Resource Extraction Disclosure: SEC Requiring More Transparency from Mining & Oil Companies?

The financial reform legislation in Congress, the Dodd-Frank act, is sure turning into a monstrosity.  Now it’s totaling over 2000 pages.  Tucked away in the bill, in a “miscellaneous provision,” Senator Richard Lugar of Indiana slipped in language covering the disclosure of revenues from oil and mineral extracting companies.

Evidently, late in the conference proceedings, Senator Lugar was successful in having language inserted into the bill regarding disclosure of payments by resource extraction issuers to the Federal Government and foreign governments.

Tucked in the back of the bill in "miscellaneous provisions," Section 1504 amends Section 13 of the '34 Exchange Act and requires that the SEC 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 [U.S.] 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."

The Act defines "commercial development of oil, natural gas, or minerals" to include "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 [SEC]."

The Act defines "payment" as any payment that is "made to further the commercial development of oil, natural gas, or minerals; and 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."

So what do you think this means?  The key issue here is that as is the case with most legislation, Congress passes, and it is up to the agencies to implement the rules.

If companies have to identify—and perhaps itemize—payments for every area in which they are operating, mining, or drilling, would this allow consumers and stakeholders to indentify, and therefore research, where such activities are occurring?

Does this make any difference at all?  Or will this even survive such legislation?  Share what you think with us.