SEC Focuses on Payment Reporting by Extractive Industries, Canada Follows Suit
The new SEC rules require companies engaged in commercial development of oil, natural gas and minerals to disclose pay-ments made to governments if the compa-ny is required to file an annual report with the SEC. Such payments include taxes, royalties, fees (including license fees), pro-duction entitlements, bonuses, dividends and infrastructure improvements. The rules apply to individual projects as well as to national governments. These new SEC rules regarding payments by natural resource companies to governments should not be confused with other new SEC rules, also issued in August, regarding the use and reporting of conflict minerals (E&MJ, September 2012, p. 136).
The American Petroleum Institute issued a statement saying the new rules could put U.S. firms at a competitive dis-advantage and interfere with ongoing and more effective efforts to increase trans-parency. “This unilateral approach to rev-enue disclosure will harm the U.S. econo-my. U.S. firms could lose business, U.S. jobs might not be created, and potential revenue to our government could be lost.
The rules will give foreign oil and natural gas companies access to confidential, pro-prietary information that they could use against U.S. companies when competing for crucial energy resources around the globe. State-owned foreign firms could plunder this information to help them determine the strategies and resource lev-els of their U.S. rivals.”
In Canada, the new Resource Reve-nue Transparency Working Group in-cludes the Mining Association of Canada (MAC), the Prospectors and Developers Association of Canada (PDAC), Publish What you Pay Canada (PWYP-Canada) and the Revenue Watch Institute (RWI). The group aims to develop a framework for the disclosure of payments to governments for Canadian oil and mining companies operating domestically and internationally by June 2013. Once complete, the working group will make policy recommendations to federal government policymakers and/or provincial security regulators for the Canadian adoption of mandatory disclosure requirements based on the framework.
There is currently no such mandatory reporting framework in place in Canada; however, many Canadian mining compa-nies participate in the Extractive Industries Transparency Initiative, a voluntary report-ing standard adopted by more than 35 countries to date.