Item 1202(a)(2). In addition, a 

registrant need not provide disclosure of the 

reserves in a country containing 15% or more of the 

registrant’s proved reserves if that country’s 

government prohibits disclosure in a particular 

field and disclosure of reserves in that country 

would have the effect of disclosing reserves in 

particular fields. 

Government for the purpose of the 

commercial development of oil, natural 

gas, or minerals.85 We are proposing to 

use the language from Section 13(q) in 

the disclosure requirements. 

Under our proposal and consistent 

with the statutory language, a resource 

extraction issuer would be required to 

provide disclosure if control is present. 

Consistent with the definition of control 

under the securities laws, such as in 

Exchange Act Rule 12b–2, a resource 

extraction issuer would need to make a 

factual determination as to whether it 

has control of an entity based on a 

consideration of all relevant facts and 

circumstances.86 At a minimum, under 

our proposal, payments made by a 

subsidiary or entity under the control of 

a resource extraction issuer would be 

subject to disclosure under this standard 

if the resource extraction issuer must 

provide consolidated financial 

information for the subsidiary or other 

entity in the issuer’s financial 

statements included in its Exchange Act 

reports.87

Request for Comment 

49. As noted above, our rules 

currently include definitions of 

‘‘subsidiary’’ and ‘‘control,’’ which would 

apply in this context as well. Should we 

include a different definition for 

‘‘subsidiary’’ or ‘‘entity under the control 

of’’ a resource extraction issuer? If so, 

why? How should the definitions vary? 

50. Under the definition of control, a 

resource extraction issuer may be 

determined to control entities that are 

not consolidated subsidiaries. Is the 

requirement to disclose payments by an 

entity under the control of the issuer 

even though the issuer does not 

consolidate the entity appropriate? 

51. Under the proposed rules, a 

resource extraction issuer would be 

required to provide disclosure for an 

entity if it is consolidated in the 

financial statements of the resource 

extraction issuer presented under U.S. 

GAAP (or other jurisdictional GAAP 

that requires a U.S. GAAP 

reconciliation) and IFRS as issued by 

the IASB because entities meeting the 

consolidation requirement generally 

also meet the definition of control. Are 

there circumstances under U.S. GAAP 

and IFRS that would render different 

consolidation results, such as 

proportionate consolidation, that we 

should consider? If so, please describe 

the circumstances and indicate how the 

different circumstances should be 

addressed in the new rules. We 

understand that entities and operations 

that are proportionately consolidated 

are viewed as consolidated entities or 

operations of an extractive issuer, while 

investments presented on the equity 

method are not viewed as consolidated 

entities or operations. Should our rules 

specifically include these concepts? For 

instance, should our rules treat equity 

investees differently even if they are 

controlled by the resource extraction 

issuer? Should our rules, as proposed, 

include equity investees that the issuer 

controls but does not consolidate? 

52. Are there instances, other than 

control in which a resource extraction 

issuer should have to disclose payments 

made by a subsidiary or other entity? If 

so, should we revise our proposal to 

mandate disclosure in those 

circumstances? 88 Would resource 

extraction issuers have access to 

payment information in those 

circumstances? Should our rules specify 

that an issuer would have to disclose 

payments made by a non-controlled 

entity only if the issuer is the operator 

of the joint venture or other project? 89

Would it be appropriate to require an 

issuer to disclose payments that 

correspond to its proportional interest 

in the joint venture rather than all of the 

payments made by or for the joint 

venture? 90

53. Are there factors or concepts 

different than the ones discussed above 

that should determine whether a 

resource extraction issuer must disclose 

payments made for a subsidiary or other 

entity under the issuer’s control for the 

purpose of commercial development of 

oil, natural gas, or minerals? For 

example, should the rules require 

disclosure only of information that the 

issuer knows or has reason to know? 

5. Other Matters 

Under the disclosure rules concerning 

oil and gas reserves adopted in 2008,91

the Commission required disclosure of 

reserves in the aggregate and by 

geographic area and for each country 

containing 15% or more of a registrant’s 

proved reserves.92 The oil and gas 

disclosure rules provide an exception 

that a registrant need not provide 

disclosure of the reserves in a country 

containing 15% or more of the 

registrant’s proved reserves if that 

country’s government prohibits 

disclosure of reserves in that country.93

Section 13(q) does not contain an 

exception to the requirement to disclose 

payments made to foreign governments 

for the purpose of commercial 

development of oil, natural gas, or 

minerals in circumstances when the 

host country prohibits the disclosure. 

The provision also does not include an 

exception for confidentiality clauses in 

existing or future agreements. Thus, we 

have not proposed any exceptions to the 

proposed disclosure requirements under 

Section 13(q). Nevertheless, we are 

interested in learning whether the 

disclosure requirement would 

potentially cause a resource extraction 

issuer to violate any host country’s laws 

and whether an exception similar to the 

exception in the oil and gas disclosure 

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80988 Federal Register / Vol. 75, No. 246 / Thursday, December 23, 2010 / Proposed Rules 

94See, e.g., letter from Eight Law Firms. But see 

letter from Senator Cardin, stating that ‘‘[t]he 

language of Sec. 1504 is very clear: there should be 

no exemptions for confidentiality or for hostcountry restrictions. It would be too easy for 

countries who want to avoid disclosures to simply 

pass their own law against disclosure. The purpose 

of Sec. 1504 is to not allow for exemptions for 

confidentiality or other reasons that undermine the 

principle of transparency and full disclosure.’’). 

95See letters from API; Eight Law Firms; NMA; 

and RDS supporting such an exception. One 

commentator suggested that laws prohibiting 

disclosure are uncommon, but ‘‘normal exemption 

procedures conducted on a case-by-case basis are 

sufficient to deal with such conflicts.’’ Letter from 

RWI. But see letter from Senator Cardin. 

96See discussion in footnote 93 and 

accompanying text above regarding the exception 

for disclosure of certain proved reserves. 

97See letter from API supporting such an 

exception. 

98See letter from API suggesting such an 

exception. 

99See letter from RDS suggesting such an 

exception. 

100See letter from API; NMA; and RDS. But see 

letter from PWYP (discussing concerns regarding 

competitiveness and commercially sensitive 

information and noting a study of ‘‘over 100 oil and 

mining contracts between host governments and 

extractive companies worldwide found that ‘stock 

exchange disclosures are a widely stated exception 

in confidentiality clauses and where not explicitly 

stated, would be interpreted to include such an 

exception.’ ’’) (footnote omitted). 

101 15 U.S.C. 78m(q)(1)(B). 

102See proposed Regulation S–K Item 105(b)(2), 

proposed Item 16I.B.(2) under Part II of Form 20– 

F, and proposed paragraph B.(17)(b)(2) under the 

General Instructions of Form 40–F. 

103Of course, if a resource extraction issuer 

makes a payment (that is otherwise covered by the 

definition of payment) to a third party to be paid 

to the government on its behalf, disclosure of that 

payment would be covered under our proposed 

rule. 

104This is consistent with the EITI, which 

recognizes that payments to subnational 

governments may have to be included within the 

scope of an EITI program. See Implementing the 

EITI, p. 34. We also believe this is consistent with 

the statutory scheme of Section 13(q), which 

requires an issuer to identify, for each disclosed 

payment, the government that received the 

payment, and the country in which the government 

is located. See Exchange Act Section 

13(q)(2)(D)(ii)(V) [15 U.S.C. 78m(q)(2)(D)(ii)(V)]. 

105 In this regard, given that the statute requires 

disclosure of payments made to a ‘‘foreign 

government or the Federal Government,’’ we believe 

the term ‘‘foreign government’’ is meant to refer to 

a non-U.S. government. 

106See proposed Item 105(a) of Regulation S–K, 

proposed Item 16I.A. under Part II of Form 20–F, 

and proposed paragraph B.(17)(a) under the General 

Instructions of Form 40–F. 

rules would be appropriate for the 

disclosure requirements under Section 

13(q). 

In this regard, some commentators 

have stated that, should a host 

government prohibit the disclosure of 

payments made by resource extraction 

issuers to the host government, without 

an appropriate exception for that 

prohibition, an issuer could be 

compelled to select between avoiding or 

abandoning projects in that country and 

maintaining its registration under the 

Exchange Act. According to those 

commentators, such a situation would 

be contrary to the interests of investors 

and the principles of competition and 

comity.94

Request for Comment 

54. Would the disclosure requirement 

in Section 13(q) and the proposed rules 

potentially cause a resource extraction 

issuer to violate any host country’s 

laws? Are there laws that currently 

prohibit such disclosure? Would the 

answer depend on the type of payment 

or the level of aggregation of the 

payment information required to be 

disclosed? If there are laws that 

currently prohibit the type of disclosure 

required by Section 13(q) and the 

proposed rules, please identify the 

specific law and the corresponding 

country. 

55. Should the Commission include 

an exception to the requirement to 

disclose the payment information if the 

laws of a host country prohibit the 

resource extraction issuer from 

disclosing the information? 95 Would 

such an exception be consistent with 

the statutory provision and the 

protection of investors? If we provide 

such an exception, should it be similar 

to the exception provided in Instruction 

4 to Item 1202 of Regulation S–K? 96

Should we require the registrant to 

disclose the project and the country and 

to state why the payment information is 

not disclosed? If so, should we revise 

Item 1202 to require the same disclosure 

of the country and reason for nondisclosure? 

56. Should the rules provide an 

exception only if a host country’s 

statutes or administrative code prohibits 

disclosure of the required payment 

information? Should we provide an 

exception if a judicial or administrative 

order or executive decree prohibits 

disclosing the required payment 

information as long as the order or 

decree is in written form? Should we 

limit any exception provided to 

circumstances in which such a 

prohibition on disclosure was in place 

prior to the enactment of the Act? 

57. Should the rules provide an 

exception for existing or future 

agreements that contain confidentiality 

provisions? 97 Would an exception be 

consistent with the statute and the 

protection of investors? 

58. Are there circumstances in which 

the disclosure of the required payment 

information would jeopardize the safety 

and security of a resource extraction 

issuer’s operations or employees? If so, 

should the rules provide an exception 

for those circumstances? 98

59. Should we permit a foreign 

private issuer that is already subject to 

resource payment disclosure obligations 

under its home country laws or the rules 

of its home country stock exchange to 

follow those home country laws or rules 

instead of the resource extraction 

disclosure rules mandated under 

Section 13(q)? 99

60. Are there any other circumstances 

in which an exception to the disclosure 

requirement would be appropriate? For 

instance, would it be appropriate to 

provide an exception for commercially 

or competitively sensitive 

information,100 or when disclosure 

would cause a resource extraction issuer 

to breach a contractual obligation? 

E. Definition of ‘‘Foreign Government’’ 

Under Section 13(q), Congress defined 

‘‘foreign government’’ to mean a foreign 

government, a department, agency, or 

instrumentality of a foreign government, 

or a company owned by a foreign 

government, while granting the 

Commission the authority to determine 

the scope of the definition.101 For 

purposes of the disclosure requirement, 

we propose to define the term ‘‘foreign 

government’’ consistent with the statute 

and to specifically include foreign 

subnational governments in the 

definition to provide additional clarity 

regarding the definition.102 Resource 

extraction issuers may be required to 

pay fees for permits, licenses, 

concessions, and other entry 

requirements to a variety of national and 

subnational foreign governments, 

including a state, province, county, 

district, municipality or other level of 

subnational government.103 The 

proposed definition, is intended to 

capture payments made by resource 

extraction issuers to any foreign 

government and would not be limited to 

payments made to foreign national 

governments.104

Section 13(q) requires that a resource 

extraction issuer disclose payments to 

the Federal Government in addition to 

payments made to a foreign government. 

While Congress left undefined the term 

‘‘Federal Government,’’ typically that 

term refers only to the U.S. national 

government, and not to the states or 

other subnational governments in the 

United States.105 We propose to clarify 

in the rule text that ‘‘Federal 

Government’’ means the United States 

Federal Government.106

Request for Comment 

61. Should the definition of foreign 

government include a foreign 

government, a department, agency, or 

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Federal Register / Vol. 75, No. 246 / Thursday, December 23, 2010 / Proposed Rules 80989 

107See proposed Instruction to Item 105(b)(2) of 

Regulation S–K; proposed Instruction 2 to Item 

16I.B.(2) of Form 20–F; and proposed Note 2 to 

Instruction B.17(b)(2) of Form 40–F. 

108 In this regard, one commentator has requested 

that we require an issuer to conduct an appropriate 

level of due diligence to determine whether a 

company to which it is making a payment is owned 

by a foreign government. See letter from PWYP. 

109 15 U.S.C. 78m(q)(2)(A). 

110 15 U.S.C. 78m(q)(2)(C) and (D). 

111We received comment that due to the ‘‘tight 

annual reporting deadline,’’ we should not require 

the payment disclosure to be part of the audited 

financial statements and that we should keep the 

reporting separate from annual reporting on Form 

10–K and Form 20–F. Letter from API. The 

commentator recommended requiring the payment 

disclosure in a separate report with an annual 

deadline of 150 days following the fiscal year end. 

See id. We note that the statute does not require the 

payment disclosure to be part of the audited 

financial statements, and the rules do not propose 

to do so. Therefore, we preliminarily believe it 

could be less burdensome for resource extraction 

issuers, as well as more useful to investors, to 

provide the disclosure in a form that issuers are 

already required to file rather than requiring them 

to furnish a separate report; however, we are 

soliciting comment about this issue. 

112See letters from Calvert and SIF and PWYP 

supporting that approach. 

113See letters from API and NMA suggesting such 

an approach. 

114See Sections 1502 and 1503 of the Dodd-Frank 

Act. 

instrumentality of a foreign government, 

or a company owned by a foreign 

government, as proposed? 

62. We note that the definition of 

foreign government would include a 

company owned by a foreign 

government. We understand that in the 

case of certain state owned companies, 

the government would be a shareholder. 

Thus, certain transactions may occur as 

transactions between the company and 

the government and as transactions 

between company and shareholder. 

Should we adopt specific rules or 

provide guidance regarding payments 

made by state owned companies that 

distinguish between such types of 

transactions? 

63. Under Section 13(q) and the 

proposal, the definition of ‘‘foreign 

government’’ includes ‘‘a company 

owned by a foreign government.’’ We are 

proposing to include an instruction in 

the rules clarifying that a company 

owned by a foreign government is a 

company that is at least majority-owned 

by a foreign government.107 Is this 

clarification appropriate? Should a 

company be considered to be owned by 

a foreign government if government 

ownership is lower than majorityownership? Should the rules provide 

that a company is owned by a foreign 

government if government ownership is 

at a level higher than majorityownership? If so, what level of 

ownership would be appropriate? Are 

there some levels of ownership of 

companies by a foreign government that 

should be included in or excluded from 

the proposed definition of foreign 

government? 

64. Should the definition of foreign 

government include a foreign 

subnational government, such as a state, 

province, county, district, municipality 

or territory of a non-U.S. government, in 

addition to a non-U.S. national 

government, as proposed? 

65. Are there some levels of 

subnational government that should be 

excluded from the proposed definition 

of foreign government? If so, please 

provide specific examples of those 

levels of subnational government that 

should be excluded. 

66. Should we also require a resource 

extraction issuer to disclose amounts 

paid to the states and other subnational 

governments in the United States in 

addition to payments to the Federal 

Government? 

67. Is there additional guidance that 

we should provide regarding the 

definition of foreign government? 108

F. Disclosure Required and Form of 

Disclosure 

Section 13(q) mandates that a 

resource extraction issuer disclose in an 

annual report the type and total amount 

of payments made for each project 

relating to the commercial development 

of oil, natural gas, or minerals as well 

as the type and total amount of such 

payments made to each government.109

Section 13(q) also mandates the 

submission of the payment information 

in an interactive data format, and 

provides the Commission with the 

discretion to determine the applicable 

interactive data standard.110

1. Annual Report Requirement 

Section 13(q) mandates that a 

resource extraction issuer provide the 

payment disclosure required by that 

section in an annual report, but 

otherwise does not specify the location 

of the disclosure, either in terms of a 

specific form or in terms of location 

within a specific form. As proposed, a 

resource extraction issuer would have to 

provide the required payment 

disclosure in its Exchange Act annual 

report filed on Form 10–K, Form 20–F, 

or Form 40–F. We preliminarily believe 

this approach is an appropriate way to 

implement the Act’s disclosure 

requirements for resource extraction 

issuers without imposing additional 

burdens that might be associated with 

submitting a separate annual report to 

the Commission.111 In addition, to 

facilitate investors’ ability to locate the 

disclosure within the annual report 

without over-burdening them with 

extensive information about resource 

extraction payments in the body of the 

report, our proposed rules would 

require issuers to include a brief 

statement under a separate heading 

entitled, ‘‘Payments Made By Resource 

Extraction Issuers,’’ directing investors 

to the detailed information about 

payments provided in the exhibits. 

While Section 13(q) mandates that a 

resource extraction issuer provide the 

payment disclosure required by that 

section in an annual report, it does not 

specifically mandate the time period for 

which a resource extraction issuer must 

provide the disclosure. Given that the 

statute requires the disclosure in an 

annual report and we are proposing to 

require resource extraction issuers to 

furnish the disclosure in the annual 

report on Form 10–K, Form 20–F, or 

Form 40–F, as applicable, we believe it 

is reasonable to require resource 

extraction issuers to provide the 

mandated payment information for the 

fiscal year covered by the applicable 

annual report. 

Request for Comment 

68. Section 13(q) requires disclosure 

of the payment information in an annual 

report but does not specify the type of 

annual report. Should we require 

resource extraction issuers to provide 

the payment disclosure mandated under 

Section 13(q) in its Exchange Act annual 

report, as proposed? 112 Should we 

require, or permit, resource extraction 

issuers to provide the payment 

information in an annual report other 

than an annual report on Form 10–K, 

Form 20–F, or Form 40–F? For example, 

should we require the disclosure in a 

new form filed annually on the 

Commission’s Electronic Data 

Gathering, Analysis, and Retrieval 

system (‘‘EDGAR’’)? 113 Would requiring 

resource extraction issuers to disclose 

the information in a separate annual 

report be consistent with Section 13(q)? 

Should we require an oil, natural gas, or 

mining company to file a separate 

annual report containing all of the 

specialized disclosures mandated by the 

Dodd-Frank Act? 114 What would be the 

benefits or burdens of such a form for 

investors or resource extraction issuers? 

If we should require, or permit, a 

separate annual report, what should be 

the due date of the report (e.g. 30, 60, 

90, 120, or 150 days after the end of the 

fiscal year covered by the report)? 

69. If we require resource extraction 

issuers to provide the disclosure of 

payment information in their Exchange 

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115 17 CFR 210.3–09. 

116 15 U.S.C. 77a et seq. 

117 17 CFR 240.12g3–2(b). A foreign private issuer 

may claim that exemption as long as it meets a 

foreign listing requirement, publishes its material 

home country documents in English on its Internet 

Web site or through another electronic information 

delivery system that is generally available to the 

public in its primary trading market, and otherwise 

is not required to file Exchange Act reports. A 

foreign private issuer typically relies on the Rule 

12g3–2(b) exemption in order to establish an 

unlisted American Depositary Receipt (‘‘ADR’’) 

facility for the issuance and trading of ADRs 

through the over-the-counter market. 

118See letters from Calvert and SIF and PWYP 

supporting such an approach. 

119The Commission has not considered Rule 

12g3–2(b)—exempt companies to be subject to 

Exchange Act reporting and filing requirements. 

Prior to the amendment to Rule 12g3–2(b) in 2008, 

we required issuers claiming the Rule 12g3–2(b) 

exemption to furnish paper copies of their material 

home country documents to the Commission. The 

documents were deemed furnished and not filed 

under the Exchange Act because they were subject 

to their home country, and not Exchange Act, 

disclosure rules. (See the discussion of ‘‘furnished’’ 

vs. ‘‘filed’’ in Section II.F.3 of this release.) Since the 

2008 amendment, Rule 12g3–2(b)-exempt 

companies do not submit or file any document with 

the Commission, and must comply only with the 

rule’s Internet publishing requirement. 

120See proposed Regulation S–K Items 601(a), 

(b)(97), and (b)(98), proposed paragraphs 17 and 18 

of the Instructions as to Exhibits for Form 20–F, and 

proposed paragraph B.(17)(a) under the General 

Instructions of Form 40–F. 

121See id. 

122See proposed Regulation S–K Item 601(b)(98), 

proposed paragraph 18 under Instructions as to 

Exhibits for Form 20–F, and proposed paragraph 

B.(17)(a)(2) under the General Instructions of Form 

40–F. 

123See letters from API; Calvert and SIF; and 

PWYP. Calvert and SIF stated that XBRL ‘‘reduces 

the costs for investors associated with obtaining and 

assimilating information from issuers, and, at the 

same time, reduces the costs to issuers submitting 

data to regulators.’’ In addition, Calvert and SIF 

noted that ‘‘XBRL allows far more standardization 

and harmonization of international business 

reporting standards, thereby lowering the costs of 

compliance and reporting for issuers, while making 

the information far more valuable and easily 

interpreted and analyzed by investors.’’ Letter from 

Calvert and SIF. PWYP recommended XBRL ‘‘in 

order to more seamlessly integrate with existing 

company filings formatted in XBRL, as well as the 

Commission’s existing XBRL reporting platform, 

and with external XBRL-based databases managed 

by private sector companies.’’ Letter from PWYP. Cf. 

letter from NMA (stating that ‘‘issuers should be 

given the flexibility to disclose the data in any 

format that would allow users to click through the 

information in a standard file type (e.g. Microsoft 

Word, Web-based HTML, Microsoft Excel, or .pdf) 

to reach data sorted by each of the electronic tags 

specified in the Act.’’ According to this 

commentator, while XBRL could satisfy the 

statutory requirement, ‘‘issuers should not be 

prohibited from using other formats that allow for 

meaningful use of ‘electronic tags’.’’). 

124See proposed Item 4(c) under Part I of Form 

10–K, proposed Item 16I.A. under Part II of Form 

20–F, and proposed paragraph B.(17)(a) under the 

General Instructions of Form 40–F. 

125Rule 301 under Regulation S–T [17 CFR 

232.301] requires electronic filings to comply with 

the EDGAR Filer Manual, and Section 5.1 of the 

Filer Manual requires that electronic filings be in 

ASCII or HTML format. Rule 104 under Regulation 

S–T [17 CFR 232.104] permits filers to submit 

voluntarily as an adjunct to their official filings in 

ASCII or HTML unofficial PDF copies of filed 

documents. 

126 15 U.S.C. 78p(a). 

127See Interactive Data to Improve Financial 

Reporting, Release No. 33–9002 (January 30, 2009), 

74 FR 6776 (February 10, 2009) (‘‘XBRL Adopting 

Release’’). 

128See Asset-Backed Securities, Release No. 33– 

9117 (April 7, 2010), 75 FR 23328 (May 3, 2010). 

129The term ‘‘open standard’’ is generally applied 

to technological specifications that are widely 

Act annual reports, should we permit 

resource extraction issuers to file an 

amendment to the annual report within 

a specified period of time subsequent to 

the due date of the report, similar to 

Article 12 schedules or financial 

statements provided in accordance with 

Regulation S–X Rule 3–09,115 to provide 

the payment information? If so, what 

would be the appropriate time period 

(e.g. 30, 60 or 90 days after the due date 

of the report)? 

70. As noted above, Section 13(q) 

mandates that a resource extraction 

issuer provide the payment disclosure 

required by that section in an annual 

report, but it does not specifically 

mandate the time period for which a 

resource extraction issuer must provide 

the disclosure. Is it reasonable to require 

resource extraction issuers to provide 

the mandated payment information for 

the fiscal year covered by the applicable 

annual report, as proposed? Why or why 

not? Should the rules instead require 

disclosure of payments made by 

resource extraction issuers during the 

most recent calendar year? 

71. Should we also require an issuer 

to provide the resource extraction 

payment disclosure in a registration 

statement under the Securities Act of 

1933 116 or under the Exchange Act? If 

so, what time period should the 

disclosure cover? 

72. Should we require an issuer that 

has a class of securities exempt from 

Exchange Act registration pursuant to 

Exchange Act Rule 12g3–2(b) 117 to 

provide the resource extraction payment 

disclosure in its home country annual 

report or in a report on EDGAR? 118

Would such an approach be consistent 

with the Exchange Act? 119

2. Exhibits and Interactive Data Format 

Requirement 

We propose to require a resource 

extraction issuer to present the 

mandated payment information in two 

exhibits to its annual report on Form 

10–K, Form 20–F, or Form 40–F, as 

applicable.120 Specifically, the proposed 

rules would add new exhibits (97) and 

(98) to Item 601 of Regulation S–K, new 

paragraphs 17 and 18 to the 

‘‘Instructions as to Exhibits’’ in Form 20– 

F, and new paragraph B(17) of the 

‘‘General Instructions’’ in Form 40–F.121

We believe two exhibits are necessary to 

provide investors with the information 

in a format that is useful to them. 

Resource extraction issuers would be 

required to file the information in 

HTML or ASCII format in one exhibit, 

which would enable investors to easily 

read the disclosure about payment 

information without additional 

computer programs or software. 

Resource extraction issuers also would 

be required to file an exhibit with the 

information electronically tagged in 

XBRL format and the disclosure would 

be readable through a viewer. As noted 

above, Section 13(q) requires that the 

rules issued pursuant to the section 

require that the information included in 

the annual report be submitted in an 

interactive data format. We are 

proposing to require resource extraction 

issuers to submit the mandated payment 

information in XBRL in an exhibit.122

Some commentators indicated a 

preference for XBRL.123

In addition, we propose to require a 

resource extraction issuer to provide a 

statement, under an appropriate heading 

in the issuer’s annual report, referring to 

the payment information provided in 

the exhibits to the report.124 We believe 

this approach would facilitate access to 

the information by placing it outside the 

body of the annual report. By requiring 

resource extraction issuers to provide 

the payment information in exhibits to 

the annual report, the proposed rules 

would enable anyone accessing EDGAR 

to determine quickly whether an issuer 

provided disclosure in accordance with 

Section 13(q) and the rules issued 

pursuant to that section. In addition, we 

are concerned that presenting the 

information in interactive data format in 

the body of the annual report would not 

be comprehensible. Thus, we believe a 

brief reference in the body of the filing 

to the disclosure and the complete 

presentation in the exhibits to the filing 

is the most appropriate approach. 

Resource extraction issuers currently 

are required to file their registration 

statements, current and periodic reports 

in ASCII or HTML.125 Our electronic 

filing system also uses other formats for 

reporting related to corporate issuers, 

such as XML, to process reports of 

beneficial ownership of equity securities 

on Forms 3, 4, and 5 under Section 16(a) 

of the Exchange Act,126 and a form of 

XML known as XBRL to provide 

financial statement data.127 As we 

explained in the XBRL Adopting 

Release and the proposing release for 

asset-backed securities,128 electronic 

formats such as HTML, XML, and XBRL 

are open standards 129 that define or 

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available to the public, royalty-free, and at minimal 

or no cost. 

130See letter from API; Calvert and SIF; and 

PWYP. 

131 15 U.S.C. 78m(q)(2)(D)(ii). 

132See proposed Regulation S–K Item 601(b)(98), 

paragraph 18 under Instructions as to Exhibits of 

Form 20–F, and paragraph B.(17)(a)(2) under the 

General Instructions of Form 40–F. 

133 15 U.S.C. 78m(q)(3)(A). That information 

includes the type and total amount of payments 

made by resource extraction issuers to foreign 

governments or the U.S. Federal Government for the 

purpose of the commercial development of oil, 

natural gas, or minerals on a per project and per 

government basis. 

134Section 13(q) provides that ‘‘[n]othing in 

[Section 13(q)(3)(A)] shall require the Commission 

to make available online information other than the 

information required to be submitted under the 

rules issued under paragraph (2)(A).’’ 15 U.S.C. 

78m(q)(3)(B). 

135One commentator requested that we require 

issuers to disclose the payment information as a 

separate section of the audited financial statements 

that are filed with the Exchange Act annual report 

and that we require the payment disclosure on both 

a cash and accrual basis. See letter from Calvert and 

SIF. See also letter from PWYP (requesting that we 

require the information to be included in a separate 

section of the Exchange Act annual report and 

subject to ‘‘rigorous audit or review procedures by 

the company’s independent external auditor’’). 

‘‘tag’’ data using standard definitions. 

The tags establish a consistent structure 

of identity and context. This consistent 

structure can be recognized and 

processed by a variety of different 

software applications. 

In the case of HTML, the standardized 

tags enable Web browsers to present 

Web sites’ embedded text and 

information in a predictable format so 

that they are human readable. In the 

case of XML and XBRL, software 

applications, such as databases, 

financial reporting systems, and 

spreadsheets recognize and process 

tagged information. As noted above, 

some commentators have indicated we 

should require these data points in 

XBRL as we are proposing.130

As mandated by Section 13(q),131 the 

proposed rules would require a resource 

extraction issuer to submit the payment 

information using electronic tags that 

identify, for any payments made by a 

resource extraction issuer to a foreign 

government or the U.S. Federal 

Government: 

• The total amounts of the payments, 

by category; 

• The currency used to make the 

payments; 

• The financial period in which the 

payments were made; 

• The 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; and 

• The project of the resource 

extraction issuer to which the payments 

relate.132

In addition, under Section 13(q), a 

resource extraction issuer would be 

required to provide the type and total 

amount of payments made for each 

project and the type and total amount of 

payments made to each government in 

interactive data format. Consistent with 

the statute, the proposed rules require a 

resource extraction issuer to include an 

electronic tag that identifies the 

currency used to make the payments. 

The statute does not otherwise specify 

how the resource extraction issuer 

should present the type and total 

amount of payments for each project or 

to each government. We preliminarily 

believe it is appropriate to require 

resource extraction issuers to provide 

the type and total amount of payments 

for each project and to each government 

in the currency in which the payments 

were made, as we believe it may 

increase comparability with disclosure 

provided under EITI programs in other 

countries. 

We expect that some of the electronic 

tags, such as those pertaining to 

category, currency, country, and 

financial period would have fixed 

definitions and would enable interested 

persons to evaluate and compare the 

payment information across companies 

and governments. Other tags, which 

could include those pertaining to 

business segment, government, and 

project, would allow for issuers to enter 

information specific to their business. 

Section 13(q) requires the 

Commission, to the extent practicable, 

to make available online, to the public, 

a compilation of the information 

required under paragraph (2)(A) of that 

section.133 We request comment on the 

particular form, content, or time period 

for the compilation.134

Request for Comment 

73. Should we require that 

information concerning the type and 

total amount of payments made for each 

project and to each government relating 

to the commercial development of oil, 

natural gas, or minerals be provided in 

the exhibits to Form 10–K, Form 20–F, 

or Form 40–F, as proposed? 

74. Should we require, as proposed, a 

resource extraction issuer to provide a 

statement, under an appropriate heading 

in the issuer’s annual report, referring to 

the payment information provided in 

the exhibits to the report, as proposed? 

75. Should we require a resource 

extraction issuer to present some or all 

of the required payment information in 

the body of the annual report instead of, 

or in addition to, presenting the 

information in the exhibits? If you 

believe we should require disclosure of 

some or all the payment information in 

the body of the annual report, please 

explain what information should be 

required and why. For example, should 

we require a resource extraction issuer 

to provide a summary of the payment 

information in the body of the annual 

report? If so, what items of information 

should be disclosed in the summary? 

76. Section 13(q) does not require the 

resource extraction payment 

information to be audited or provided 

on an accrual basis.135 Accordingly, the 

proposed rules do not include such 

requirements. Should we require 

resource extraction issuers to have the 

payment information audited or provide 

the payment information on an accrual 

basis? Why or why not? What would be 

the likely benefits and burdens? Would 

including such requirements be 

consistent with the statute? 

77. Should we require two new 

exhibits for the resource extraction 

disclosure, as proposed? 

78. Should we require that the 

resource extraction payment disclosure 

be provided in a new exhibit in HTML 

or ASCII, as proposed? Why or why not? 

79. Should we require the resource 

extraction payment disclosure to be 

electronically formatted in XBRL and 

provided in a new exhibit, as proposed? 

Is XBRL the most suitable interactive 

data standard for purposes of this rule? 

If not, why not? Should the information 

be provided in XML format? If so, why? 

Are there characteristics of XML, such 

as ease of entering information into a 

form, which makes it a better interactive 

data standard for the payment 

information than XBRL? Would the use 

of the XBRL taxonomy based on U.S. 

GAAP cause confusion in light of the 

fact that the information required under 

Section 13(q) is information about cash 

or in kind payments (that are not 

computed in accordance with GAAP) 

made by resource extraction issuers? 

Should we require an interactive data 

standard for the payment information 

other than XML or XBRL? 

80. Section 13(q) and our proposed 

rules require a resource extraction issuer 

to include an electronic tag that 

identifies the currency used to make the 

payments. If the currency in which the 

payment was made differs from the 

issuer’s reporting currency, should the 

rules require issuers to convert the 

payments to the issuer’s reporting 

currency at the applicable rate? If the 

rules should, as proposed, require 

disclosure of in kind payments, should 

the rules require in kind payments to be 

converted to the host country currency? 

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80992 Federal Register / Vol. 75, No. 246 / Thursday, December 23, 2010 / Proposed Rules 

136 15 U.S.C. 78m(q)(2)(D)(ii)(III). 

137 15 U.S.C. 78m(q)(2)(D)(ii)(IV). 

138 15 U.S.C. 78m(q)(2)(D)(ii)(VI). 

139 15 U.S.C. 78m(q)(2)(D)(ii)(VII). 

140See letter from API. 

141We received a suggestion that the compilation 

take the form of an online database and summary 

report. The online database would enable users to 

search by country and company, as well as by year 

or multiple years of reporting. The suggested 

summary report would list the total payments by 

each issuer for each government, total payments 

within each payment category, the total payments 

per project for each issuer, and project payments 

within each payment category. See letter from 

PWYP. 

142 15 U.S.C. 78m(q)(2)(A). 

143 15 U.S.C. 78m(a) and 15 U.S.C. 78o(d). 

144 Item 601(b)(32)(ii) of Regulation S–K [17 CFR 

229.601(b)(32)]. 

145 17 CFR 240.13a–14(b). 

146 17 CFR 240.15d–14(b). 

147 18 U.S.C. 1350. 

148 17 CFR 229.407(d). 149 17 CFR 229.407(e)(5). 150See letter from NMA. 151 15 U.S.C. 78m(q)(2)(E). In addition, an author 

of the legislation has noted that the purpose of the 

legislation is to provide information to investors. 

See, e.g., Statement of Senator Cardin in support of 

Amendment No. 3732 to Restoring American 

Financial Stability Act (S3217), 111 Cong. Rec. 

S3316 (daily ed. May 6, 2010) (stating that 

‘‘Investors need to be able to assess the risks of their 

investments. Investors need to know where, in what 

amount, and on what terms their money is being 

spent in what are often very high-risk operating 

environments. These environments are often poor 

developing countries that may be politically 

unstable, have lots of corruption, and have a history 

of civil unrest. The investor has a right to know 

about the payments. Secrecy of payments carries 

real bottom-line risks for investors. Creating a 

reporting requirement with the SEC will capture a 

larger portion of the international extractive 

industries corporations than any other single 

mechanism, thereby setting a global standard for 

transparency and promoting a level playing field. 

Investors should be able to know how much money 

is being invested up front in oil, gas, and mining 

projects. For example, oil companies often pay very 

large signature payments to secure the rights for an 

oilfield, long before the first drop of oil is produced. 

Such payments are in addition to the capital 

investment required.’’). 

Should the rules require in kind 

payments to be converted to the issuer’s 

reporting currency at the applicable 

rate? Should the rules require disclosure 

of the in kind payments in the form in 

which the payments were made and 

also require the payments to be 

converted to the issuer’s reporting 

currency? Should we require issuers to 

provide a conversion to U.S. dollars for 

payments made in cash and in kind, and 

to electronically tag that information? 

81. Section 13(q) and our proposed 

rules require an issuer to include an 

electronic tag that identifies the 

financial period in which the payments 

were made.136 Should we require an 

issuer to identify in the tag the 

particular fiscal year, quarter, or other 

period, such as a particular half-year, in 

which the payments were made? 

82. Section 13(q) and our proposed 

rules require an issuer to include an 

electronic tag that identifies the issuer’s 

business segment that made the 

payments.137 Should we define 

‘‘business segment’’ for purpose of 

disclosing and tagging the payment 

information required by Section 13(q)? 

If so, what definition should we use? 

Should we instead allow resource 

extraction issuers to disclose and 

identify the business segment in 

accordance with how it operates its 

business? What are the advantages and 

disadvantages of allowing an issuer to 

rely on its definition of business 

segment? 

83. Section 13(q) and our proposed 

rules require an issuer to include an 

electronic tag that identifies the project 

to which the payments relate.138 Are 

there some payments that would not 

relate to a particular project? If so, 

should we nevertheless require that 

each payment be allocated to a 

particular project? Should we instead 

permit an issuer to use only the 

electronic tag that identifies the 

government receiving the payments if 

those payments do not relate to, or 

cannot be allocated to, a particular 

project? 

84. Section 13(q) requires an issuer to 

electronically tag ‘‘such other 

information as the Commission may 

determine is necessary or appropriate in 

the public interest or for the protection 

of investors.’’ 139 Would it be useful to 

have additional information about the 

payments electronically tagged? If so, 

what additional tags should we require? 

Are there any other items of information 

that should be electronically tagged? 

85. Should we permit issuers to 

aggregate their payments into three 

categories: ‘‘taxes and royalties,’’ 

‘‘production entitlements,’’ and ‘‘other 

payments’’? 140 Would that approach be 

consistent with Section 13(q)? 

86. Section 13(q)(3) requires the 

Commission to provide a compilation of 

the disclosure made by resource 

extraction issuers. Should the 

Commission provide the compilation on 

an annual basis? Should the 

compilation be provided on a calendar 

year basis, or would some other time 

period be more appropriate? Should the 

compilation provide information as to 

the type and total amount of payments 

made on a country basis? What other 

information should be provided in the 

compilation? 141

3. Treatment for Purposes of the 

Securities Act and the Exchange Act 

The statutory language of Section 

13(q) does not specify that the 

information about resource extraction 

payments must be ‘‘filed,’’ rather, it 

states that the information should be 

‘‘include[d] in an annual report[.]’’ 142

We are proposing that the disclosure 

required by Section 13(q) would be 

required to be ‘‘furnished’’ rather than 

‘‘filed’’ and not be subject to liability 

under Section 18 of the Exchange Act, 

unless the issuer explicitly states that 

the resource extraction disclosure is 

filed under the Exchange Act. Issuers 

that fail to comply with the rules would 

be subject to violations of Exchange Act 

Sections 13(a) or 15(d), as applicable.143

The disclosure would be treated in the 

same manner as other furnished 

documents, such as the certifications 

required to be submitted as exhibit 

32 144 to Exchange Act documents under 

Rule 13a–14(b) 145 or Rule 15d–14(b) 146

and Section 1350 of Chapter 63 of Title 

18 of the United States Code,147 the 

Audit Committee Report required by 

Item 407(d) of Regulation S–K 148 and 

the Compensation Committee Report 

required by Item 407(e)(5) of Regulation 

S–K.149

We believe this approach is consistent 

with the statute. Section 13(q) does not 

mandate that the disclosure be included 

in the annual report on Form 10–K, 

Form 20–F, or Form 40–F.150 In 

addition, we preliminarily believe this 

approach is appropriate in light of the 

nature and primary purpose of the 

disclosure. Section 13(q) requires the 

Commission, to the extent practicable, 

to issue rules under the section that 

support the Federal Government’s 

commitment to international 

transparency promotion efforts relating 

to the commercial development of oil, 

natural gas, or minerals.151 We believe 

the nature and purpose of the disclosure 

required by Section 13(q) is 

qualitatively different from the nature 

and purpose of existing disclosure that 

has historically been required under 

Section 13 of the Exchange Act. As a 

result, we preliminarily believe it is 

appropriate to require a resource 

extraction issuer to furnish the 

disclosure. Therefore, we are proposing 

new Instructions to Item 105 of 

Regulation S–K, Item 16I of Form 20–F, 

and Instruction B.(17) of Form 40–F, 

which would state that the disclosure 

provided in response to those items 

would not be deemed to be ‘‘filed’’ with 

the Commission or subject to the 

liabilities of Section 18 of the Exchange 

Act, and will not be deemed to be 

incorporated by reference into any filing 

under the Securities Act or the 

Exchange Act, except to the extent that 

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152Exchange Act Section 18(a). 

153 15 U.S.C. 78m(q)(2)(F). 

154Section 13(q)(2)(A) requires that the 

Commission issue final rules under that section no 

later than 270 days after the Dodd-Frank Act’s 

enactment. The Act was signed into law on July 21, 

2010; therefore the Commission must enact final 

rules no later than April 15, 2011. 

155One commentator has requested that we delay 

the effective date of the resource extraction 

payment disclosure rules until fiscal year 2013. See 

letter from NMA. Another commentator 

recommended that ‘‘first reporting be for the 2012 

fiscal year in 2013.’’ Letter from API. 

156 44 U.S.C. 3501 et seq. 

157 44 U.S.C. 3507(d) and 5 CFR 1320.11. 

158The paperwork burden from Regulation S–K is 

imposed through the forms that are subject to the 

disclosures in Regulation S–K and is reflected in 

the analysis of those forms. To avoid a Paperwork 

Reduction Act inventory reflecting duplicative 

burdens, for administrative convenience we 

estimate the burdens imposed by Regulation S–K to 

be a total of one hour. 

159 15 U.S.C. 78m(q)(2)(A). 

the issuer specifically incorporates it by 

reference. 

Request for Comment 

87. Should we, as proposed, require 

the resource extraction payment 

disclosure to be furnished as exhibits to 

the annual report? If not, why not? How 

should it be provided? 

88. Should we require the resource 

extraction payment disclosure to be 

filed as exhibits, rather than furnished, 

which would affect issuers’ liability 

under the Exchange Act or under the 

Securities Act (if any such issuer 

incorporates by reference its annual 

report into a Securities Act registration 

statement)? 

89. Under Exchange Act section 18, 

‘‘Any person who shall make or cause to 

be made any statement in any 

application, report, or document filed 

pursuant to [the Exchange Act] or any 

rule or regulation thereunder or any 

undertaking contained in a registration 

statement as provided in subsection (d) 

of section 15, which statement was at 

the time and in the light of the 

circumstances under which it was made 

false or misleading with respect to any 

material fact, shall be liable to any 

person (not knowing that such 

statement was false or misleading) who, 

in reliance upon such statement, shall 

have purchased or sold a security at a 

price which was affected by such 

statement, for damages caused by such 

reliance, unless the person sued shall 

prove that he acted in good faith and 

had no knowledge that such statement 

was false or misleading.’’ 152 Is it 

appropriate not to have the disclosures 

subject to Section 18 liability even if the 

elements of Section 18 could otherwise 

be established? Should we require the 

resource extraction payment disclosure 

to be filed for purposes of Section 18 of 

the Exchange Act, but permit an issuer 

to elect not to incorporate the disclosure 

into Securities Act filings? 

90. Should the resource extraction 

payment disclosure be furnished 

annually on Form 8–K? Would that 

approach be consistent with the statute? 

If so, should foreign private issuers, 

which do not file Forms 8–K, be 

permitted to submit the resource 

extraction payment disclosure either in 

their Form 20–F or Form 40–F, as 

applicable, or annually on Form 6–K, at 

their election? 

G. Effective Date 

Section 13(q) provides that, with 

respect to each resource extraction 

issuer, the final rules issued under that 

section shall take effect on the date on 

which the resource extraction issuer is 

required to submit an annual report 

relating to the issuer’s fiscal year that 

ends not earlier than one year after the 

date on which the Commission issues 

the final rules under Section 13(q).153

Because the Commission must enact 

final rules under Section 13(q) at the 

latest by April 15, 2011,154 the statute 

appears to require disclosure in an 

issuer’s annual report relating to the 

fiscal year ending on or after April 15, 

2012. 

Request for Comment 

91. Should we provide a delayed 

effective date for the final rules, either 

for all issuers subject to the rules or for 

certain types of issuers (e.g. smaller 

reporting companies or foreign private 

issuers)? 155 Would doing so be 

consistent with the statute? Why or why 

not? If we should provide for a delayed 

effective date, should issuers be 

required to provide disclosure in an 

annual report for the fiscal year ending 

on or after June 30, 2012, September 30, 

2012, December 31, 2012, or some other 

date? 

H. General Request for Comment 

We request and encourage any 

interested person to submit comments 

regarding: 

• The proposed amendments that are 

the subject of this release; 

• Additional or different changes; or 

• Other matters that may have an 

effect on the proposals contained in this 

release. 

We request comment from the point 

of view of companies, investors and 

other market participants. With regard 

to any comments, we note that such 

comments are of great assistance to our 

rulemaking initiative if accompanied by 

supporting data and analysis of the 

issues addressed in those comments. 

III. Paperwork Reduction Act 

A. Background 

The proposed rule and form 

amendments contain ‘‘collection of 

information’’ requirements within the 

meaning of the Paperwork Reduction 

Act of 1995 (‘‘PRA’’).156 We are 

submitting the proposal to the Office of 

Management and Budget for review in 

accordance with the PRA.157 The titles 

for the collections of information are: 

(1) ‘‘Regulation S–K’’ (OMB Control 

No. 3235–0071); 158

(2) ‘‘Form 10–K’’ (OMB Control No. 

3235–0063); 

(3) ‘‘Form 20–F’’ (OMB Control No. 

3235–0288); and 

(4) ‘‘Form 40–F’’ (OMB Control No. 

3235–0381). 

The regulation and forms were 

adopted under the Securities Act and 

the Exchange Act. The regulation and 

forms set forth the disclosure 

requirements for periodic reports and 

registration statements filed by 

companies to help shareholders make 

informed investment and voting 

decisions. The hours and costs 

associated with preparing and filing the 

forms constitute reporting and cost 

burdens imposed by each collection of 

information. An agency may not 

conduct or sponsor, and a person is not 

required to respond to, a collection of 

information unless it displays a 

currently valid OMB control number. 

The proposed rule and form 

amendments would implement Section 

13(q) of the Exchange Act, which was 

added by Section 1504 of the Act. 

Section 13(q) requires the Commission 

to ‘‘issue final rules that require each 

resource extraction issuer to include in 

an annual report of the resource 

extraction issuer information relating to 

any payment made by the resource 

extraction issuer, a subsidiary of the 

resource extraction issuer, or an entity 

under the control of the resource 

extraction issuer to a foreign 

government or the Federal Government 

for the purpose of the commercial 

development of oil, natural gas, or 

minerals, including—(i) 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, and (ii) the type and total 

amount of such payments made to each 

government.’’ 159 Section 13(q) also 

mandates the submission of the 

payment information in an interactive 

data format, and provides the 

Commission with the discretion to 

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80994 Federal Register / Vol. 75, No. 246 / Thursday, December 23, 2010 / Proposed Rules 

160 15 U.S.C. 78m(q)(2)(C) and (D). 161See proposed Item 105 of Regulation S–K. 162See proposed Item 4(c) under Part I of Form 

10–K. 163While Form 20–F may be used by any foreign 

private issuer, Form 40–F is only available to a 

Canadian issuer that is eligible to participate in the 

U.S.-Canadian Multijurisdictional Disclosure 

System (‘‘MJDS’’). 

164See proposed Item 16I under Part II of Form 

20–F and proposed paragraph (17) to General 

Instruction B of Form 40–F. 

165We derived this number by determining the 

number of issuers that fall under all the SIC codes 

that pertain to oil, natural gas, and mining 

companies and, thus, are most likely to be resource 

extraction issuers, and subtracting from that figure 

the number of issuers that file annual reports on 

Form 20–F and Form 40–F. 

166 In estimating 75 burden hours, we looked to 

the burden hours associated with the disclosure 

required by the oil and gas rules adopted in 2008, 

which estimated an increase of 100 hours for 

domestic issuers and 150 hours for foreign private 

issuers. We preliminarily believe that the disclosure 

required by the proposed rules is less extensive 

than the disclosure required by the oil and gas 

rules, and therefore we have estimated 75 burden 

hours. 

167We derived this number by determining the 

number of issuers that fall under all the SIC codes 

that pertain to oil, natural gas, and mining 

companies and, thus, are most likely to be resource 

extraction issuers, and that file annual reports on 

Form 20–F. 

determine the applicable interactive 

data standard.160

The proposed rule and form 

amendments would require an issuer to 

provide the statutorily-mandated 

information about resource extraction 

payments in an exhibit filed in HTML 

or ASCII format, which would enable 

investors to easily read the disclosure 

about payment information without 

additional computer programs or 

software. A resource extraction issuer 

also would be required to file another 

exhibit with the information 

electronically tagged in XBRL format, 

which would be readable through a 

viewer. In addition, the proposed rule 

and form amendments would require a 

resource extraction issuer to provide a 

statement, under an appropriate heading 

in the issuer’s annual report, referring to 

the payment information provided in 

the exhibits to the report. 

The same payment disclosure 

requirements would apply to U.S. and 

foreign resource extraction issuers. As 

discussed above, we propose to add new 

Item 105 to Regulation S–K 161 to 

require a resource extraction issuer to 

provide information relating to any 

payment made by it, a subsidiary, or an 

entity under its control to a foreign 

government or the U.S. Federal 

Government during the fiscal year 

covered by the annual report for the 

purpose of the commercial development 

of oil, natural gas, or minerals. We also 

propose to add new Item 4(c) to Form 

10–K to require a resource extraction 

issuer to provide a statement that the 

information required by Section 13(q) 

and new Item 105 of Regulation S–K is 

included in two specified exhibits.162 In 

addition, we are proposing to amend 

Regulation S–K Item 601 to add the two 

new exhibits to Form 10–K. Because 

Regulation S–K does not apply to Forms 

20–F and 40–F,163 we propose to amend 

those forms to include the same 

disclosure requirements as those 

proposed for resource extraction issuers 

that are not foreign private issuers.164

Compliance with the proposed rule 

and form amendments by affected 

issuers would be mandatory. The 

disclosure and reports submitted by 

issuers would not be kept confidential, 

and there would be no mandatory 

retention period for the information 

disclosed. 

B. Burden and Cost Estimates Related to 

the Proposed Amendments 

The proposed rule and form 

amendments would require, if adopted, 

additional disclosure for a resource 

extraction issuer’s annual report filed on 

Form 10–K, Form 20–F or Form 40–F, 

which would increase the burden hour 

and cost estimates for each of those 

forms. For purposes of the Paperwork 

Reduction Act, we estimate the total 

annual increase in the paperwork 

burden for all affected companies to 

comply with our proposed collection of 

information requirements to be 

approximately 52,932 hours of company 

personnel time and to be approximately 

$11,857,200 for the services of outside 

professionals. These estimates include 

the time and cost of collecting the 

information, preparing and reviewing 

disclosure, filing documents, and 

retaining records. 

We derived the above estimates by 

estimating the average number of hours 

it would take an issuer to prepare and 

review the proposed disclosure 

requirements. In deriving our estimates, 

we recognize that the burdens will 

likely vary among individual issuers 

based on a number of factors, including 

the size and complexity of their 

operations. We believe that some issuers 

will experience costs in excess of this 

average in the first year of compliance 

with the proposals and some issuers 

may experience less than these average 

costs. When determining these 

estimates, we have assumed that: 

• For Form 10–K, 75% of the burden 

of preparation is carried by the issuer 

internally and 25% of the burden of 

preparation is carried by outside 

professionals retained by the issuer at 

an average cost of $400 per hour; and 

• For Forms 20–F and 40–F, 25% of 

the burden of preparation is carried by 

the issuer internally and 75% of the 

burden of preparation is carried by 

outside professionals retained by the 

issuer at an average cost of $400 per 

hour. 

The portion of the burden carried by 

outside professionals is reflected as a 

cost, while the portion of the burden 

carried by the issuer internally is 

reflected in hours. We request comment 

regarding the allocation of the annual 

burden. In particular, we request 

comment regarding whether the 

proposed rules would add more internal 

burden hours rather than costs for 

outside professionals. 

We have based our estimates of the 

effect that the proposed rule and form 

amendments, if adopted, would have on 

those collections of information 

primarily on our review of the most 

recently completed PRA submissions for 

the affected rules and forms as well as 

on PRA submissions for similar rule and 

form amendments. We expect that the 

rules’ effect will be greatest during the 

first year of their effectiveness and 

diminish in subsequent years. 

1. Form 10–K 

For purposes of the PRA, we estimate 

that, of the 13,545 Form 10–Ks filed 

annually, approximately 861 are filed by 

issuers that would be affected by the 

proposed rule and form amendments.165

We further estimate that the annual 

incremental paperwork burden for the 

Forms 10–K as a result of the proposed 

rule and form amendments would be 75 

burden hours per affected form.166

2. Regulation S–K 

While the proposed rule and form 

amendments would make revisions to 

Regulation S–K, the collection of 

information requirements for that 

regulation are reflected in the burden 

hours estimated for Form 10–K. The 

rules in Regulation S–K do not impose 

any separate burden. Consistent with 

historical practice, we are proposing to 

retain an estimate of one burden hour to 

Regulation S–K for administrative 

convenience. 

3. Form 20–F 

For purposes of the PRA, we estimate 

that, of the 942 Form 20–F annual 

reports filed each year, approximately 

166 are filed by issuers that would be 

affected by the proposed form 

amendments.167 We estimate that the 

annual incremental paperwork burden 

for the Forms 20–F as a result of the 

proposed rule and form amendments 

would be 75 burden hours per affected 

form. 

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Federal Register / Vol. 75, No. 246 / Thursday, December 23, 2010 / Proposed Rules 80995 

168We derived this number by determining the 

number of issuers that fall under all the SIC codes 

that pertain to oil, natural gas, and mining 

companies and, thus, are most likely to be resource 

extraction issuers, and that file annual reports on 

Form 40–F. 169This number corresponds to the estimated 

number of forms expected to be affected by the 

proposed rule and form amendments. 

170The proposed rule and form amendments 

would not change the number of annual responses. 

4. Form 40–F 

For purposes of the PRA, we estimate 

that, of the 205 Form 40–F annual 

reports filed each year, approximately 

74 are filed by companies that would be 

affected by the proposed form 

amendments.168 We estimate that the 

annual incremental paperwork burden 

for the Forms 40–F as a result of the 

proposed form amendments would be 

75 burden hours per affected form. 

C. Summary of Proposed Changes to 

Annual Compliance Burden in 

Collection of Information 

The following tables summarize the 

estimated changes in annual compliance 

burden in the collection of information 

in hours and costs for Exchange Act 

annual reports as a result of the 

proposed rule and form amendments. 

Table 1 illustrates the incremental 

annual compliance burden of the 

collection of information in hours and 

cost for our amendments. 

TABLE 1 

Form 

Number of 

responses 169

(A) 

Incremental 

burden 

hours/form 

(B) 

Total 

incremental 

burden 

hours 

(C)=(A)*(B) 

Incremental 

company 

(D)=(C)*0.75 

(Form 10–K) 

(D)=(C)*0.25 

(Forms 20–F 

& 40–F) 

Incremental 

professional 

(E)=(C)*0.25 

(Form 10–K) 

(E)=(C)*0.75 

(Forms 20–F 

& 40–F) 

Incremental 

professional 

cost 

(F)=(E)*$400/ 

hr. 

10–K ........................................................................... 861 75 64,575 48,431 16,144 $6,457,600 

20–F ........................................................................... 166 75 12,450 3,112 .5 9,337 .5 3,735,000 

40–F ........................................................................... 74 75 5,550 1,387 .5 4,162 .5 1,665,000 

Table 2 illustrates the totalannual 

compliance burden of the collection of 

information in hours and cost resulting 

from the proposed amendments. That 

burden was calculated by adding the 

incremental burdens to the existing 

burdens. 

TABLE 2 

Form 

Current 

annual 

response 170

Current burden hours 

(A) 

Increase in 

burden 

hours (B) 

Proposed 

burden hours 

(C)=(A)+(B) 

Current 

professional 

costs (D) 

Increase in 

professional 

costs (E) 

Proposed 

professional 

costs 

(F)=(D)+(E) 

10–K ............................... 13,545 21,363,548 48,431 21,411,979 $2,848,473,000 $6,457,600 $2,854,930,600 

20–F ............................... 942 622,907 3,112.5 626,019 .5 743,089,980 3,735,000 746,824,980 

40–F ............................... 205 21,884 1,387.5 23,271 .5 26,260,500 1,665,000 27,925,500 

D. Solicitation of Comment 

We request comment on the accuracy 

of our estimates. Pursuant to 44 U.S.C. 

3506(c)(2)(B), the Commission solicits 

comments to: (i) Evaluate whether the 

proposed collections of information are 

necessary for the proper performance of 

the functions of the agency, including 

whether the information will have 

practical utility; (ii) evaluate the 

accuracy of the Commission’s estimate 

of burden of the proposed collections of 

information; (iii) determine whether 

there are ways to enhance the quality, 

utility, and clarity of the information to 

be collected; (iv) evaluate whether there 

are ways to minimize the burden of the 

collections of information on those who 

are to respond, including through the 

use of automated collection techniques 

or other forms of information 

technology; and (v) evaluate whether 

the proposed amendments will have any 

effects on any other collections of 

information not previously identified in 

this section. 

In particular, we request comment 

and supporting empirical data for 

purposes of the PRA on whether the 

proposed rule and form amendments: 

• Will affect the burden hours and 

costs required to produce the annual 

reports on Forms 10–K, 20–F and 40–F; 

and 

• If so, whether the resulting change 

in the burden hours and costs required 

to produce those Exchange Act annual 

reports is the same as or different than 

the estimated incremental burden hours 

and costs proposed by the Commission. 

Any member of the public may direct 

to us any comments concerning the 

accuracy of these burden estimates and 

any suggestions for reducing these 

burdens. Persons submitting comments 

on the collection of information 

requirements should direct the 

comments to the Office of Management 

and Budget, Attention: Desk Officer for 

the Securities and Exchange 

Commission, Office of Information and 

Regulatory Affairs, Room 10102, New 

Executive Office Building, Washington, 

DC 20503, and should send a copy to 

Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090, with reference to File No. 

S7–42–10. Requests for materials 

submitted to OMB by the Commission 

with regard to these collections of 

information should be in writing, refer 

to File No. S7–42–10, and be submitted 

to the Securities and Exchange 

Commission, Office of Investor 

Education and Advocacy, 100 F Street 

NE., Washington, DC 20549–0213. OMB 

is required to make a decision 

concerning the collection of information 

between 30 and 60 days after 

publication of this release. 

Consequently, a comment to OMB is 

best assured of having its full effect if 

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171 15 U.S.C. 78(a) and 15 U.S.C. 78o(d). 

172 15 U.S.C. 78m(q)(2)(E). 

OMB receives it within 30 days of 

publication. 

IV. Cost-Benefit Analysis 

We are proposing the rule and form 

amendments discussed in this release in 

order to implement Section 13(q), which 

was added to the Exchange Act by 

Section 1504 of the Act. As mandated 

by Section 13(q), the proposed rule and 

form amendments would require a 

resource extraction issuer to disclose in 

its annual report filed with the 

Commission certain information relating 

to any payment made by the issuer, a 

subsidiary, or an entity under the 

issuer’s control to a foreign government 

or the U.S. Federal Government for the 

purpose of the commercial development 

of oil, natural gas, or minerals. The 

statutorily required information would 

include the type and total amount of 

payments made for each project of the 

issuer relating to the commercial 

development of oil, natural gas, or 

minerals as well as the type and total 

amount of those payments made to each 

government. We expect that the 

proposed rule and form amendments 

would affect in substantially the same 

way both U.S. companies and foreign 

companies that meet Section 13(q)’s 

definition of ‘‘resource extraction 

issuer,’’ which is an issuer that is 

required to file an annual report with 

the Commission and engages in the 

commercial development of oil, natural 

gas, or minerals. 

We are sensitive to the costs and 

benefits of the proposed rule and form 

amendments. Section 1504 of the DoddFrank Act added Section 13(q) to the 

Exchange Act, which establishes a 

disclosure requirement for payments 

made by resource extraction issuers. 

The rules proposed to implement the 

statute largely track the statutory 

provision. The cost-benefit analysis that 

follows focuses on the benefits and costs 

related to the aspects of the proposed 

rules in which we exercised discretion, 

and not on the overall benefits and costs 

of the statutory regime for disclosure of 

payments by resource extraction issuers. 

A. Benefits 

The proposed rulemaking is intended 

to implement the requirements of 

Exchange Act Section 13(q) as set forth 

in Section 1504 of the Dodd-Frank Act. 

Overall, we expect that the proposed 

rules will have the benefit of furthering 

Congress’ goal of promoting 

international transparency efforts. 

The proposed rules would clarify that 

resource extraction issuers would be 

required to provide information about 

certain payments made to foreign 

governments, including foreign 

subnational governments. This 

clarification may reduce uncertainty 

about compliance for resource 

extraction issuers and increase 

transparency with regard to the 

payments made to foreign governments. 

It also may provide increased 

consistency in the application of the 

requirement across resource extraction 

sectors to the extent that it is more 

common for certain resource extraction 

issuers, such as mining companies, to 

make payments to subnational 

governments than national 

governments. 

The proposed rules do not provide a 

definition of what ‘‘other material 

benefits’’ should be classified as 

payments subject to disclosure. 

Specifically, the Commission is not 

proposing that social or community 

payments be included in the disclosure 

mandated by Section 13(q). 

Section 13(q) provides that the 

resource extraction payment disclosure 

must be ‘‘included in an annual report.’’ 

As proposed, the rules would specify 

the forms in which the required 

payment information must be disclosed 

and location of the required disclosure. 

The proposed rules would require a 

resource extraction issuer to provide the 

required payment disclosure in its 

Exchange Act annual report filed on 

Form 10–K, Form 20–F, or Form 40–F. 

We preliminarily believe this approach 

is an appropriate way to implement 

Section 13(q)’s disclosure requirements 

for resource extraction issuers without 

imposing additional burdens that might 

be associated with submitting a separate 

annual report to the Commission. To 

facilitate investors’ ability to locate the 

disclosure within the annual report, our 

proposed rules would require issuers to 

provide the payment information in 

exhibits to the annual report and 

include a brief statement in the body of 

the annual report under a separate 

heading entitled, ‘‘Payments Made By 

Resource Extraction Issuers,’’ directing 

investors to the detailed information 

about payments provided in the 

exhibits. 

In this regard, the proposed rules 

would require that the resource 

extraction payment disclosure be 

furnished with the Commission, rather 

than filed. As noted above, Section 13(q) 

provides that the resource extraction 

payment disclosure must be ‘‘included 

in an annual report,’’ but it does not 

indicate whether the disclosure should 

be filed or furnished. Information that is 

furnished, rather than filed, is not 

subject to liability under Section 18 of 

the Exchange Act, although issuers that 

fail to comply with the rules would be 

subject to violations of Exchange Act 

Sections 13(a) or 15(d), as applicable.171

By requiring the resource extraction 

payment disclosure to be furnished 

rather than filed, we are subjecting the 

disclosure to less liability than would 

exist if the disclosure were filed. 

To meet the mandate of Section 13(q), 

the proposed disclosure would have to 

be electronically formatted using an 

interactive data standard. We have 

considered two alternative standards, 

XML and XBRL, for this purpose. Either 

standard would benefit market 

participants and observers, including 

investors, by enabling them to more 

easily search, retrieve and analyze the 

formatted information. To the extent 

that requiring the specified information 

to be presented in XBRL format may 

promote consistency and 

standardization in business reporting 

standards and reduce compliance costs, 

it could benefit both issuers and users 

of the information. Moreover, the 

proposed rule and form amendments 

would require a resource extraction 

issuer to provide the required payment 

disclosure in two exhibits to its 

Exchange Act annual report—one 

exhibit formatted in HTML or ASCII so 

that it is easily readable as text and 

another exhibit formatted in XBRL and 

providing all of the electronic tags 

required by Section 13(q) and the 

proposed rules. We believe that 

requiring the specified information to be 

presented in two separate formats will 

benefit users of the information by 

allowing them to access the information 

in whatever format is most useful for 

their purposes. 

B. Costs 

Section 13(q) requires the 

Commission to adopt rules that support 

the U.S. Federal Government’s 

commitment to international 

transparency promotion efforts relating 

to the commercial development of oil, 

natural gas, or minerals.172 Resource 

extraction issuers would incur costs in 

meeting the additional disclosure 

required for their Exchange Act annual 

reports under Section 13(q) and the 

proposed rule and form amendments. 

Those costs would include costs related 

to tracking and collecting information 

about different types of payments across 

projects, governments, countries, 

subsidiaries and other controlled 

entities. Those tracking and collecting 

costs would vary depending upon how 

an issuer would need to modify its 

existing systems to track, collect, and 

report the proposed payment 

information. While some issuers are 

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173See 17 CFR 240.13a–15(e) and 17 CFR 

240.15d–15(e). 

174See letters from API and NMA. 

175 15 U.S.C. 78w(a)(2). 

176 15 U.S.C. 78c(f). 

177 15 U.S.C. 78m(q)(2)(E). 

178See letter from Eight Law Firms. 

179See letters from API and Eight Law Firms. 

already providing some payment 

information on a voluntary basis under 

an EITI program, others are currently 

not reporting any payment information. 

Moreover, the EITI requires the 

disclosure of payment information on a 

per country basis, and not per project. 

Therefore, we expect that most resource 

extraction issuers would incur some 

costs to develop disclosure controls and 

procedures to record, process, 

summarize and report the required 

payment information.173 However, we 

believe these costs are a result of the 

statutory requirements that we are 

required to implement. 

The proposed rules do not define 

‘‘other material benefits’’ that should be 

considered payments subject to 

disclosure, which could impose some 

costs. First, resource extraction issuers 

that predominantly make payments that 

would be required to be disclosed 

pursuant to the proposed rules (e.g. 

royalties, license fees, bonuses) may be 

at a competitive disadvantage as 

compared to resource extraction issuers 

that predominantly make payments that 

are not identified in the proposed rules 

(e.g. social and community payments). 

Second, to the extent that other types of 

payments could be used to substitute for 

explicitly defined payments, resource 

extraction issuers may try to circumvent 

the required disclosures by shifting to 

other, not explicitly defined payments, 

and away from payments defined by the 

statute. This could have the effect of 

reducing the transparency contemplated 

by Section 1504 of the Dodd-Frank Act. 

The proposed rules would require a 

resource extraction issuer to provide the 

required payment disclosure in its 

Exchange Act annual report filed on 

Form 10–K, Form 20–F, or Form 40–F. 

While we preliminarily believe that 

requiring resource extraction issuers to 

provide the information in an existing 

form that they already file would be less 

burdensome than providing the 

information in a new separate form, to 

the extent that issuers have concerns 

with regard to the time period in which 

to provide the disclosure in the existing 

form,174 the proposed rules could result 

in increased compliance costs. 

The proposed rules would require 

resource extraction issuers to submit the 

information required by Section 13(q) in 

two separate exhibits, one formatted in 

HTML or ASCII so that it is easily 

readable as text and another exhibit 

formatted in XBRL and providing all of 

the electronic tags required by Section 

13(q). The requirement to provide two 

separately formatted versions of the 

required information will result in some 

increased compliance costs for issuers; 

however, we believe it is appropriate to 

require the information in readable 

format as text in addition to the 

statutorily-mandated interactive data 

format in order for the information to be 

readily accessible to different users. In 

addition, the electronic formatting costs 

would vary depending upon an issuer’s 

prior experience with XBRL. While 

many issuers are already familiar with 

XBRL because they currently use XBRL 

for their annual and quarterly reports 

filed with the Commission, issuers not 

already filing reports using XBRL would 

incur some start-up costs associated 

with XBRL. 

V. Consideration of Burden on 

Competition and Promotion of 

Efficiency, Competition and Capital 

Formation 

Section 23(a)(2) of the Exchange 

Act 175 requires us, when adopting rules 

under the Exchange Act, to consider the 

impact that any new rule would have on 

competition. In addition, Section 

23(a)(2) prohibits us from adopting any 

rule that would impose a burden on 

competition not necessary or 

appropriate in furtherance of the 

purposes of the Exchange Act. Section 

3(f) of the Exchange Act 176 requires us, 

when engaging in rulemaking that 

requires us to consider or determine 

whether an action is necessary or 

appropriate in the public interest, to 

consider, in addition to the protection of 

investors, whether the action will 

promote efficiency, competition and 

capital formation. 

The Commission is proposing the rule 

and form amendments discussed in this 

release to implement the requirements 

of Exchange Act Section 13(q) as added 

by Section 1504 of the Dodd-Frank Act. 

Section 13(q) mandates that the 

Commission adopt rules requiring 

resource extraction issuers to disclose in 

an annual report payments made to a 

foreign government or the Federal 

Government for the purpose of the 

commercial development of oil, natural 

gas, or minerals. In addition, Section 

13(q) requires the Commission to adopt 

rules that support the U.S. Federal 

Government’s commitment to 

international transparency promotion 

efforts relating to the commercial 

development of oil, natural gas, or 

minerals.177

A commentator stated that, should a 

host government prohibit the disclosure 

of payments made by resource 

extraction issuers to the host 

government, and if the Commission 

does not adopt an appropriate exception 

for that prohibition, an issuer could be 

compelled to select between avoiding or 

abandoning projects in that country and 

maintaining its registration under the 

Exchange Act.178 According to the 

commentator, such a situation would 

harm the competitive position of issuers 

and be contrary to the interests of their 

investors. Some commentators have 

further maintained that, if the 

Commission adopts a rule requiring the 

disclosure of payments without regard 

to the materiality of the project to which 

the payments relate, that rule would 

result in voluminous disclosures of 

immaterial information of little to no 

benefit to investors, which may harm 

the competitive position of affected 

issuers and may harm efficient capital 

formation.179

Request for Comment 

We request comment on whether the 

proposals, if adopted, would promote 

efficiency, competition and capital 

formation or have an impact or burden 

on competition. In particular, we 

request comment on the potential effect 

on efficiency, competition and capital 

formation should the Commission not 

adopt certain exceptions or 

accommodations. Commentators are 

requested to provide empirical data and 

other factual support for their views, if 

possible. 

VI. Initial Regulatory Flexibility 

Analysis 

This Initial Regulatory Flexibility Act 

Analysis has been prepared in 

accordance with 5 U.S.C. 603. It relates 

to proposed rule and form amendments 

to implement Section 13(q) of the 

Exchange Act, which concerns certain 

disclosure obligations of resource 

extraction issuers. As defined by 

Section 13(q), a resource extraction 

issuer is an issuer that is required to file 

an annual report with the Commission, 

and engages in the commercial 

development of oil, natural gas, or 

minerals. 

A. Reasons for, and Objectives of, the 

Proposed Action 

The proposed rule and form 

amendments are designed to implement 

the requirements of Section 13(q), 

which was added by Section 1504 of the 

Dodd-Frank Act. Specifically, the 

proposed rule and form amendments 

would require a resource extraction 

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180 17 CFR 240.0–10(a). 

181While Form 20–F may be used by any foreign 

private issuer, Form 40–F is only available to a 

Canadian issuer that is eligible to participate in the 

U.S.-Canadian Multijurisdictional Disclosure 

System (‘‘MJDS’’). 

182See proposed Item 16I under Part II of Form 

20–F and proposed paragraph (17) to General 

Instruction B of Form 40–F. 

183Public Law 104–121, Title II, 110 Stat. 857 

(1996). 

issuer to disclose in an annual report 

certain information relating to any 

payment made by the issuer, a 

subsidiary, or an entity under the 

issuer’s control to a foreign government 

or the United States Federal 

Government for the purpose of the 

commercial development of oil, natural 

gas, or minerals. An issuer would have 

to include that information in an exhibit 

to its Exchange Act annual report. An 

issuer also would have to submit the 

payment information in two exhibits— 

one formatted in HTML or ASCII and 

one formatted in XBRL. 

B. Legal Basis 

We are proposing the rule and form 

amendments pursuant to Sections 12, 

13, 23(a), and 35A of the Exchange Act. 

C. Small Entities Subject to the 

Proposed Amendments 

The proposals would affect small 

entities that are required to file an 

annual report with the Commission 

under Section 13(a) or Section 15(d) of 

the Exchange Act, and are engaged in 

the commercial development of oil, 

natural gas, or minerals. Exchange Act 

Rule 0–10(a) 180 defines an issuer to be 

a ‘‘small business’’ or ‘‘small 

organization’’ for purposes of the 

Regulatory Flexibility Act if it had total 

assets of $5 million or less on the last 

day of its most recent fiscal year. We 

believe that the proposals would affect 

small entities that meet the definition of 

resource extraction issuer under Section 

13(q). Based on a review of total assets 

for Exchange Act registrants filing under 

certain SICs, we estimate that there are 

approximately 196 oil, natural gas, and 

mining companies that are resource 

extraction issuers and that may be 

considered small entities. 

D. Reporting, Recordkeeping, and Other 

Compliance Requirements 

The proposed rule and form 

amendments would add to the annual 

disclosure requirements of companies 

meeting the definition of resource 

extraction issuer, including small 

entities, by requiring them to provide 

the payment disclosure mandated by 

Section 13(q) in their Exchange Act 

annual reports. That information must 

include: 

• The type and total amount of 

payments made for each project of the 

issuer relating to the commercial 

development of oil, natural gas, or 

minerals; and 

• The type and total amount of those 

payments made to each government. 

The same payment disclosure 

requirements would apply to U.S. and 

foreign resource extraction issuers. We 

are proposing to amend Form 10–K and 

Regulation S–K to require domestic 

resource extraction issuers to provide 

the information about payments made to 

foreign governments or the U.S. Federal 

Government. Because Regulation S–K 

does not apply to Forms 20–F and 40– 

F,181 we propose to amend those forms 

to include the same disclosure 

requirements as those proposed for 

resource extraction issuers that are not 

foreign private issuers.182

E. Duplicative, Overlapping, or 

Conflicting Federal Rules 

We believe there are no federal rules 

that duplicate, overlap or conflict with 

the proposed rules. 

F. Significant Alternatives 

The Regulatory Flexibility Act directs 

us to consider significant alternatives 

that would accomplish the stated 

objectives, while minimizing any 

significant adverse impact on small 

entities. In connection with the 

proposals, we considered the following 

alternatives: 

(1) Establishing different compliance 

or reporting requirements which take 

into account the resources available to 

smaller entities; 

(2) Exempting smaller entities from 

coverage of the disclosure requirements, 

or any part thereof; 

(3) The clarification, consolidation, or 

simplification of disclosure for small 

entities; and 

(4) Use of performance standards 

rather than design standards. 

Section 13(q) does not contemplate 

separate disclosure requirements for 

small entities that would differ from the 

proposed reporting requirements, or 

exempting them from those 

requirements. The proposed rules are 

designed to implement the payment 

disclosure requirements of Section 

13(q). That statutory section applies to 

resource extraction issuers, regardless of 

size. We have requested comment as to 

whether we should provide an 

exemption or delayed compliance for 

smaller reporting companies and 

whether doing so would be consistent 

with the statute and the protection of 

investors. 

The proposed rules would require 

clear disclosure about the payments 

made by resource extraction issuers to 

foreign governments and the U.S. 

Federal Government, which may result 

in increased transparency about those 

payments. The proposed requirement to 

disclose the payment information in 

exhibits to an issuer’s Exchange Act 

annual report may simplify the process 

of submitting the proposed payment 

disclosure. In addition, the required 

electronic formatting of one of the 

exhibits would simplify the search and 

retrieval of payment information 

regarding resource extraction issuers, 

including small entities, for investors 

and other interested persons. 

We have used design rather than 

performance standards in connection 

with the proposed amendments 

because, based on our past experience, 

we believe the proposed amendments 

would be more useful to investors if 

there were specific disclosure 

requirements. In addition, the specific 

disclosure requirements in the proposed 

amendments would promote consistent 

and comparable disclosure among all 

resource extraction issuers. 

G. Solicitation of Comment 

We encourage the submission of 

comments with respect to any aspect of 

this Initial Regulatory Flexibility 

Analysis. In particular, we request 

comments regarding: 

• How the proposed amendments can 

achieve their objective while lowering 

the burden on small entities; 

• The number of small entity 

companies that may be affected by the 

proposed amendments; 

• The existence or nature of the 

potential impact of the proposed 

amendments on small entity companies 

discussed in the analysis; and 

• How to quantify the impact of the 

proposed amendments. 

Respondents are asked to describe the 

nature of any impact and provide 

empirical data supporting the extent of 

the impact. Such comments will be 

considered in the preparation of the 

Final Regulatory Flexibility Analysis, if 

the proposed rule amendments are 

adopted, and will be placed in the same 

public file as comments on the proposed 

amendments themselves. 

VII. Small Business Regulatory 

Enforcement Fairness Act 

For purposes of the Small Business 

Regulatory Enforcement Fairness Act of 

1996 (‘‘SBREFA’’),183 a rule is ‘‘major’’ if 

it has resulted, or is likely to result in: 

• An annual effect on the economy of 

$100 million or more; 

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• A major increase in costs or prices 

for consumers or individual industries; 

or 

• Significant adverse effects on 

competition, investment or innovation. 

Request for Comment 

We request comment on whether our 

proposals would be a ‘‘major rule’’ for 

purposes of SBREFA. We solicit 

comment and empirical data on: 

• The potential effect on the U.S. 

economy on an annual basis; 

• Any potential increase in costs or 

prices for consumers or individual 

industries; and 

• Any potential effect on competition, 

investment or innovation. 

VIII. Statutory Authority and Text of 

Proposed Rule and Form Amendments 

We are proposing the rule and form 

amendments contained in this 

document under the authority set forth 

in Sections 12, 13, 23(a), and 35A the 

Exchange Act. 

List of Subjects in 17 CFR Parts 229 and 

249 

Reporting and recordkeeping 

requirements, Securities. 

In accordance with the foregoing, we 

propose to amend Title 17, Chapter II of 

the Code of Federal Regulations as 

follows: 

PART 229—STANDARD 

INSTRUCTIONS FOR FILING FORMS 

UNDER SECURITIES ACT OF 1933, 

SECURITIES EXCHANGE ACT OF 1934 

AND ENERGY POLICY AND 

CONSERVATION ACT OF 1975— 

REGULATION S–K 

1. The authority citation for part 229 

continues to read in part as follows: 

Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 

77k, 77s, 77z–2, 77z–3, 77aa(25), 77aa(26), 

77ddd, 77eee, 77ggg, 77hhh, 777iii, 77jjj, 

77nnn, 77sss, 78c, 78i, 78j, 78l, 78m, 78n, 

78o, 78u–5, 78w, 78ll, 78mm, 80a–8, 80a–9, 

80a–20, 80a–29, 80a–30, 80a–31(c), 80a–37, 

80a–38(a), 80a–39, 80b–11, and 7201 et seq.; 

and 18 U.S.C. 1350, unless otherwise noted. 

* * * * * 

2. Add § 229.105 to read as follows: 

§ 229.105 (Item 105) Disclosure of 

payments made by resource extraction 

issuers. 

(a) Pursuant to Section 13(q) of the 

Securities Exchange Act of 1934 (15 

U.S.C. 78m(q)), a resource extraction 

issuer must include in an annual report 

filed with the Commission information 

relating to any payment made during 

the fiscal year covered by the annual 

report by the resource extraction issuer, 

a subsidiary of the resource extraction 

issuer, or an entity under the control of 

the resource extraction issuer to a 

foreign government or the United States 

Federal Government, for the purpose of 

the commercial development of oil, 

natural gas, or minerals. Specifically, 

the information must include: 

(1) 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; 

(2) The type and total amount of such 

payments made to each government; 

(3) The total amounts of the 

payments, by category; 

(4) The currency used to make the 

payments; 

(5) The financial period in which the 

payments were made; 

(6) The business segment of the 

resource extraction issuer that made the 

payments; 

(7) The government that received the 

payments, and the country in which the 

government is located; and 

(8) The project of the resource 

extraction issuer to which the payments 

relate. 

Instructions to paragraph (a). 

1. The resource extraction issuer must 

provide the information required by this 

Item as specified by § 229.601(b)(97) 

and (b)(98) of this chapter. In addition, 

the resource extraction issuer must 

provide a statement, in an appropriately 

captioned section of the annual report, 

that the information required by Section 

13(q) and this Item is included in 

exhibits 97 and 98 to the annual report. 

2. The disclosure required by this 

Item and § 229.601(b)(97) and (b)(98) of 

this chapter shall not be deemed to be 

‘‘filed’’ with the Commission or subject 

to the liabilities of section 18 of the 

Exchange Act (15 U.S.C. 78r), except to 

the extent that the registrant specifically 

incorporates the information by 

reference into a document filed under 

the Securities Act or the Exchange Act. 

The disclosure required by this Item 

need not be provided in any filings 

other than an annual report on Form 

10–K (§ 249.310 of this chapter). Such 

information will not be deemed to be 

incorporated by reference into any filing 

under the Securities Act or the 

Exchange Act, except to the extent that 

the registrant specifically incorporates it 

by reference. 

(b) For the purpose of this item: 

(1) Commercial development of oil, 

natural gas, or minerals includes 

exploration, extraction, processing, 

export, and other significant actions 

relating to oil, natural gas, or minerals, 

or the acquisition of a license for any 

such activity. 

(2) Foreign government means a 

foreign government, a department, 

agency, or instrumentality of a foreign 

government, or a company owned by a 

foreign government. As used in this 

item, foreign government includes a 

foreign national government as well as 

a foreign subnational government, such 

as the government of a state, province, 

county, district, municipality, or 

territory under a foreign national 

government. 

(3) Payment means an amount paid 

that: 

(i) Is made to further the commercial 

development of oil, natural gas, or 

minerals; 

(ii) Is not de minimis; and 

(iii) Includes: 

(A) Taxes; 

(B) Royalties; 

(C) Fees (including license fees); 

(D) Production entitlements; and 

(E) Bonuses. 

(4) Resource extraction issuer means 

an issuer that: 

(i) Is required to file an annual report 

with the Commission; and 

(ii) Engages in the commercial 

development of oil, natural gas, or 

minerals. 

Instruction to paragraph (b)(2): For 

purposes of this item, a company owned 

by a foreign government is a company 

that is at least majority-owned by a 

foreign government. 

Instruction to paragraph (b)(3)(iii)(A): 

A resource extraction issuer must 

disclose taxes on corporate profits, 

corporate income, and production. 

Disclosure of taxes levied on 

consumption, such as value added 

taxes, personal income taxes, or sales 

tax is not required. 

3. Amend § 229.601 by adding entries 

(97) and (98) to the exhibit table in 

paragraph (a), and adding paragraphs 

(b)(97) and (b)(98), to read as follows: 

§ 229.601 (Item 601) Exhibits. 

(a) * * * 

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81000 Federal Register / Vol. 75, No. 246 / Thursday, December 23, 2010 / Proposed Rules 

EXHIBIT TABLE

Securities Act forms Exchange Act forms 

S–1 S–3 S– 

4 1 S–8 S– 11 F–1 F–3 F– 4 1 10 8– 

K2

10– 

D 

10– 

Q 10–K 

*******

(36) through (96) [Reserved] ............................................. N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 

(97) Resource Extraction Issuers Exhibit .......................... X 

(98) Resource Extraction ...................................................

Issuers Exhibit (Interactive Data) .......................................

X 

* * * * * * * 

(b) * * * 

(97) Resource Extraction Issuers 

Exhibit. A resource extraction issuer 

that is required to disclose information 

relating to payments made to foreign 

governments or the United States 

Federal Government under Exchange 

Act Section 13(q) (15 U.S.C. 78m(q)) 

must provide the information required 

by Item 105 of Regulation S–K 

(§ 229.105 of this chapter) in an exhibit 

to its Exchange Act annual report. This 

exhibit must be provided in HTML or 

ASCII format. Specifically, a resource 

extraction issuer must provide the 

following disclosure: 

(i) The type and total amount of 

payments made for each project of the 

resource extraction issuer relating to the 

commercial development of oil, natural 

gas, or minerals; 

(ii) The type and total amount of such 

payments made to each government; 

(iii) The total amounts of the 

payments, by category; 

(iv) The currency used to make the 

payments; 

(v) The financial period in which the 

payments were made; 

(vi) The business segment of the 

resource extraction issuer that made the 

payments; 

(vii) The government that received the 

payments, and the country in which the 

government is located; and 

(viii) The project of the resource 

extraction issuer to which the payments 

relate. 

(98) Resource Extraction Issuers 

Exhibit (Interactive Data). A resource 

extraction issuer that is required to 

disclose information relating to 

payments made to foreign governments 

or the United States Federal 

Government under Exchange Act 

Section 13(q) (15 U.S.C. 78m(q)) must 

provide the information required by 

Item 105 of Regulation S–K (§ 229.105 of 

this chapter) in an exhibit to its 

Exchange Act annual report. This 

exhibit must be electronically formatted 

using the eXtensible Business Reporting 

Language (XBRL) interactive data 

standard. This exhibit must include 

electronic tags that identify the 

following information for any payments 

made by a resource extraction issuer to 

a foreign government or the United 

States Federal Government: 

(i) The type and total amount of 

payments made for each project of the 

resource extraction issuer relating to the 

commercial development of oil, natural 

gas, or minerals; 

(ii) The type and total amount of such 

payments made to each government; 

(iii) The total amounts of the 

payments, by category; 

(iv) The currency used to make the 

payments; 

(v) The financial period in which the 

payments were made; 

(vi) The business segment of the 

resource extraction issuer that made the 

payments; 

(vii) The government that received the 

payments, and the country in which the 

government is located; and 

(viii) The project of the resource 

extraction issuer to which the payments 

relate. Refer to the EDGAR Filer Manual 

(§ 232.301 of this chapter) and the 

corresponding technical specification 

for resource extraction issuers 

disclosure for further guidance. 

PART 249—FORMS, SECURITIES 

EXCHANGE ACT OF 1934 

4. The authority citation for part 249 

continues to read in part as follows: 

Authority: 15 U.S.C. 78a et seq., 7202, 

7233, 7241, 7262, 7264, and 265; and 18 

U.S.C. 1350, unless otherwise noted. 

* * * * * 

5. Amend Form 20–F (referenced in 

§ 249.220f) by adding Item 16I to Part II, 

and adding Instruction 17 and 18 to the 

Instructions as to Exhibits, of Form 20– 

F, to read as follows: 

Note: The text of Form 20–F does not, and 

this amendment will not, appear in the Code 

of Federal Regulations. 

UNITED STATES SECURITIES AND 

EXCHANGE COMMISSION 

Washington, DC 20549 

FORM 20–F 

* * * * * 

Part II 

* * * * * 

Item 16I. Disclosure of Payments Made 

by Resource Extraction Issuers 

A. If you are a resource extraction 

issuer, pursuant to Section 13(q) of the 

Exchange Act (15 U.S.C. 78m(q)), 

include information relating to any 

payment made during the fiscal year 

covered by the annual report by you, 

your subsidiary, or an entity under your 

control to a foreign government or the 

United States Federal Government for 

the purpose of the commercial 

development of oil, natural gas, or 

minerals. Under the heading ‘‘Payments 

Made By Resource Extraction Issuers’’ in 

the annual report, provide a statement 

that the information concerning 

payments to governments required by 

Section 13(q) and paragraph A. of this 

Item is included in exhibits 17 and 18 

to the annual report. Include the 

following information as specified in 

exhibits 17 and 18 to the annual report: 

(1) The type and total amount of 

payments made for each project of the 

resource extraction issuer relating to the 

commercial development of oil, natural 

gas, or minerals; 

(2) The type and total amount of those 

payments made to each government; 

(3) The total amounts of the 

payments, by category; 

(4) The currency used to make the 

payments; 

(5) The financial period in which the 

payments were made; 

(6) The business segment of the 

resource extraction issuer that made the 

payments; 

(7) The government that received the 

payments, and the country in which the 

government is located; and 

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(8) The project of the resource 

extraction issuer to which the payments 

relate. 

B. For the purpose of this item: 

(1) Commercial development of oil, 

natural gas, or minerals includes 

exploration, extraction, processing, 

export, and other significant actions 

relating to oil, natural gas, or minerals, 

or the acquisition of a license for any 

such activity. 

(2) Foreign government means a 

foreign government, a department, 

agency, or instrumentality of a foreign 

government, or a company owned by a 

foreign government. As used in this 

item, foreign government includes a 

foreign national government as well as 

a foreign subnational government, such 

as the government of a state, province, 

county, district, municipality, or 

territory under a foreign national 

government. 

(3) Payment means an amount paid 

that: 

(i) Is made to further the commercial 

development of oil, natural gas, or 

minerals; 

(ii) Is not de minimis; and 

(iii) Includes: 

(a) Taxes; 

(b) Royalties; 

(c) Fees (including license fees); 

(d) Production entitlements; and 

(e) Bonuses. 

(4) Resource extraction issuer means 

an issuer that: 

(i) Is required to file an annual report 

with the Commission; and 

(ii) Engages in the commercial 

development of oil, natural gas, or 

minerals. 

Instructions to Item 16I: 

1. Item 16I only applies to annual 

reports, and not to registration 

statements on Form 20–F. 

2. For purposes of paragraph B.(2), a 

company owned by a foreign 

government is a company that is at least 

majority-owned by a foreign 

government. 

3. For purposes of paragraph 

B.(3)(iii)(a), a resource extraction issuer 

must disclose taxes on corporate profits, 

corporate income, and production. 

Disclosure of taxes levied on 

consumption, such as value added 

taxes, personal income taxes, or sales 

tax is not required. 

4. The exhibits described in paragraph 

A. of this Item must meet the 

requirements under Instruction 17 and 

18 as to Exhibits of this Form. 

5. The disclosure required by 

paragraph A. of this Item and 

Instructions 17 and 18 of this Form shall 

not be deemed to be ‘‘filed’’ with the 

Commission or subject to the liabilities 

of section 18 of the Exchange Act (15 

U.S.C. 78r), except to the extent that the 

registrant specifically incorporates the 

information by reference into a 

document filed under the Securities Act 

or the Exchange Act. The disclosure 

required by this Item need not be 

provided in any filings other than an 

annual report on Form 20–F (§ 249.220f 

of this chapter). Such information will 

not be deemed to be incorporated by 

reference into any filing under the 

Securities Act or the Exchange Act, 

except to the extent that the registrant 

specifically incorporates it by reference. 

* * * * * 

INSTRUCTIONS AS TO EXHIBITS 

* * * * * 

17. The disclosure of payments by 

resource extraction issuers required by 

Exchange Act Section 13(q) (15 U.S.C. 

78m(q)). 

A registrant that is required to 

disclose the payments made to foreign 

governments or the United States 

Federal Government under Exchange 

Act Section 13(q) and Item 16I must 

provide the information required by 

Item 16I.A. in exhibit 17 to its annual 

report on Form 20–F. This exhibit must 

provide the following information in 

HTML or ASCII format: 

(a) The type and total amount of 

payments made for each project of the 

resource extraction issuer relating to the 

commercial development of oil, natural 

gas, or minerals; 

(b) The type and total amount of such 

payments made to each government; 

(c) The total amounts of the payments, 

by category; 

(d) The currency used to make the 

payments; 

(e) The financial period in which the 

payments were made; 

(f) The business segment of the 

resource extraction issuer that made the 

payments; 

(g) The government that received the 

payments, and the country in which the 

government is located; and 

(h) The project of the resource 

extraction issuer to which the payments 

relate. 

18. The disclosure of payments by 

resource extraction issuers required by 

Exchange Act Section 13(q) (15 U.S.C. 

78m(q)) (interactive data). 

A registrant that is required to 

disclose the payments made to foreign 

governments or the United States 

Federal Government under Exchange 

Act Section 13(q) and Item 16I must 

provide the information required by 

Item 16I.A. in exhibit 18 to its annual 

report on Form 20–F. This exhibit must: 

(a) Be electronically formatted using 

the eXtensible Business Reporting 

Language (XBRL) interactive data 

standard; and 

(b) Include electronic tags that 

identify the following information 

specified by Exchange Act Section 

13(q)(2)(D)(ii) (15 U.S.C. 

78m(q)(2)(D)(ii)) for any payments made 

by a resource extraction issuer to a 

foreign government or the United States 

Federal Government: 

(1) The type and total amount of 

payments made for each project of the 

resource extraction issuer relating to the 

commercial development of oil, natural 

gas, or minerals; 

(2) The type and total amount of such 

payments made to each government; 

(3) The total amounts of the 

payments, by category; 

(4) The currency used to make the 

payments; 

(5) The financial period in which the 

payments were made; 

(6) The business segment of the 

resource extraction issuer that made the 

payments; 

(7) The government that received the 

payments, and the country in which the 

government is located; and 

(8) The project of the resource 

extraction issuer to which the payments 

relate. 

Refer to the EDGAR Filer Manual 

(§ 232.301 of this chapter) and the 

corresponding technical specification 

for resource extraction issuers 

disclosure for further guidance. 

19. through 99. [Reserved] 

* * * * * 

6. Amend Form 40–F (referenced in 

§ 249.240f) by adding paragraph (17) to 

General Instruction B of Form 40–F to 

read as follows: 

Note: The text of Form 40–F does not, and 

this amendment will not, appear in the Code 

of Federal Regulations. 

UNITED STATES SECURITIES AND 

EXCHANGE COMMISSION 

Washington, DC 20549 

Form 40–F 

* * * * * 

GENERAL INSTRUCTIONS 

* * * * * 

B. Information To Be Filed on This Form 

* * * * * 

(17) Disclosure of Payments Made By 

Resource Extraction Issuers. 

(a) If you are a resource extraction 

issuer, pursuant to Section 13(q) of the 

Exchange Act (15 U.S.C. 78m(q)), 

disclose information relating to any 

payment made during the fiscal year 

covered by the annual report by you, 

your subsidiary, or an entity under your 

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81002 Federal Register / Vol. 75, No. 246 / Thursday, December 23, 2010 / Proposed Rules 

control to a foreign government or the 

United States Federal Government for 

the purpose of the commercial 

development of oil, natural gas, or 

minerals. Under the heading ‘‘Payments 

Made By Resource Extraction Issuers’’ in 

the annual report, provide a statement 

that the information concerning 

payments to governments required by 

Section 13(q) and paragraph (a) of this 

Item is included in specified exhibits to 

the annual report. 

(1) Include the following information, 

provided in HTML or ASCII format, in 

an exhibit to the annual report: 

(i) The type and total amount of 

payments made for each project of the 

resource extraction issuer relating to the 

commercial development of oil, natural 

gas, or minerals; 

(ii) The type and total amount of those 

payments made to each government; 

(iii) The total amounts of the 

payments, by category; 

(iv) The currency used to make the 

payments; 

(v) The financial period in which the 

payments were made; 

(vi) The business segment of the 

resource extraction issuer that made the 

payments; 

(vii) The government that received the 

payments, and the country in which the 

government is located; and 

(viii) The project of the resource 

extraction issuer to which the payments 

relate. 

(2) Include the following information, 

electronically formatted using the 

eXtensible Business Reporting Language 

(XBRL) interactive data standard in an 

exhibit to the annual report: 

(i) The type and total amount of 

payments made for each project of the 

resource extraction issuer relating to the 

commercial development of oil, natural 

gas, or minerals; 

(ii) The type and total amount of such 

payments made to each government; 

(iii) The total amounts of the 

payments, by category; 

(iv) The currency used to make the 

payments; 

(v) The financial period in which the 

payments were made; 

(vi) The business segment of the 

resource extraction issuer that made the 

payments; 

(vii) The government that received the 

payments, and the country in which the 

government is located; and 

(viii) The project of the resource 

extraction issuer to which the payments 

relate. Refer to the EDGAR Filer Manual 

(§ 232.301 of this chapter) and the 

corresponding technical specification 

for resource extraction issuers 

disclosure for further guidance. 

(b) For the purpose of Item 17: 

(1) Commercial development of oil, 

natural gas, or minerals includes 

exploration, extraction, processing, 

export, and other significant actions 

relating to oil, natural gas, or minerals, 

or the acquisition of a license for any 

such activity. 

(2) Foreign government means a 

foreign government, a department, 

agency, or instrumentality of a foreign 

government, or company owned by a 

foreign government. As used in this 

item, foreign government includes a 

foreign national government as well as 

a foreign subnational government, such 

as the government of a state, province, 

county, district, municipality, or 

territory under a foreign national 

government. 

(3) Payment means an amount paid 

that: 

(i) Is made to further the commercial 

development of oil, natural gas, or 

minerals; 

(ii) Is not de minimis; and 

(iii) Includes: 

(A) Taxes; 

(B) Royalties; 

(C) Fees (including license fees); 

(D) Production entitlements; and 

(E) Bonuses. 

(4) Resource extraction issuer means 

an issuer that: 

(i) Is required to file an annual report 

with the Commission; and 

(ii) Engages in the commercial 

development of oil, natural gas, or 

minerals. 

Notes to Instruction B.(17) 

1. Instruction B.(17) only applies to 

annual reports, and not to registration 

statements on Form 40–F. 

2. For purposes of paragraph (b)(2), a 

company owned by a foreign 

government is a company that is at least 

majority-owned by a foreign 

government. 

3. For purposes of paragraph 

(b)(3)(iii)(A), a resource extraction issuer 

must disclose taxes on corporate profits, 

corporate income, and production. 

Disclosure of taxes levied on 

consumption, such as value added 

taxes, personal income taxes, or sales 

tax is not required. 

4. The disclosure required by 

Instruction B.(17) of this Form shall not 

be deemed to be ‘‘filed’’ with the 

Commission or subject to the liabilities 

of section 18 of the Exchange Act (15 

U.S.C. 78r), except to the extent that the 

registrant specifically incorporates the 

information by reference into a 

document filed under the Securities Act 

or the Exchange Act. The disclosure 

required by this Item need not be 

provided in any filings other than an 

annual report on Form 40–F (§ 249.240f 

of this chapter). Such information will 

not be deemed to be incorporated by 

reference into any filing under the 

Securities Act or the Exchange Act, 

except to the extent that the registrant 

specifically incorporates it by reference. 

* * * * * 

7. Amend Form 10–K (referenced in 

§ 249.310) by adding paragraph (c) to 

Item 4 under Part I of Form 10–K to read 

as follows: 

Note: The text of Form 10–K does not, and 

this amendment will not, appear in the Code 

of Federal Regulations. 

UNITED STATES SECURITIES AND 

EXCHANGE COMMISSION 

Washington, DC 20549 

FORM 10–K 

* * * * * 

PART I 

* * * * * 

Item 4. Specialized Disclosures * * * 

(c) Disclosure of Payments Made By 

Resource Extraction Issuers. If you are a 

resource extraction issuer, as defined 

under Section 13(q) of the Exchange Act 

and Item 105(b)(4) of Regulation S–K 

(§ 229.105(b)(4) of this chapter), provide 

a statement under the heading 

‘‘Payments Made By Resource Extraction 

Issuers’’ that the information concerning 

payments to governments required by 

Section 13(q) and Item 105 of 

Regulation S–K (§ 229.105 of this 

chapter) is included in exhibits 97 and 

98 to the annual report. 

* * * * * 

By the Commission. 

Dated: December 15, 2010. 

Elizabeth Murphy, 

Secretary. 

[FR Doc. 2010–31943 Filed 12–22–10; 8:45 am] 

BILLING CODE 8011–01–P 

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