New U.S. Transparency Reporting Requirements For Extractive Sector

On July 27, 2016, the U.S. Securities and Exchange Commission (SEC) adopted revised rules requiring resource extraction issuers to disclose payments made to governments for the commercial development of oil, natural gas, or minerals (the U.S. Rules). Disclosure is required for payments to any foreign government and payments to the U.S. federal government (U.S. states and other U.S. subnational governments are excluded).

Like Canada's efforts in passing the Extractive Sector Transparency Measures Act (ESTMA), the U.S. Rules, directed by the Dodd-Frank Wall Street Reform and Consumer Protection Act, are part of global international efforts to address corruption in resource-rich countries by providing transparency of resource extraction payments to governments.

Under the U.S. Rules, reporting entities must file reports starting with their first fiscal year ending on or after September 30, 2018. Reports can be made by filing the Form SD (a special disclosure report) with the SEC no later than 150 days after the end of the applicable fiscal year. For a reporting entity with a fiscal year end of December 31, the first filing deadline is May 30, 2019.

Reporting Entities under the U.S. Rules

All U.S. or foreign companies that are engaged in the commercial development of oil, natural gas or minerals and are required to file annual reports under section 13 or 15(d) of the Exchange Act (SEC Forms 10-K, 20-F or 40-F) are considered reporting entities under the U.S. Rules.

Canadian resource extraction issuers who make the above annual report filings in the U.S. are subject to the U.S. Rules whether or not they are subject to ESTMA. Unlike ESTMA, the U.S. Rules do not include a size threshold for the reporting requirements to be applicable.

Canadian Reports Generally Substitutable

Under the U.S. Rules, a reporting entity may file an alternative report used for an approved foreign jurisdiction if it is subject to the resource extraction payment disclosure requirements of that jurisdiction and has previously prepared and filed the report under that jurisdiction's requirements.

The SEC has determined that the current reporting requirements of the European Union Accounting and Transparency Directives and ESTMA are substitutable under the U.S. Rules, subject to the additional requirements outlined below.

A Canadian reporting entity that already complies with ESTMA and is also subject to the U.S. Rules, may, for its U.S. filing, use the same report it...