Archive for the ‘Dodd-Frank’ Category

SEC Requires Disclosure of Energy Company Payments to Foreign Governments

The Securities and Exchange Commission on Wednesday approved rules requiring oil and mining companies to disclose payments made to foreign governments. The rule, under Section 1504 of the Dodd-Frank financial reform law (see the full text here through our Dodd-Frank Tracker), requires SEC-listed oil, natural gas, and mining companies to reveal payments to governments related to projects in their countries, including the type and amount of each payment and their totals every year. Money for production licenses, taxes, royalties, among other payments, fall under the rules.

The SEC vote was 2-1 for the rule, but a two-year battle has been raging behind the scenes. Human-rights groups and the oil industry threw their efforts at influencing the final rule. Groups like Oxfam American and the Revenue Watch Institute joined with other anti-poverty and human rights groups to build public pressure on the SEC to approve the draft rules proposed in 2010. They argued that greater disclosure helps ensure that revenues from energy and mining provide public benefit. Secretary of State Hillary Clinton, noting that the EU is considering similar provisions because of Section 1504, lent her weight toward strong rules.

Oil companies, through the influential American Petroleum Institute, demanded that the SEC scale back the rules from their draft phase. They said the rules would make them less competitive, especially when competing with state-owned firms like Russia’s Gazprom and the China National Petroleum Company. They sought provisions such as allowing aggregate payment information by country, and exemption if host countries prohibited such disclosure.

Both sides agree that the goal of the rules is worthy: The “resource curse,” leaving many energy-rich countries in Africa impoverished by corruption and conflict, must be addressed. In favor of the rule, Luis Aguilar, Democratic SEC member, called on the late Supreme Court Justice Louis Brandeis’s saying that “sunlight is the best disinfectant.” But Republican member Daniel Gallagher argued that an SEC rule is a strange way to achieve social and foreign-policy goals.

The rules don’t leave much middle ground, and the SEC estimates that the rule will carry industry-wide compliance costs of up to $1 billion initially, with annual costs between $200 million and $400 million. The only bone thrown to energy companies is a small one: By leaving out any specific definition of the word “project” (emphasized in the section of the rule entitled ‘Definition of the word “project”’), companies have some discretion in applying the rule to their business.

GAO to SEC: Still No Final Rule on Conflict Minerals? Really?

By now, the SEC’s leisurely pace for adopting the mining & minerals provisions under Dodd-Frank has become almost comical. The final rule for Section 1503 (Mine Safety Disclosure) was published approximately one year after the rule was initially proposed. The rules under Section 1504 (Disclosure of Payments by Resource Extraction Issuers) and Section 1502 (Conflict Minerals) haven’t done any better – the final versions of the rules proposed back in December of 2010 have yet to surface. And folks are getting antsy.

Yesterday the GAO published a relatively neutral-sounding report, “Conflict Minerals Disclosure Rule: SEC’s Actions and Stakeholder-Developed Initiatives,” that talked about all the various factors leading to the SEC’s delay in finalizing the conflict mineral rule. Section 1502 of the Dodd-Frank Act requires the SEC to issue a disclosure rule for companies using conflict minerals (tin, tantalum, tungsten, and gold) in their products, and it’s a complicated and controversial subject.

The SEC claims that since July 2010, it has received “a large and steady volume of comment letters […] with over 400 distinct comment letters posted to its website.” (Knowledge Mosaic subscribers can see comments here.) The time to address these comment letters, along with the many meeting requests from external stakeholders have supposedly contributed to the SEC’s delays.

In addition, the GAO says that the SEC has faced a sharp learning curve in “develop[ing] contextual understanding” about “relevant in-region political and economic actors, economic arrangements between these actors, and other evolving issues in these [mineral-rich, war-torn] countries,” and that the Commission has taken on “complex and time-consuming” “rigorous economic analysis” as a result.

The problem is, these delays are more than just a slight professional embarrassment – according to the GAO, various stakeholders have already developed and implemented initiatives that may help affected companies comply with the anticipated rule. Now, “due to the uncertainty regarding potential due diligence and disclosure requirements stemming from SEC’s delay in issuing a final rule, some stakeholders’ efforts to improve their initiatives through expansion and harmonization have been hindered.”

GAO’s recommendations? “GAO recommends that the Chairman of SEC identify remaining steps and associated time frames to issue a final rule.”

For background on the conflict minerals provisions, check out some of our previous posts. And don’t forget to check out the GAO report for more details on the delays.

Extracting Information from Extractive Industries

Photo by koolmann. Some rights reserved.

A notice in the Federal Register yesterday provided details on upcoming public listening sessions and initiated a new comment period for the United States Extractive Industries Transparency Initiative’s (USEITI) Stakeholder Assessment, which was published last Friday.

USEITI is the U.S. implementation of, well, “regular” EITI, a global coalition of governments and companies that sets standards for transparency in oil, gas, and mining. The U.S. committed to implementing EITI standards in 2011, as part of our National Action Plan, charging the DOI with the task of developing a plan for the government to disclose revenues from oil, gas, and mining assets. (Sound familiar? The voluntary disclosures encouraged by EITI are similar to those required by public companies under Dodd-Frank’s Section 1504.)

Part of this implementation means forming a Multi-Stakeholder Group (MSG), which will be responsible for overseeing implementation of USEITI. EITI Requirement 4(h)(v) notes that the “government may…wish to undertake a stakeholder assessment” as part of forming the MSG, and thus the aforementioned Assessment was born.

Comments on the Assessment are due June 29, 2012.

Oxfam American Sues Securities and Exchange Commission Over Pokey Rulemaking

Photo by Phillip Perry. Some rights reserved.

As reported by E2 Wire’s The Hill, as well as Oxfam itself, the International relief and development organization has recently filed a lawsuit in U.S. District Court for the District of Massachusetts against the SEC for “unlawfully delaying the issuance of a Final Rule implementing a provision of the Dodd-Frank Act that requires disclosure of payments from oil, gas and mining companies to the United States and foreign governments.”

Section 1504 of the Dodd-Frank Act, which mandates the rulemaking, states that “[n]ot later than 270 days after the date of enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Commission shall issue [the resource extraction disclosure] final rules.” According to Oxfam, that deadline worked out to be April 17, 2011, making the SEC more than a full year late in complying. The Hill reports that the suit is asking the court to compel the SEC to issue final rules within 30 days.

The proposed rule (“Disclosure of Payments By Resource Extraction Issuers,” SEC 34-63549) was issued by the SEC on December 15, 2010, and has been fought tooth and nail by the oil industry ever since. You can see comments on the proposed rule – both for and against – on Knowledge Mosaic’s Laws, Rules, and Agency Materials page.

While no case filings are available yet, you can follow the progress of the lawsuit here: Oxfam America, Inc. v. United States Securities and Exchange Commission.

Two “Big Deal” Final Rules Released: Mine Safety Disclosure and Mercury and Air Toxics Standards

Photo by Grayskullduggery. Some rights reserved.

December 21st marked a day of great regulatory importance as both the SEC and EPA released final versions of rules that have been in the works for years.

The SEC published Final Rule 33-9286, “Mine Safety Disclosure,” – which implements Section 1503 of the Dodd-Frank Act – a grandiose 364 days after the proposed version hit the Federal Register. The new rule will dictate how mining companies must disclose information about mine safety and health in certain SEC filings. Now that the rule has finalized (it becomes effective 30 days after publication in the Federal Regsiter), we hope to see examples of this disclosure from more companies than just Monarch Cement Co.

Even earlier in the day came the news that the EPA had revealed its new, finalized rule setting national standards to limit mercury, acid gases and other toxic pollution from power plants. Grist called the rules a “Big Deal,” waxing poetic about how the rules “will make America a more decent, just, and humane place to live.” Grist wasn’t the only one who thought so – we thought they were landmark, too. To read more about the standards, check out the EPA’s “MATS” page.

So go ahead and mark December 21st down in your calendar. It may just go down in history.

Early (very early) Adopters of Mine Safety Disclosure

They're early - but for what worm? Photo by rabbot. Some rights reserved.

Even though the SEC’s Mine Safety Disclosure rule has been stuck in an adolescent state of proposedness for almost an entire year, it hasn’t stopped some companies from getting a leg up on complying.

Well, one company.

Just a few months ago, Monarch Cement Co, a Kansas-based manufacturer and seller of “portland” cement, became the first – and only so far – company to file an Exhibit 95, “Mine Safety Disclosure,” as part of a quarterly report. All this, even though the disclosure isn’t even required yet.

The SEC proposed rule (which implements Section 1503 of the Dodd-Frank Act), if adopted, will require “issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine to disclose in their periodic reports filed with the Commission information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities.”

Exhibit 95 is just one of the ways this type of disclosure will be filed. The same proposed rule, once finalized, will also require similar disclosure in a new item of Form 8-K, Item 1.04 (Mine Safety – Reporting of Shutdowns and Patterns of Violations). As of yet, no early birds have filed this item. Once they do, you’ll see Item 1.04 pop up in our list of Items in the 8-K section of knowledgemosaic’s SEC filings search page.

And what you’ve all been waiting for? Monarch’s Exhibit 95 can be found here.

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The Green Mien has been keeping our collective eye on the energy and environmental aspects of Dodd-Frank. Check out our related posts.

API Cries “Too Expensive” Over Dodd-Frank’s Section 1504

If it’s not one thing about Dodd-Frank, it’s another. A recent post on The Hill’s E2 Wire Blog talks about the latest backlash against Dodd-Frank – this time from the oil industry.

On August 11th, the American Petroleum Institute sent a letter to the SEC complaining about Section 1504 of the Dodd-Frank Act, which would amend Section 13 of the Securities Exchange Act to require disclosure of payments made by “resource extraction issues” to governments for the purpose of commercial development of oil, natural gas or minerals.

In the letter, API claims that the proposed changes go against the spirit of Executive Order 13563, which directs agencies to “propose or adopt a regulation only upon a reasoned determination that its benefits justify its costs” and “tailor its regulations to impose the least burden on society.”

How so? Well, first there are the “hundreds of millions of dollars in direct reporting and compliance costs,” and then there are the “tens of billions of dollars of existing, profitable capital investments” that would be “placed at risk should the final rules require public disclosure of information that is prohibited from disclosure by the laws of other countries,” says API.

As both E2 Wire and the letter itself point out, the oil companies are worried that all this public disclosure would result in “competitive harm” for those companies that file with the SEC.

The API closes their letter with a plea that the SEC “hold[] company data in confidence,” “preparing a public report consisting only of aggregated payment information by country.”

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