As previously reported on our Securities Regulation and Corporate Governance Monitor here and here, domestic and foreign “resource extraction issuers” are required to annually disclose information about certain payments made to foreign governments or the U.S. federal government on Form SD. For companies with a December 31, 2024 fiscal year end, this year’s form will be due by September 29, 2025.
What kind of information is required to be disclosed?
The final rule implements Section 13(q) of the Securities Exchange Act of 1934, as amended, which requires disclosure of company-specific, project-level information on Form SD (available here), including 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;
- type and total amount of such payments for all projects made to a government, as well as the country in which each such government is located;
- currency used and the fiscal year in which the payments were made;
- fiscal year in which the payments were made;
- business segment of the issuer that made the payments;
- specific projects to which such payments relate and the resources that are being developed;
- method of extraction used in the project and the major subnational political jurisdiction of each project; and
- payments made by a subsidiary or entity controlled by the issuer.
What kinds of activities does the rule apply to, and to whom does the rule apply?
The adopted rule applies to any resource extraction issuer. Resource extraction includes: the commercial development of oil, natural gas or minerals; the exploration, extraction, processing and export of oil, natural gas or minerals; or the acquisition of a license for any such activity. For example, companies engaged in oil exploration and production operations and the mining industry will generally be subject to the rule.
For resource extraction joint ventures or arrangements where no one party has control, the operator of the venture or arrangement must report all of the payments. Non-operator members are only required to report payments that, as resource extraction issuers, they make directly to governments.
Are there exemptions or other forms of relief?
Exemptions. There are exemptions for (i) smaller reporting companies and emerging growth companies, (ii) issuers that are unable to comply with the final rule without violating the laws of the jurisdiction where the project is located, and (iii) issuers that are unable to comply with the final rule without violating the terms in a contract that became effective before the final rule was adopted.
Transitional relief. We note that the rule includes transitional relief for recently acquired companies that were not previously subject to the rule and for issuers that completed their initial public offering within their last full fiscal year.
Alternative reporting regimes. The rule also allows companies to satisfy disclosure obligations through the use of reports prepared under an approved alternative reporting regime (such as the UK’s Reports on Payments to Governments Regulations or Canada’s Extractive Sector Transparency Measures Act), provided those reports are furnished as exhibits to the Form SD.
Acquisitions. Form SD reporting obligations for an acquired entity will depend on whether the acquired entity was subject to Section 13(q) for the fiscal year prior to the acquisition. If the acquired entity was not subject to Section 13(q) (or an alternative reporting regime) for the issuer’s last full fiscal year prior to the acquisition, then the issuer will be required to begin reporting payment information for that acquired entity starting with the Form SD submission for the first full fiscal year immediately following the effective date of the acquisition. The issuer will therefore not be required to provide the (excluded) payment disclosure for the year in which it acquired the entity. However, this transition period does not apply to acquisitions of entities that were already subject to Section 13(q)’s disclosure requirements. In these instances, disclosure is required for the fiscal year of the acquisition.
By way of example, if an acquisition of an entity that was not subject to Section 13(q) closes in November 2025, assuming a December 31 fiscal year end, then the acquired entity’s payments will be first reported on the Form SD covering fiscal year 2026, which must be furnished by September 27, 2027. However, if the acquired entity was already subject to Section 13(q), then the acquired entity’s payments will be reported on the Form SD covering fiscal year 2025, which must be furnished by September 28, 2026, given that September 27, 2026 is a Sunday.
What about the XBRL requirement?
The payment disclosure described above will be included as an exhibit to the Form SD, which must be tagged using standard XBRL (not Inline XBRL). This tagging requirement also applies to reports prepared under an approved alternative reporting regime. The SEC has published a guide for tagging exhibits to Form SD, which is available here.
Is there SEC guidance on interpretive questions raised by the rule since its implementation?
No. The SEC has not published guidance with respect to this rule. To the extent questions arise, we recommend that you continue to coordinate discussions on these questions with your peers and industry groups. In addition, Gibson Dunn lawyers are available to assist in addressing any questions that you may have regarding compliance with this rule and related Form SD filing requirements, as we have been working through questions with our clients that operate in the oil and gas and mining industries.
The following Gibson Dunn lawyers assisted in preparing this update: Harrison Tucker; Hillary Holmes; and Meghan Sherley.