[Federal Register Volume 77, Number 177 (Wednesday, September 12, 2012)]
[Rules and Regulations]
[Pages 56365-56419]
[FR Doc No: 2012-21155]

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 240 and 249

[Release No. 34-67717; File No. S7-42-10]
RIN 3235-AK85

Disclosure of Payments by Resource Extraction Issuers

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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SUMMARY: We are adopting new rules and an amendment to a new form
pursuant to Section 1504 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act relating to disclosure of payments by resource
extraction issuers. Section 1504 added Section 13(q) to the Securities
Exchange Act of 1934, which requires the Commission to issue rules
requiring resource extraction issuers to include in an annual report
information relating to any payment made by the issuer, a subsidiary of
the issuer, or an entity under the control of the issuer, to a foreign
government or the Federal Government for the purpose of the commercial
development of oil, natural gas, or minerals. Section 13(q) requires a
resource extraction issuer to provide information about the type and
total amount of such payments made for each project related to the
commercial development of oil, natural gas, or minerals, and the type
and total amount of payments made to each government. In addition,
Section 13(q) requires a resource extraction issuer to provide
information regarding those payments in an interactive data format.

DATES: Effective date: November 13, 2012.
    Compliance date: A resource extraction issuer must comply with the
new rules and form for fiscal years ending after September 30, 2013.
For the first report filed for fiscal years ending after September 30,
2013, a resource extraction issuer may provide a partial year report if
the issuer's fiscal year began before September 30, 2013. The issuer
will be required to provide a report for the period beginning October
1, 2013 through the end of its fiscal year. For any fiscal year
beginning on or after September 30, 2013, a resource extraction issuer
will be required to file a report disclosing payments for the full
fiscal year.

FOR FURTHER INFORMATION CONTACT: Tamara Brightwell, Senior Special
Counsel, Division of Corporation Finance, Elliot Staffin, Special
Counsel, Office of International Corporate Finance, Division of
Corporation Finance, or Eduardo Aleman, Special Counsel, Office of
Rulemaking, Division of Corporation Finance, at<PHONE_NUMBER>, U.S.
Securities and Exchange Commission, 100 F Street NE., Washington, DC
20549-4553.

SUPPLEMENTARY INFORMATION: We are adopting new Rule 13q-1 \1\ and an
amendment to new Form SD \2\ under the Securities Exchange Act of 1934
(``Exchange Act'').\3\
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    \1\ 17 CFR 240.13q-1.
    \2\ 17 CFR 249.448.
    \3\ 15 U.S.C. 78a et seq.
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Table of Contents

I. Background
II. Final Rules Implementing Section 13(q)
    A. Summary of the Final Rules
    B. Definition of ``Resource Extraction Issuer'' and Application
of the Disclosure Requirements
    1. Proposed Rules
    2. Comments on the Proposed Rules
    3. Final Rules
    C. Definition of ``Commercial Development of Oil, Natural Gas,
or Minerals''
    1. Proposed Rules
    2. Comments on the Proposed Rules
    3. Final Rules
    D. Definition of ``Payment''
    1. Types of Payments
    2. The ``Not De Minimis'' Requirement
    3. The Requirement To Provide Disclosure for ``Each Project''
    4. Payments by ``a Subsidiary * * * or an Entity Under the
Control of * * *''
    E. Definition of ``foreign government''
    1. Proposed Rules
    2. Comments on the Proposed Rules
    3. Final Rules
    F. Disclosure Required and Form of Disclosure
    1. Annual Report Requirement
    2. Exhibits and Interactive Data Format Requirements
    3. Treatment for Purposes of Securities Act and Exchange Act
    G. Effective Date
    1. Proposed Rules
    2. Comments on the Proposed Rules
    3. Final Rules
III. Economic Analysis
    A. Introduction
    B. Benefits and Costs Resulting From the Mandatory Reporting
Requirement
    1. Benefits
    2. Costs
    C. Benefits and Costs Resulting From Commission's Exercise of
Discretion
    1. Definition of ``Commercial Development of Oil, Natural Gas,
or Minerals''
    2. Types of Payments
    3. Definition of ``Not De Minimis''
    4. Definition of ``Project''
    5. Annual Report Requirement
    6. Exhibit and Interactive Data Requirement
    D. Quantified Assessment of Overall Economic Effects
IV. Paperwork Reduction Act
    A. Background
    B. Summary of the Comment Letters
    C. Revisions to PRA Reporting and Cost Burden Estimates
    D. Revised PRA Estimate
V. Final Regulatory Flexibility Act Analysis
    A. Reasons for, and Objectives of, the Final Rules
    B. Significant Issues Raised by Public Comments
    C. Small Entities Subject to the Final Rules
    D. Reporting, Recordkeeping, and Other Compliance Requirements
    E. Agency Action To Minimize Effect on Small Entities
VI. Statutory Authority and Text of Final Rule and Form Amendments

I. Background

    On December 15, 2010, we proposed rule and form amendments \4\
under the Exchange Act to implement Section 13(q) of the Exchange Act,
which was added by Section 1504 of the Dodd-Frank Wall Street Reform
and Consumer Protection Act (``the Act'').\5\ Section 13(q) requires
the Commission to ``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 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.'' \6\
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    \4\ See Exchange Act Release No. 63549 (December 15, 2010), 75
FR 80978 (December 23, 2010), available at http://www.sec.gov/rules/proposed/2010/34-63549.pdf (``Proposing Release'').
    \5\ Public Law 111-203 (July 21, 2010).
    \6\ 15 U.S.C. 78m(q)(2)(A). As discussed further below, Section
13(q) also specifies that the Commission's rules must require
certain information to be provided in interactive data format.
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    Based on the legislative history, we understand that Congress
enacted Section 1504 to increase the transparency of payments made by
oil, natural gas, and mining companies to governments for the purpose
of the commercial development of their oil, natural gas, and minerals.
A primary goal of such transparency is to help empower citizens of
those resource-rich countries to hold their governments accountable for
the wealth generated by those resources.\7\ To accomplish this goal,
Congress created a disclosure regime under the Exchange Act that would
support the commitment of the U.S. Federal Government to international
transparency promotion efforts relating to the commercial development
of oil, natural gas, or minerals.\8\
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    \7\ See, e.g., statement by Senator Richard Lugar, one of the
sponsors of Section 1504 (``Adoption of the Cardin-Lugar amendment
would bring a major step in favor of increased transparency at home
and abroad * * *. More importantly, it would help empower citizens
to hold their governments to account for the decisions made by their
governments in the management of valuable oil, gas, and mineral
resources and revenues * * *. The essential issue at stake is a
citizen's right to hold its government to account. Americans would
not tolerate the Congress denying them access to revenues our
Treasury collects. We cannot force foreign governments to treat
their citizens as we would hope, but this amendment would make it
much more difficult to hide the truth.''), 156 Cong. Rec. S3816 (May
17, 2010).
    \8\ See 15 U.S.C. 78m(q)(2)(E).
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    Section 13(q) provides the following definitions and descriptions
of several key terms:
     ``resource extraction issuer'' means an issuer that is
required to file an annual report with the Commission and engages in
the commercial development of oil, natural gas, or minerals; \9\
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    \9\ 15 U.S.C. 78m(q)(1)(D).
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     ``commercial development of oil, natural gas, or
minerals'' includes 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 Commission; \10\
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    \10\ 15 U.S.C. 78m(q)(1)(A).
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     ``foreign government'' means a foreign government, a
department, agency or instrumentality of a foreign government, or a
company owned by a foreign government, as determined by the Commission;
\11\ and
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    \11\ 15 U.S.C. 78m(q)(1)(B).
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     ``payment'' means a payment that:
     Is made to further the commercial development of oil,
natural gas, or minerals;
     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.\12\
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    \12\ 15 U.S.C. 78m(q)(1)(C).
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    Section 13(q) specifies that ``[t]o the extent practicable, the
rules issued under [the section] shall support the commitment of the
Federal Government to international transparency promotion efforts
relating to the commercial development of oil, natural gas, or
minerals.'' \13\ As noted above, the statute explicitly refers to one
international initiative, the Extractive Industries Transparency
Initiative (``EITI''),\14\ in the definition of ``payment.'' Although a
separate provision in Section 13(q) regarding international
transparency

efforts does not explicitly mention the EITI, the legislative history
indicates that the EITI was considered in connection with the new
statutory provision.\15\ The United States is one of several countries
that supports the EITI.\16\
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    \13\ 15 U.S.C. 78m(q)(2)(E).
    \14\ The EITI is a voluntary coalition of oil, natural gas, and
mining companies, foreign governments, investor groups, and other
international organizations dedicated to fostering and improving
transparency and accountability in countries rich in oil, natural
gas, and minerals through the publication and verification of
company payments and government revenues from oil, natural gas, and
mining. See Implementing the Extractive Industries Transparency
Initiative (2008) (``Implementing the EITI''), available at http://eiti.org/document/implementingtheeiti. According to the EITI, ``[b]y
encouraging greater transparency and accountability in countries
dependent on the revenues from oil, gas and mining, the potential
negative impacts of mismanaged revenues can be mitigated, and these
revenues can instead become an important engine for long-term
economic growth that contributes to sustainable development and
poverty reduction.'' EITI Source Book (2005), at 4, available at
http://eiti.org/files/document/sourcebookmarch05.pdf. Announced by
former UK Prime Minister Tony Blair at the World Summit on
Sustainable Development in Johannesburg in September 2002, the EITI
received the endorsement of the World Bank Group in 2003. See
History of EITI, http://www.eiti.org/eiti/history (last visited
August 15, 2012).
    Currently 14 countries--Azerbaijan, Central African Republic,
Ghana, Kyrgyz Republic, Liberia, Mali, Mauritania, Mongolia, Niger,
Nigeria, Norway, Peru, Timor Leste, and Yemen--have achieved ``EITI
compliant'' status by completing a validation process in which
company payments are matched with government revenues by an
independent auditor. See http://eiti.org/countries/compliant (last
visited August 15, 2012). Some 22 other countries are EITI
candidates in the process of complying with EITI standards, although
one of the countries, Madagascar, recently had its EITI candidate
status suspended. See http://eiti.org/candidatecountries (last
visited August 15, 2012). Several other countries have indicated
their intent to implement the EITI. See http://eiti.org/othercountries. Implementation of the EITI varies across countries--
the EITI provides criteria and a framework for implementation, but
allows countries to make key decisions on the scope of its program
(e.g., degree of aggregation of data, inclusion of subnational or
social or community payments). See Implementing the EITI, at 23-24.
    On September 20, 2011, President Obama declared that the United
States will join the global initiative and released a National
Action Plan stating that the Administration is committing to
implement the EITI. See http://www.whitehouse.gov/the-press-office/2011/09/20/opening-remarks-president-obama-open-government-partnership and http://www.whitehouse.gov/sites/default/files/us_national_action_plan_final_2.pdf. The U.S. Department of the
Interior (``DOI'') is responsible for implementing the U.S. EITI.
See ``White House Announces Secretary Ken Salazar as Senior Official
Responsible for Oversight of Implementation of Extractive Industries
Transparency Initiative,'' White House Statements and Releases
(October 25, 2011), available at http://www.whitehouse.gov/the-press-office/2011/10/25/white-house-announces-secretary-ken-salazar-administrations-senior-offic. After soliciting comment on and
evaluating comments regarding the formation of the multi-stakeholder
group for the U.S. EITI, the DOI announced that the assessment phase
of the U.S. EITI implementation was complete, and the next phase of
the U.S. EITI implementation will involve establishing the multi-
stakeholder group. See ``U.S. Department of the Interior Announces
Results of USEITI Implementation Assessment,'' U.S. Department of
the Interior News Release (July 10, 2012), available at http://www.doi.gov/EITI/index.cfm. See also letter from Batirente Inc. and
NEI Investments (February 10, 2012) (``Batirente and NEI
Investments'') (submitting a copy of a statement by 17 Canadian
investment institutions calling on the Canadian government to become
an EITI implementing country). One commentator indicated that the
final rules should be ``aligned and coordinated'' with the process
being developed by the DOI to fulfill the United States' commitment
to implementing the EITI. See letter from NMA 3.
    \15\ See, e.g., statement by Senator Lugar (``This domestic
action will complement multilateral transparency efforts such as the
Extractive Industries Transparency Initiative--the EITI--under which
some countries are beginning to require all extractive companies
operating in their territories to publicly report their
payments.''), 111 Cong. Rec. S3816 (daily ed. May 17, 2010). Other
examples of international transparency efforts include the
amendments of the Hong Kong Stock Exchange listing rules for mineral
companies and the London Stock Exchange AIM rules for extractive
companies. See Amendments to the GEM Listing Rules of the Hong Kong
Stock Exchange, Chapter 18A.05(6)(c) (effective June 3, 2010),
available at http://www.hkex.com.hk/eng/rulesreg/listrules/gemrulesup/Documents/gem34_miner.pdf (requiring a mineral company
to include in its listing document, if relevant and material to the
company's business operations, information regarding its compliance
with host country laws, regulations and permits, and payments made
to host country governments in respect of tax, royalties, and other
significant payments on a country by country basis) and Note for
Mining and Oil & Gas Companies--June 2009, available at http://www.londonstockexchange.com/companies-and-advisors/aim/advisers/rules/guidance-note.pdf (requiring disclosure in the initial listing
of ``any payments aggregating over [pound]10,000 made to any
government or regulatory authority or similar body made by the
applicant or on behalf of it, in regards to the acquisition of, or
maintenance of its assets.'').
    \16\ See the list of EITI supporting countries, available at
http://eiti.org/supporters/countries (last visited August 15, 2012).
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    The Commission's rules under Section 13(q) must require a resource
extraction issuer to submit the payment information included in an
annual report in an interactive data format \17\ using an interactive
data standard established by the Commission.\18\ Section 13(q) defines
``interactive data format'' to mean an electronic data format in which
pieces of information are identified using an interactive data
standard.\19\ The section also defines ``interactive data standard'' as
a standardized list of electronic tags that mark information included
in the annual report of a resource extraction issuer.\20\ The rules
issued pursuant to Section 13(q) \21\ must include electronic tags that
identify:
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    \17\ 15 U.S.C. 78m(q)(2)(C).
    \18\ 15 U.S.C. 78m(q)(2)(D).
    \19\ 15 U.S.C. 78m(q)(1)(E).
    \20\ 15 U.S.C. 78m(q)(1)(F).
    \21\ 15 U.S.C. 78m(q)(2)(D)(i).
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     The total amounts of the payments, by category;
     The currency used to make the payments;
     The financial period in which the payments were made;
     The business segment of the resource extraction issuer
that made the payments;
     The government that received the payments and the country
in which the government is located; and
     The project of the resource extraction issuer to which the
payments relate.\22\ Section 13(q) further authorizes the Commission to
require electronic tags for other information that it determines is
necessary or appropriate in the public interest or for the protection
of investors.\23\
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    \22\ 15 U.S.C. 78m(q)(2)(D)(ii).
    \23\ 15 U.S.C. 78m(q)(2)(D)(ii).
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    Section 13(q) provides that the final rules ``shall take effect on
the date on which the resource extraction issuer is required to submit
an annual report relating to the fiscal year * * * that ends not
earlier than 1 year after the date on which the Commission issues final
rules[.]'' \24\
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    \24\ 15 U.S.C. 78m(q)(2)(F).
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    Finally, Section 13(q) requires, to the extent practicable, the
Commission to make publicly available online a compilation of the
information required to be submitted by resource extraction issuers
under the new rules.\25\ The statute does not define the term
compilation.
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    \25\ 15 U.S.C. 78m(q)(3).
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    The Commission received over 150 unique comment letters on the
proposal as well as over 149,000 form letters (including a petition
with 143,000 signatures).\26\ These letters came from corporations in
the resource extraction industries, industry and professional
associations, United States and foreign government officials, non-
governmental organizations, law firms, pension and other investment
funds, academics, investors, a labor union and other employee groups,
and other interested parties. Commentators generally supported
transparency efforts and offered numerous suggestions for revising
certain aspects of the proposal in the final rules.
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    \26\ The letters, including the form letters designated as Type
A, Type B, and Type C, are available at http://www.sec.gov/comments/s7-42-10/s74210.shtml. In addition, to facilitate public input on
the Act, the Commission provided a series of email links, organized
by topic, on its Web site at http://www.sec.gov/spotlight/regreformcomments.shtml. The public comments we received on Section
1504 of the Act, which were submitted prior to the Proposing
Release, are available on our Web site at http://www.sec.gov/comments/df-title-xv/specialized-disclosures/specialized-disclosures.shtml. Many commentators provided comments both prior
to, and in response to, the proposal. Generally, our references to
comment letters refer to the comments submitted in response to the
proposal. When we refer to a comment letter submitted prior to the
proposal, however, we make that clear in the citation.
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    We have reviewed and considered all of the comments that we
received and the rules we are adopting reflect changes made in response
to many of the comments. Generally, as adopted, the final rules track
the language in the statute, and except for where the language or
approach of Section 13(q) clearly deviates from the EITI, the final
rules are consistent with the EITI.\27\ In instances where the language
or approach of Section 13(q) clearly deviates from the EITI, the final
rules track the statute rather than the EITI because in those instances
we believe Congress intended the final rules to go beyond what is
required by the EITI. We believe this approach is consistent with
Section 13(q) and furthers the statutory goal to support international
transparency promotion efforts relating to the commercial development
of oil, natural gas, or minerals because the EITI is referenced in
Section 13(q) and is well-recognized for promoting such
transparency.\28\
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    \27\ A country volunteers to become an EITI member. To become an
EITI member country, among other things, a country must establish a
multi-stakeholder group, including representatives of civil society,
industry, and government, to oversee implementation of the EITI. The
stakeholder group for a particular country agrees to the terms of
that country's EITI plan, including the requirements for what
information will be provided by the governments and by the companies
operating in that country. Generally, as we understand it, under the
EITI, companies and the host country's government submit payment
information confidentially to an independent administrator selected
by the country's multi-stakeholder group, which is frequently an
independent auditor. The auditor reconciles the information provided
to it by the government and by the companies and produces a report.
The information provided in the reports varies widely among
countries. A country must complete an EITI validation process to
become a compliant member. The EITI Source Book and Implementing the
EITI provide guidance regarding what should be included in a
country's EITI plan, and we have looked to those materials and to
the reports made by EITI member countries for guidance as to EITI
requirements. See the EITI's Web site at http://eiti.org.
    \28\ See Exchange Act Sections 13(q)(2)(C)(ii) and 13(q)(2)(E)
[15 U.S.C. 78m(q)(2)(C)(ii) and 78m(q)(2)(E)].
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II. Final Rules Implementing Section 13(q)

A. Summary of the Final Rules

    Consistent with the proposal, we are adopting final rules that
define the term ``resource extraction issuer'' as defined in Section
13(q). As proposed, the final rules will apply to all U.S. companies
and foreign companies that are engaged in the commercial development of
oil, natural gas, or minerals, and that are required to file annual
reports with the Commission, regardless of the size of the company or
the extent of business operations constituting commercial development
of oil, natural gas, or minerals. Consistent with the proposal, the
final rules will apply to an issuer, whether government-owned or not,
that

meets the definition of resource extraction issuer.
    Consistent with the proposal and in light of the structure,
language, and purpose of the statute, the final rules do not provide
any exemptions from the disclosure requirements. As such, the final
rules do not include an exemption for certain categories of issuers or
for resource extraction issuers subject to similar reporting
requirements under home country laws, listing rules, or an EITI
program. The final rules also do not provide an exemption for
situations in which foreign law may prohibit the required disclosure.
In addition, the final rules do not provide an exemption for instances
when an issuer has a confidentiality provision in an existing or future
contract or for commercially sensitive information.
    Consistent with Section 13(q) and the proposal, the final rules
define ``commercial development of oil, natural gas, or minerals'' to
include the activities of exploration, extraction, processing, and
export, or the acquisition of a license for any such activity.
    Consistent with Section 13(q) and the proposal, the final rules
define ``payment'' to mean a payment that is made to further the
commercial development of oil, natural gas, or minerals, is ``not de
minimis,'' and includes taxes, royalties, fees (including license
fees), production entitlements, and bonuses. After considering the
comments, under the final rules and in accordance with Section
13(q)(1)(C)(ii), we also are including dividends and payments for
infrastructure improvements in the list of payments required to be
disclosed. The final rules include instructions to clarify the types of
taxes, fees, bonuses, and dividends that are covered. In addition,
after considering the comments, we have determined to define the term
``not de minimis.'' Unlike the proposed rules, which left the term
``not de minimis'' undefined, the final rules define ``not de minimis''
to mean any payment, whether a single payment or a series of related
payments, that equals or exceeds $100,000 during the most recent fiscal
year.
    Consistent with Section 13(q) and the proposal, after considering
the comments, we have decided to leave the term ``project'' undefined.
    Consistent with the proposal, the final rules require a resource
extraction issuer to disclose payments made by the issuer, a subsidiary
of the issuer, or an entity under the control of the issuer to a
foreign government or the U.S. Federal Government for the purpose of
commercial development of oil, natural gas, or minerals. A resource
extraction issuer will be required to disclose payments made directly,
or by any subsidiary, or entity under the control of the resource
extraction issuer. Therefore, a resource extraction issuer must
disclose payments made by a subsidiary or entity under the control of
the resource extraction issuer where the subsidiary or entity is
consolidated in the resource extraction issuer's financial statements
included in its Exchange Act reports, as well as payments by other
entities it controls as determined in accordance with Rule 12b-2. A
resource extraction issuer may be required to provide the disclosure
for entities in which it provides proportionately consolidated
information. A resource extraction issuer will be required to determine
whether it has control of an entity for purposes of the final rules
based on a consideration of all relevant facts and circumstances.\29\
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    \29\ See Exchange Act Rule 12b-2 for the definition of
``control.'' See also note 315.
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    We are adopting the definition of ``foreign government'' consistent
with the definition in Section 13(q), as proposed. A ``foreign
government'' includes a foreign national government as well as a
foreign subnational government, such as the government of a state,
province, county, district, municipality, or territory under a foreign
national government. As proposed, the final rules clarify that
``Federal Government'' means the United States Federal Government. The
final rules do not require disclosure of payments made to subnational
governments in the United States. Consistent with the proposal, the
final rules clarify that a company owned by a foreign government is a
company that is at least majority-owned by a foreign government.
    After considering the comments, the final rules we are adopting
require resource extraction issuers to provide the required disclosure
about payments in a new annual report, rather than in the issuer's
existing Exchange Act annual report as proposed. We are adopting
amendments to new Form SD to require the disclosure.\30\ Similar to the
proposal, the Form SD will require issuers to include a brief statement
in the body of the form in an item entitled, ``Disclosure of Payments
By Resource Extraction Issuers,'' directing users to detailed payment
information provided in an exhibit to the form. As adopted, in response
to comments, the final rules require resource extraction issuers to
file Form SD on EDGAR no later than 150 days after the end of the
issuer's most recent fiscal year. The final rules will require resource
extraction issuers to present the payment information in one exhibit to
new Form SD rather than in two exhibits, as was proposed. The required
exhibit must provide the information using the XBRL interactive data
standard.\31\ Because the XBRL exhibit will be automatically rendered
into a readable form available on EDGAR, we are not requiring a
separate HTML or ASCII exhibit in addition to the XBRL exhibit. Under
the final rules, and as required by the statute, a resource extraction
issuer must submit the payment information using electronic tags that
identify, for any payments made by a resource extraction issuer to a
foreign government or the U.S. Federal Government:
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    \30\ In another release we are issuing today, we are adopting
rules to implement the requirements of Section 1502 of the Dodd-
Frank Act and requiring issuers subject to those requirements to
file the disclosure on Form SD. See Conflict Minerals, Release 34-
67716 (August 22, 2012) (``Conflict Minerals Adopting Release'').
Because of the order of our actions, we are adopting Form SD in that
release and we are amending the form in this release, but we intend
for the form to be used equally for these two separate disclosure
requirements and potentially others that would benefit from
placement in a specialized disclosure form.
    \31\ As proposed, an issuer would have been required to submit
two exhibits--one in HTML or ASCII and the other in XBRL. As
discussed below, we have decided to require only one exhibit for
technical reasons and to reduce the compliance burden of the final
rules.
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     The total amounts of the payments, by category;
     The currency used to make the payments;
     The financial period in which the payments were made;
     The business segment of the resource extraction issuer
that made the payments;
     The government that received the payments, and the country
in which the government is located; and
     The project of the resource extraction issuer to which the
payments relate.\32\

    \32\ See Item 2.01(a) of Form SD (17 CFR 249.448).
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In addition, a resource extraction issuer must provide the type and
total amount of payments made for each project and the type and total
amount of payments made to each government in interactive data format.
Unlike the proposal, in response to comments we received, the final
rules require resource extraction issuers to file rather than furnish
the payment information.
    Under the final rules, a resource extraction issuer will be
required to comply with the new rules and form for fiscal years ending
after September 30, 2013. For the first report filed for fiscal years
ending after September 30, 2013, a resource extraction issuer may
provide

a partial year report if the issuer's fiscal year began before
September 30, 2013. The issuer will be required to provide a report for
the period beginning October 1, 2013 through the end of its fiscal
year. For any fiscal year beginning on or after September 30, 2013, a
resource extraction issuer will be required to file a report disclosing
payments for the full fiscal year.

B. Definition of ``Resource Extraction Issuer'' and Application of the
Disclosure Requirements

1. Proposed Rules
    In accord with Section 13(q), the proposed rules would have applied
to issuers meeting the definition of ``resource extraction issuer'' and
would have defined the term to mean an issuer that is required to file
an annual report with the Commission and that engages in the commercial
development of oil, natural gas, or minerals. Consistent with Section
13(q), the proposed rules would not have provided any exemptions from
the disclosure requirements for resource extraction issuers. The
Proposing Release further clarified that the proposed rules would apply
to companies that fall within the definition of resource extraction
issuer whether or not they are owned or controlled by governments.
2. Comments on the Proposed Rules
    We received a variety of comments regarding the proposed rules and
the application of the disclosure requirements. Numerous commentators
supported the Commission's proposed definition and application of the
disclosure requirements, including that the rules should not provide
any exemptions from the disclosure requirements.\33\ Noting an absence
of statutory language regarding exemptions, several commentators stated
that the legislative intent underlying Section 1504 was to provide the
broadest possible coverage of extractive companies so as to create a
level playing field.\34\
---------------------------------------------------------------------------

    \33\ See letters from Association of Forest Communities in
Guatemala (March 8, 2012) (``Guatemalan Forest Communities''),
Batirente (February 28, 2011), BC Investment Management Corporation
(March 2, 2011) (``bcIMC''), Bon Secours Health System (March 1,
2011) (``Bon Secours''), California State Teachers' Retirement
System (March 1, 2011) (``CalSTRS''), Calvert Investments (March 1,
2011) (``Calvert''), Catholic Relief Services and Committee on
International Justice and Peace (February 9, 2011) (``CRS''),
Derecho Ambiente y Recursos Naturales DAR (March 23, 2012)
(``Derecho''), EarthRights International (December 2, 2010) (pre-
proposing letter) (``ERI pre-proposal''), EarthRights International
(January 26, 2011), (September 20, 2011), (February 3, 2012),
(February 7, 2012) (respectively, ``ERI 1,'' ``ERI 2,'' ``ERI 3,''
and ``ERI 4''), Earthworks (March 2, 2011), Extractive Industries
Working Group (March 2, 2011) (``EIWG''), Global Financial Integrity
(March 1, 2011) (``Global Financial 2''), Global Witness (February
25, 2011) (``Global Witness 1''), Global Witness (February 24, 2012)
(with attachments) (``Global Witness 2''), Global Witness (February
24, 2012) (``Global Witness 3''), Greenpeace (March 8, 2012), Grupo
FARO (February 13, 2012), Philippe Le Billon (March 2, 2012) (``Le
Billon''), Libyan Transparency Association (February 22, 2012)
(``Libyan Transparency''), National Civil Society Coalition on
Mineral Resource Governance of Senegal (February 14, 2012)
(``National Coalition of Senegal''), Newground Social Investment
(March 1, 2011) (``Newground''), Nigeria Union of Petroleum and
Natural Gas Workers (July 8, 2011) (``NUPENG''), ONE (March 2,
2011), ONE Petition (February 23, 2012), Oxfam America (February 21,
2011) (``Oxfam 1''), Petroleum and Natural Gas Senior Staff
Association of Nigeria (June 27, 2011) (``PENGASSAN''), PGGM
Investments (March 1, 2011) (``PGGM''), PricewaterhouseCoopers LLP
(March 2, 2011) (``PWC''), Publish What You Pay U.S. (November 22,
2010) (pre-proposing letter) (``PWYP pre-proposal''), Publish What
You Pay U.S. (February 25, 2011) (``PWYP 1''), Railpen Investments
(February 25, 2011), Representative Barney Frank, Representative
Jose Serrano, Representative Norman Dicks, Representative Henry
Waxman, Representative Maxine Waters, Representative Donald Payne,
Representative Nita Lowey, Representative Betty McCollum,
Representative Barbara Lee, Representative Jesse Jackson, Jr.,
Representative Alcee Hastings, Representative Gregory Meeks,
Representative Rosa DeLauro, and Representative Marcy Kaptur
(February 15, 2012) (``Rep. Frank et al.''), Revenue Watch Institute
(February 17, 2011) (``RWI 1''), Peter Sanborn (March 12, 2011)
(``Sanborn''), Senator Benjamin Cardin, Senator John Kerry, Senator
Patrick Leahy, Senator Charles Schumer, and Representative Barney
Frank (March 1, 2011) (``Sen. Cardin et al. 1''), Senator Benjamin
Cardin, Senator John Kerry, Senator Patrick Leahy, Senator Carl
Levin, and Senator Charles Schumer (January 31, 2012) (``Sen. Cardin
et al. 2''), Senator Carl Levin (February 1, 2011) (``Sen. Levin
1''), Social Investment Forum (March 2, 2011) (``SIF''), George
Soros (February 23, 2011) and (February 21, 2012) (``Soros 1'' and
``Soros 2'', respectively), Syena Capital Management LLC (February
17, 2011) (``Syena''), Ta'ang Students and Youth Organization
(``TSYO''), TIAA-CREF (March 2, 2011) (``TIAA''), U.S. Agency for
International Development (July 15, 2011) (``USAID''), United
Steelworkers (March 29, 2011) (``USW''), WACAM (February 2, 2012),
and World Resources Institute (March 1, 2011) (``WRI''), and letters
designated as Type A and Type B. Other commentators generally voiced
their support for strong rules under Section 1504. See letters from
Cambodians for Resource Revenue Transparency (February 7, 2012)
(``Cambodians''), Conflict Risk Network (February 7, 2012), Bill and
Melinda Gates Foundation (February 9, 2012) (``Gates Foundation''),
Global Witness 2, Barbara and Richard Hause (February 24, 2012),
Network for the Fight Against Hunger in Cameroon (February 20, 2012)
(``RELUFA 3''), Oxfam America (March 7, 2012) (``Oxfam 3''), Gradye
Parsons (February 15, 2012), Representative Raul M. Grijalva
(November 15, 2011), Reverend Jed Koball (February 10, 2012), and
letters designated as Type C.
    \34\ See, e.g., letters from Calvert, Global Witness 1, Oxfam 1,
PWYP 1, Sen. Cardin et al. 1, Sen. Levin 1, and WRI.
---------------------------------------------------------------------------

    Most commentators that addressed the issue supported including
issuers that are owned or controlled by governments within the
definition of resource extraction issuer, as proposed.\35\ Commentators
favored such inclusion because it would be consistent with the intent
of the statute to hold all resource extraction issuers accountable for
payments to governments,\36\ would adhere to EITI's universality
principle that payment disclosure in a given country should involve all
extractive industry companies operating in that country,\37\ and would
avoid anti-competitive effects because many government-owned companies
are the largest in the industry.\38\ Another commentator stated that,
while it did not believe government-owned entities should be exempt
from the payment disclosure rules, it opposed requiring a government-
owned entity to disclose payments made to the government that controls
it. According to that commentator, such payments are not ``made to
further commercial development,'' but rather are ``distributions to the
entity's controlling shareholder (or to itself), and requiring them to
be disclosed is inappropriate as a matter of comity.'' \39\ Another
commentator sought an exemption for payments made by a foreign
government-owned company to a subsidiary or entity controlled by
it.\40\
---------------------------------------------------------------------------

    \35\ See letters from American Petroleum Institute (January 28,
2011) (``API 1''), Chevron Corporation (January 28, 2011)
(``Chevron''), Exxon Mobil (January 31, 2011) (``ExxonMobil 1''), Le
Billon, PWYP 1, and Royal Dutch Shell plc (January 28, 2011) (``RDS
1'').
    \36\ See letter from PWYP 1.
    \37\ See letters from API 1 and ExxonMobil 1.
    \38\ See letters from Chevron and RDS 1.
    \39\ See letter from Cleary Gottlieb Steen & Hamilton (March 2,
2011) (``Cleary'').
    \40\ See letter from Statoil ASA (February 22, 2011)
(``Statoil'').
---------------------------------------------------------------------------

    Several other commentators supported exemptions for certain
categories of issuers or for certain circumstances.\41\ For example,
while opposing a general exemption for smaller reporting companies,
some commentators supported an exemption for a small entity having $5
million or less in assets on the last day of its most recently
completed fiscal year.\42\ Other commentators opposed an exemption for
smaller companies because of their belief that those companies
generally face greater equity risk from their

operations in host countries than larger issuers.\43\
---------------------------------------------------------------------------

    \41\ See, e.g., letters from API 1, API (August 11, 2011) (``API
2'') and API (May 18, 2012) (``API 5''), ExxonMobil 1, Cleary, New
York State Bar Association, Securities Regulation Committee (March
1, 2011) (``NYSBA Committee''), PetroChina Company Limited (February
28, 2011) (``PetroChina''), Petroleo Brasileiro S.A. (February 21,
2011) (``Petrobras''), Rio Tinto plc (March 2, 2011) (``Rio
Tinto''), RDS 1, and Statoil.
    \42\ See letters from API 1 and ExxonMobil 1. Those commentators
otherwise supported the application of the payment disclosure
requirements to all classes of issuers.
    \43\ See letters from Global Witness 1, PWYP 1, Sen. Cardin et
al. 1, and Soros 1.
---------------------------------------------------------------------------

    In addition, some commentators supported an exemption for
circumstances in which issuers were subject to other resource
extraction payment disclosure requirements, such as host country law,
stock exchange listing requirements, or an EITI program.\44\
Commentators believed that issuers should be able to satisfy their
obligations under Section 13(q) and the related rules by providing the
disclosure reported under applicable home country laws, listing rules,
or the EITI.\45\ Commentators asserted that this would minimize an
issuer's burden of having to comply with multiple transparency
standards and avoid potentially confusing duplicative disclosure.\46\
Other commentators, however, opposed providing an exemption for issuers
based on other reporting requirements because such an exemption would
result in an unlevel playing field and loss of comparability.\47\ Some
commentators asserted that because there are not currently any other
national extractive disclosure regulatory regimes equivalent to Section
13(q), providing such an exemption would be premature.\48\ In addition,
several commentators maintained that Section 13(q) was intended to go
beyond the disclosure provided under the EITI.\49\
---------------------------------------------------------------------------

    \44\ See, e.g., letters from API 1, British Petroleum p.l.c.
(February 11, 2011 and July 8, 2011) (respectively ``BP 1'' and ``BP
2''), Cleary, ExxonMobil 1, NYSBA Committee, Petrobras, Rio Tinto,
RDS 1, Royal Dutch Shell (July 11, 2011) (``RDS 3''), Statoil, and
Vale S.A. (March 2, 2011) (``Vale''). In addition, two commentators
requested that the Commission align the rules with the reporting
requirements to be adopted by the DOI for the U.S. EITI. See letters
from NMA (June 15, 2012) (``NMA 3'') and Northwest Mining
Association (June 29, 2012) (``NWMA'').
    \45\ See, e.g., letters from API 1, ExxonMobil 1, and RDS 1
(suggesting such an approach if home country requirements are at
least as rigorous as Section 13(q)); AngloGold Ashanti (January 31,
2011) (``AngloGold''), BHP Billiton Limited (July 28, 2011) (``BHP
Billiton''), and Vale (suggesting such an approach if disclosure is
made based on EITI principles); BP 2 and RDS 3 (supporting a global
common standard for transparency disclosure and, alternatively,
suggesting such an approach if disclosure is made in a broadly
similar manner based on EITI principles); Cleary, NYSBA Committee,
Petrobras, Rio Tinto, and Statoil (suggesting such an approach if
disclosure is made pursuant to home country requirements regardless
of whether those requirements follow EITI principles); and Cleary,
NYSBA Committee, and Statoil (suggesting alternatively such an
approach if disclosure is made based on EITI principles if the
company is a participant in an EITI program).
    \46\ See, e.g., letters from Cleary, Rio Tinto, and Statoil.
    \47\ See, e.g., letters from ERI 1, Global Witness 1, PWYP 1,
Rep. Frank et al., Sen. Cardin et al. 1, and Sen. Levin 1.
    \48\ See, e.g., letter from PWYP 1. In this regard, after noting
that the European Commission (``EC'') is developing legislative
proposals for extractive industry reporting rules in the European
Union (``EU''), one commentator stated that ``it is critical that
country-by-country and project-by-project disclosure regulations are
adopted across other major markets to ensure a level playing field
and consistent reporting across countries.'' Letter from Publish
What You Pay U.K. (April 28, 2011) (``PWYP U.K.''). The EC
subsequently published proposals for extractive industry payment
disclosure requirements. See discussion in note 82. After the EC
published the proposals, PWYP urged the Commission to take the
initiative and promptly adopt final rules so that the EC can
harmonize its extractive disclosure requirements with the Section
13(q) rules. See letter from Publish What You Pay (December 19,
2011) (``PWYP 2''). The EC proposals are currently pending.
    \49\ See letters from Global Witness 1, PWYP 1, and Sen.
Benjamin Cardin (December 1, 2010) (pre-proposal letter) (``Cardin
pre-proposal'').
---------------------------------------------------------------------------

    Many commentators supported an exemption from the disclosure
requirements when the required payment disclosure is prohibited under
the host country's laws.\50\ Some commentators stated that the laws of
China, Cameroon, Qatar, and Angola would prohibit disclosure required
under Section 13(q) and expressed concern that other countries would
enact similar laws.\51\ Commentators stated that without an appropriate
exemption, Section 13(q) would become a ``business prohibition''
statute that would force issuers to choose between leaving their
operations in certain countries or breaching local law and incurring
penalties in order to comply with the statute's requirements.\52\
Either outcome, according to commentators, would adversely affect
investors, efficiency, competition, and capital formation.\53\ Some
commentators further suggested that failure to adopt such an exemption
could encourage foreign issuers to deregister from the U.S. market.\54\
Other commentators maintained that comity concerns must be considered
when the Section 13(q) disclosure requirements conflict with foreign
law.\55\ One commentator suggested that an exemption would be
consistent with Executive Order 13609, which directs federal agencies
to take certain steps to ``reduce, eliminate, or prevent unnecessary
differences in [international] regulatory requirements.'' \56\
---------------------------------------------------------------------------

    \50\ See letters from API 1, API 2, API 5, AngloGold Ashanti
(January 31, 2011) (``AngloGold''), Spencer Bachus, Chairman of the
U.S. House of Representatives Committee on Financial Services, and
Gary Miller, Chairman of the U.S. House of Representatives
Subcommittee on International Monetary Policy, Committee on
Financial Services (March 4, 2011) (``Chairman Bachus and Chairman
Miller''), Barrick Gold Corporation (February 28, 2011) (``Barrick
Gold''), BP 1, Chamber of Commerce Institute for 21st Century Energy
(March 2, 2011) (``Chamber Energy Institute''), Chevron, Cleary,
ExxonMobil 1, ExxonMobil (March 15, 2011) (``ExxonMobil 2''),
International Association of Oil and Gas Producers (January 27,
2011) (``IAOGP''), NMA 2, NYSBA Committee, Nexen Inc. (March 2,
2011) (``Nexen''), PetroChina, Petrobras, PWC, Rio Tinto, RDS 1,
Royal Dutch Shell (May 17, 2011) (``RDS 2''), Royal Dutch Shell
(August 1, 2011) (``RDS 4''), Senator Lisa Murkowski and Senator
John Cornyn (February 28, 2012) (``Sen. Murkowski and Sen.
Cornyn''), Split Rock International, Inc. (March 1, 2011) (``Split
Rock''), Statoil, Talisman Energy Inc. (``Talisman'') (June 23,
2011), and Vale. See also letter from Cravath, Swaine & Moore LLP,
Cleary Gottlieb Steen & Hamilton LLP, Davis Polk & Wardwell LLP,
Shearman & Sterling LLP, Simpson Thacher & Bartlett LLP, Skadden,
Arps, Slate, Meagher & Flom LLP, Sullivan & Cromwell LLP, and Wilmer
Cutler Pickering Hale and Dorr LLP (November 5, 2010) (pre-proposal
letter) (``Cravath et al. pre-proposal'').
    \51\ See letters from API 1 and ExxonMobil 1. See also letter
from RDS 1 (mentioning China, Cameroon, and Qatar).
    \52\ See letters from Barrick Gold, Cleary, NYSBA Committee, Rio
Tinto, and Statoil; see also letter from API 5.
    \53\ See, e.g., letters from API 1, ExxonMobil 1, and RDS 1; see
also letter from API 5. Several commentators noted that the
Commission has a statutory duty to consider efficiency, competition,
and capital formation when adopting rules. See letter from American
Petroleum Institute (January 19, 2012) (``API 3''), Cravath et al.
pre-proposal, Senator Mary L. Landrieu (March 6, 2012), and Sen.
Murkowski and Sen. Cornyn.
    \54\ See letters from Cleary, Royal Dutch Shell (October 25,
2010) (pre-proposal letter) (``RDS pre-proposal''), Split Rock, and
Statoil. See also letter from Branden Carl Berns (December 7, 2011)
(``Berns'') (maintaining that some foreign issuers subject to
Section 13(q) with modest capitalizations on U.S. exchanges might
choose to delist in response to competitive advantages enjoyed by
issuers not subject to Section 13(q)).
    \55\ See letters from API 5 and NMA 2.
    \56\ See letter from API 5. We note that the responsibilities of
federal agencies under Executive Order 13609 are to be carried out
``[t]o the extent permitted by law'' and that foreign regulatory
approaches are to be considered ``to the extent feasible,
appropriate, and consistent with law.'' See Proclamation No. 13609,
77 FR 26413 (May 4, 2012).
---------------------------------------------------------------------------

    Other commentators opposed an exemption for host country laws
prohibiting disclosure of payment information because they believed it
would undermine the purpose of Section 13(q) and create an incentive
for foreign countries that want to prevent transparency to pass such
laws, thereby creating a loophole for companies to avoid
disclosure.\57\ Commentators also disputed the assertion that there are
foreign laws that specifically prohibit disclosure of payment
information.\58\ Those commentators noted that most confidentiality
laws in the extractive industry sector relate to the

confidentiality of geological and other technical data, and in any
event, contain specific provisions that allow for disclosures to stock
exchanges.\59\
---------------------------------------------------------------------------

    \57\ See, e.g., letters from Cambodians, EG Justice (February 7,
2012) (``EG Justice 2''), Global Witness 1, Grupo Faro, Human Rights
Foundation of Monland (March 8, 2011 and July 15, 2011)
(respectively, ``HURFOM 1'' and ``HURFOM 2''), National Coalition of
Senegal, PWYP 1, Rep. Frank et al., Sen. Cardin et al. 1, Sen.
Cardin et al. 2, Sen. Levin 1, Soros 2, U.S. Agency for
International Development (July 15, 2011) (``USAID''), and WACAM.
    \58\ See, e.g., letters from ERI 3, Global Witness 1, PWYP 1,
Publish What You Pay (December 20, 2011) (``PWYP 3''), and Rep.
Frank et al.
    \59\ See letters from Global Witness 1, Susan Maples, J.D.,
Post-Doctoral Research Fellow, Columbia University School of Law
(March 2, 2011) (``Maples''), Network for the Fight Against Hunger
in Cameroon (March 14, 2011 and July 11, 2011) (respectively,
``RELUFA 1'' and ``RELUFA 2''), and PWYP 1.
---------------------------------------------------------------------------

    Many commentators also sought an exemption from the disclosure
requirements for payments made under existing contracts that contain
confidentiality clauses prohibiting such disclosure.\60\ According to
commentators, while some contracts may permit the disclosure of
information to comply with an issuer's home country laws, regulations,
or stock exchange rules, those contractual provisions only allow the
contracting party, not its parent or affiliate companies, to make the
disclosure.\61\ Some commentators also sought an exemption from the
requirements for payments made under future contracts containing
confidentiality clauses.\62\
---------------------------------------------------------------------------

    \60\ See letters from API 1, AngloGold, Barrick Gold, Chairman
Bachus and Chairman Miller, BP 1, Chamber Energy Institute, Chevron,
Cleary, ExxonMobil 1, IAOGP, NMA 2, NYSBA Committee, Nexen,
PetroChina, Petrobras, PWC, Rio Tinto, RDS 1, Split Rock, Statoil,
and Vale.
    \61\ See letters from API 1 and ExxonMobil 1.
    \62\ See letters from AngloGold and NMA 2. AngloGold suggested
conditioning the exemption on an issuer having made a good faith
determination that it would not have been able to enter into the
contract but for agreeing to a confidentiality provision.
---------------------------------------------------------------------------

    Other commentators opposed an exemption based on confidentiality
clauses in contracts on the grounds that such an exemption was not
necessary.\63\ Commentators maintained that most contracts include an
explicit exception for information that must be disclosed by law, and,
in cases where such language is not explicit, it generally would be
read into any such contract under judicial or arbitral review.\64\
Commentators further stated that an exemption based on contract
confidentiality would undermine Section 13(q) by creating incentives
for issuers to craft such contractual provisions.\65\
---------------------------------------------------------------------------

    \63\ See letters from Global Witness 1, Maples, Oxfam (March 20,
2012) (``Oxfam 3''), and PWYP 1.
    \64\ See, e.g., letters from Oxfam 3 and PWYP 1. See also letter
from SIF citing the ``official Production Sharing Contract of the
government of Equatorial Guinea'' and noting that it explicitly
states that companies are permitted to share all information
relating to the Contract or Petroleum Operations in the following
instances: ``To the extent that such data and information is
required to be furnished in compliance with any applicable laws or
regulation'' (Article 20.1.1c) and ``[i]n conformity with the
requirements of any stock exchange having jurisdiction over a
Party[.]'' (Article 20.1.1d)).
    \65\ See, e.g., letters from Global Witness 1 and Oxfam 1.
---------------------------------------------------------------------------

    Several commentators supported an exemption for situations when,
regardless of the existence of a contractual confidentiality clause,
such disclosure would jeopardize commercially or competitively
sensitive information.\66\ Other commentators expressed doubt that
disclosure of payment information would create competitive
disadvantages because much of the information is already available from
third-party service providers or through the large number of joint
ventures between competitors in the extractive industries.\67\
Commentators also expressed concern that providing an exemption for
commercially or competitively sensitive information would frustrate
Congress' intent to achieve payment transparency and
accountability.\68\
---------------------------------------------------------------------------

    \66\ See letters from American Exploration and Production
Council (January 31, 2011) (``AXPC''), API 1, Chamber Energy
Institute, Chevron, ExxonMobil 1, IAOGP, Local Authority Pension
Fund Forum (January 31, 2011) (``LAPFF''), NMA 2, Rio Tinto, RDS 1,
and United States Council for International Business (February 4,
2011) (``USCIB'').
    \67\ See letters from PWYP 1 and RWI 1; see also letter from
Global Witness 1 (noting a study finding that the majority of
disclosures that would be required pursuant to Section 13(q) would
already be known to actors within the industry).
    \68\ See, e.g., letter from Global Witness 1. Another
commentator stated that ``to the extent that Section 13(q)'s
reporting obligations result in some competitive disadvantage to
regulated issuers, Congress already accepted this risk when it
determined that pursuing the goals of promoting transparency and
good governance was of paramount importance--even at the cost of an
incidental burden on issuers * * * As with the Foreign Corrupt
Practices Act, Congress made the affirmative choice to set a higher
standard for global corporate practice. Other countries have already
started to follow Congress' lead in this area * * * Strong U.S.
leadership with respect to transparency in the extractive industries
will make it easier for foreign governments to adopt similar
reporting requirements, which in turn will serve to level the
playing field. Letter from Oxfam 1.
---------------------------------------------------------------------------

    Some commentators believed that the disclosure of detailed payment
information would jeopardize the safety and security of a resource
extraction issuer's operations or employees and requested an exemption
in such circumstances.\69\ Other commentators believed that detailed
payment disclosure was critical for workers and their communities to
achieve benefits from investment transparency, including a decrease in
unrest and conflict and increased stability and safety.\70\
---------------------------------------------------------------------------

    \69\ See letters from API 1, Spencer Bachus, Chairman of the
U.S. House of Representatives Committee on Financial Services
(August 21, 2012) (``Chairman Bachus''), Chevron, ExxonMobil 1, NMA
2, Nexen, PetroChina, and RDS 1.
    \70\ See letters from NUPENG, PENGASSAN, PWYP 1, and USW.
---------------------------------------------------------------------------

    Some commentators requested that the Commission extend the
disclosure requirements to foreign private issuers that are exempt from
Exchange Act reporting obligations but publish their annual reports and
other material home country documents electronically in English
pursuant to Exchange Act Rule 12g3-2(b).\71\ Those commentators
asserted that requiring such issuers to comply with the disclosure
requirements would help ameliorate anti-competitive concerns. Other
commentators, however, opposed extending the disclosure required under
Section 13(q) to companies that are exempt from Exchange Act
registration and reporting because it would discourage use of the Rule
12g3-2(b) mechanism \72\ and because such an extension would be
inconsistent with the premise of Rule 12g3-2(b).\73\
---------------------------------------------------------------------------

    \71\ See letters from API 1, Calvert, ExxonMobil 1, Global
Witness 1, RWI 1, and RDS 1.
    \72\ See letter from NYSBA Committee.
    \73\ See letter from NMA 2 and NYSBA Committee.
---------------------------------------------------------------------------

3. Final Rules
    Consistent with the proposal, we are adopting final rules that
define the term ``resource extraction issuer'' as it is defined in
Section 13(q). The final rules will apply to all U.S. companies and
foreign companies that are engaged in the commercial development of
oil, natural gas, or minerals and that are required to file annual
reports with the Commission, regardless of the size of the company or
the extent of business operations constituting commercial development
of oil, natural gas, or minerals.\74\ Consistent with the proposal, the
final rules will apply to a company, whether government-owned or not,
that meets the definition of resource extraction issuer.\75\ Any
failure to include government-owned companies within the scope of the

disclosure rules could raise competitiveness concerns.\76\
---------------------------------------------------------------------------

    \74\ See new Exchange Act Rule 13q-1.
    \75\ As discussed below, a resource extraction issuer, including
a government-owned resource extraction issuer, will be required to
provide the payment disclosure if the other requirements of the rule
are met. Contrary to some commentators' suggestions, we are not
providing a carve-out from the rules for payments made by a
government-owned resource extraction issuer to its controlling
government because we believe it would be inconsistent with the
purpose of the statute. We note a government-owned resource
extraction issuer would only disclose payments made to the
government that controls it if those payments were made for the
purpose of commercial development of oil, natural gas, or minerals
and the payments are within the categories of payments that would be
required to be disclosed under the rules.
    \76\ See note 38 and accompanying text.
---------------------------------------------------------------------------

    Although some commentators urged us to provide exemptions for
certain categories of issuers,\77\ in light of the statutory purpose of
Section 13(q),\78\ we have decided not to adopt exemptions from the
disclosure requirement for any category of resource extraction issuers,
including smaller issuers and foreign private issuers. We believe the
transparency objectives of Section 13(q) are best served by requiring
disclosure from all resource extraction issuers. In addition, we agree
with commentators that providing an exemption for smaller reporting
companies or foreign private issuers could contribute to an unlevel
playing field and raise competitiveness concerns for larger companies
and domestic companies.\79\ We also note that some commentators opposed
an exemption for smaller companies because of their belief that those
companies generally face greater equity risk from their operations in
host countries than larger issuers.\80\
---------------------------------------------------------------------------

    \77\ See note 41 and accompanying text.
    \78\ See note 7 and accompanying text.
    \79\ See notes 33 and 34 and accompanying text.
    \80\ See letters from Global Witness 1, PWYP 1, Sen. Cardin et
al. 1, and Soros 1.
---------------------------------------------------------------------------

    The final rules also do not permit resource extraction issuers to
satisfy the disclosure requirements adopted under Section 13(q) by
providing disclosures required under other extractive transparency
reporting requirements, such as under home country laws, listing rules,
or an EITI program. Section 13(q) does not provide such an
accommodation and, as noted by some commentators, in some respects the
statute extends beyond the disclosure required under other transparency
initiatives.\81\ In addition, we note that transparency initiatives for
resource extraction payment disclosure are continuing to develop.\82\
Therefore, we believe it would be premature to permit issuers to
satisfy their disclosure obligation by complying with other extractive
transparency reporting regimes or by providing the disclosure required
by those regimes in lieu of the disclosure required by the rules we are
adopting under Section 13(q).\83\
---------------------------------------------------------------------------

    \81\ See note 49 and accompanying text.
    \82\ One recent development is the European Commission's
issuance in October 2011 of proposed directives that would require
companies listed on EU stock exchanges and large private companies
based in EU member states to disclose their payments to governments
for oil, gas, minerals, and timber. See the European Commission's
press release concerning the proposal, which is available at: http://europa.eu/rapid/pressReleasesAction.do?reference=IP/11/1238&format=HTML&aged=0&language=EN&guiLanguage=en. The EU proposal
differs from the final rules we are adopting in several respects.
For example, the EU proposal would apply to large, private EU-based
companies as well as EU-listed companies engaged in oil, natural
gas, minerals, and timber, whereas the final rules apply only to
Exchange Act reporting companies engaged in oil, natural gas, and
mining. The EU proposal would require disclosure of payments that
are material to the recipient government, whereas the final rules
require disclosure of payments that are not de minimis. Further, the
EU proposal would apply to exploration, discovery, development, and
extraction activities, whereas the final rules apply to exploration,
extraction, processing, and export activities. In addition, while
both the EU proposal and final rules require payment disclosure per
project and government, the EU proposal would base project reporting
on a company's current reporting structure whereas, as discussed
below, the final rules leave the term ``project'' undefined. See
also letter from PWYP 2. Other jurisdictions have introduced, but
have not adopted, transparency initiatives. See letter from ERI 4
and note 14 and accompanying text.
    \83\ In this regard, we are not persuaded by comments suggesting
that we should align our rules with any reporting requirements that
may be adopted by the DOI as part of U.S. EITI. DOI is continuing
its efforts to develop a U.S. EITI program and is currently working
to form the stakeholder group. In addition, the scope of EITI
programs generally differs from the scope of the requirements of
Section 13(q). An EITI program adopted by a particular country
generally requires disclosure of payments to that country's
governments by companies operating in that country, but does not
require disclosure of payments made by those companies to foreign
governments. The disclosure requirements are developed country by
country. In contrast, Section 13(q) requires disclosure of payments
to the federal and foreign governments by resource extraction
issuers. As noted elsewhere in this release, the requirements of the
statute differ from the EITI in a number of respects.
---------------------------------------------------------------------------

    Consistent with Section 13(q) and the proposed rules, we also are
not providing an exemption for any situations in which foreign law may
prohibit the required disclosure. Although some commentators asserted
that certain foreign laws currently in place would prohibit the
disclosure required under Section 13(q), other commentators disagreed
and asserted that currently no foreign law prohibits the
disclosure.\84\ Further, as noted above, some commentators believed
that we should adopt final rules providing an exemption from the
disclosure requirements where foreign laws prohibit the required
disclosure, including laws that may be adopted in the future,\85\ while
others believed that providing such an exemption would be inconsistent
with the statute and would encourage countries to adopt laws
specifically prohibiting the required disclosure.\86\ While we
understand commentators' concerns regarding the situation an issuer may
face if a country in which it does business or would like to do
business prohibits the disclosure required under Section 13(q),\87\ the
final rules we are adopting do not include an exemption for situations
in which foreign law prohibits the disclosure. We believe that adopting
such an exemption would be inconsistent with the structure and language
of Section 13(q) \88\ and, as some commentators have noted,\89\ could
undermine the statute by encouraging

countries to adopt laws, or interpret existing laws, specifically
prohibiting the disclosure required under the final rules.
---------------------------------------------------------------------------

    \84\ Compare letters from API 1, Barrick Gold, Cleary,
ExxonMobil 1, NMA 2, NYSBA Committee, Rio Tinto, RDS 1, and Statoil
with letters from EarthRights International (February 3, 2012)
(``ERI 3''), Global Witness, PWYP, Publish What You Pay (December
20, 2011) (``PWYP 2''), Maples, and Rep. Frank et al. Several of the
comment letters from issuers and industry associations assert that
existing laws in Angola, Cameroon, China, and Qatar prohibit, or in
some situations may prohibit, disclosure of the type required by
Section 13(q). One commentator submitted translations of Despacho
385/06, issued by the Minister of the Angola Ministry of Petroleum,
as amended by Despacho 409/06 (the ``Angola Order'') and a letter
dated December 23, 2009, from the Deputy Premier, Minister of Energy
& Industry, of the State of Qatar (the ``Qatar Directive''). See
letter from ExxonMobil 2. Another commentator submitted a
translation of certain sections of Decree No. 2000/465 relating to
the Cameroon Petroleum Code, a copy of a legal opinion from Cameroon
counsel, and a copy of a legal opinion from Chinese counsel. See
letter from RDS 1. We are not aware of any other examples submitted
on the public record of foreign laws purported to prohibit
disclosure of payments by resource extraction issuers. Other
commentators have submitted contrary data, arguing that the laws of
Angola, Cameroon, China, and Qatar do not prohibit a resource
extraction issuer from complying with Section 13(q) and the final
rules, and providing examples of companies that have disclosed
payment information relating to resource development activities in
Angola, Cameroon, and China. See letter from ERI 3. One commentator
submitted a legal opinion stating that ``[n]othing in Cameroonian
law prevents oil companies from publishing data on revenues they pay
to the state derived from oil contracts signed with the
government.''
    \85\ See, e.g., API 1, ExxonMobil 1, and RDS 1.
    \86\ See, e.g., letters from Cambodians, EG Justice (February 7,
2012) (``EG Justice 2''), Global Witness 1, Grupo Faro, HURFOM 1 and
HURFOM 2, National Coalition of Senegal, PWYP, Rep. Frank et al.,
Sen. Cardin et al., Sen. Cardin et al. 2, Sen. Levin 1, Soros 2, US
Agency for International Development (July 15, 2011) (``USAID''),
and WACAM.
    \87\ See, e.g., API 1, ExxonMobil 1, and RDS 1.
    \88\ As noted by some commentators, Section 23(a)(2) requires
us, when adopting rules, to consider the impact any new rule would
have on competition. See, e.g., letters from API 1, API 3, Chairman
Bachus, Cravath et al pre-proposal, and ExxonMobil 1. Specifically,
Section 23(a)(2) requires us ``to consider * * * the impact any such
rule or regulation would have on competition'' in making rules
pursuant to the Exchange Act. Further, the section states that the
Commission ``shall not adopt any such rule * * * which would impose
a burden on competition not necessary or appropriate in furtherance
of [the Exchange Act].'' As discussed further below, we recognize
the final rules may impose a burden on competition; however, in
light of the language and purpose of Section 13(q), which is now
part of the Exchange Act, we believe the rules we are adopting
pursuant to the provision and any burden on competition that may
result are necessary in furtherance of the purpose of the Exchange
Act, including Section 13(q) of the Exchange Act.
    \89\ See, e.g., letters from Cambodians, EG Justice (February 7,
2012) (``EG Justice 2''), Global Witness 1, Grupo Faro, HURFOM 1 and
HURFOM 2, National Coalition of Senegal, PWYP, Rep. Frank et al.,
Sen. Cardin et al., Sen. Cardin et al. 2, Sen. Levin 1, Soros 2,
USAID, and WACAM.
---------------------------------------------------------------------------

    Consistent with Section 13(q) and the proposed rules, the final
rules do not provide an exemption for instances when an issuer has a
confidentiality provision in a relevant contract, as requested by some
commentators.\90\ We understand that contracts typically allow for
disclosure to be made when required by law for reporting purposes.\91\
Although some commentators maintained that those types of contractual
provisions only allow the contracting party, not its parent or
affiliate companies, to make the disclosure,\92\ the final rules we are
adopting do not include an exemption for confidentiality provisions in
contracts because we believe this issue can be more appropriately
addressed through the contract negotiation process.\93\ As noted by
some commentators, a different approach might encourage a change in
practice or an increase in the use of confidentiality provisions to
circumvent the disclosure required by the final rules.\94\ In addition,
including an exemption from the disclosure requirements for payments
made under existing contracts that contain confidentiality clauses
prohibiting such disclosure, as suggested by some commentators,\95\
would frustrate the purpose of Section 13(q).
---------------------------------------------------------------------------

    \90\ See, e.g., letters from API 1, Chevron, Cleary, ExxonMobil
1, NMA 2, and RDS 1.
    \91\ See letters from Global Witness 1, Maples, and PWYP 1.
    \92\ See letters from API 1 and ExxonMobil 1.
    \93\ See letter from Maples.
    \94\ See letters from Global Witness and Oxfam.
    \95\ See note 60 and accompanying text.
---------------------------------------------------------------------------

    Although some commentators sought an exemption for commercially or
competitively sensitive information, regardless of the existence of a
confidentiality provision in a contract,\96\ the final rules do not
provide such an exemption. We note that commentators disagreed on the
need for an exemption for commercially or competitively sensitive
information.\97\ While we understand commentators' concerns about
potentially being required to provide commercially or competitively
sensitive information,\98\ we also are cognizant of other commentators'
concerns that such an exemption would frustrate the purpose of Section
13(q) to promote international transparency efforts.\99\ We note that
in situations involving more than one payment, the information will be
aggregated by payment type, government, and/or project, and therefore
may limit the ability of competitors to use the information to their
advantage.
---------------------------------------------------------------------------

    \96\ See note 66 and accompanying text.
    \97\ See notes 66 and 67 and accompanying text.
    \98\ See note 66 and accompanying text.
    \99\ See note 68 and accompanying text.
---------------------------------------------------------------------------

    We note that some commentators sought an exemption for
circumstances in which a company believes that disclosure might
jeopardize the safety and security of its employees and
operations,\100\ while other commentators opposed such an exemption and
noted their belief that increased transparency would instead increase
safety for employees.\101\ We understand issuers' concerns about the
safety of their employees and operations; however, in light of
commentators' disagreement on this issue, including the belief by some
commentators that disclosure will improve employee safety, and the fact
that the statute seeks to promote international transparency efforts,
we are not persuaded that such an exemption is warranted and we are not
including it in the final rules. We also note that neither the statute
nor the final rules require disclosure regarding the names or location
of employees.
---------------------------------------------------------------------------

    \100\ See note 69 and accompanying text.
    \101\ See note 70 and accompanying text.
---------------------------------------------------------------------------

    The final rules do not extend the disclosure requirements to
foreign private issuers that are exempt from Exchange Act registration
pursuant to Rule 12g3-2(b). Foreign private issuers relying on Rule
12g3-2(b) are not required to file annual reports with the Commission
and thus, they do not fall within the plain definition of resource
extraction issuer provided in the statute. In addition, we believe that
such an extension would be inconsistent with the premise of Rule 12g3-
2(b).\102\ Issuers that are exempt from Exchange Act registration
pursuant to Rule 12g3-2(b) are not subject to reporting requirements
under the Exchange Act, including any requirement to file an annual
report.
---------------------------------------------------------------------------

    \102\ See note 73 and accompanying text.
---------------------------------------------------------------------------

C. Definition of ``Commercial Development of Oil, Natural Gas, or
Minerals''

1. Proposed Rules
    Consistent with Section 13(q), the proposed rules defined
``commercial development of oil, natural gas, or minerals'' to include
the activities of 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. In proposing the
definition, we intended to capture only activities that are directly
related to the commercial development of oil, natural gas, or minerals,
but not activities that are ancillary or preparatory, such as the
manufacture of a product used in the commercial development of oil,
natural gas, or minerals. In the Proposing Release, we noted that
commercial development would not include transportation activities for
a purpose other than export. In addition, we noted, as an example, that
an issuer engaged in the removal of impurities, such as sulfur, carbon
dioxide, and water, from natural gas after extraction but prior to its
transport through the pipeline would be included in the definition of
commercial development because such removal is generally considered to
be a necessary part of the processing of natural gas in order to
prevent corrosion of the pipeline.
2. Comments on the Proposed Rules
    Commentators supported various aspects of the proposed definition
\103\ while suggesting clarifications or alternative approaches to the
definition of commercial development. For example, numerous
commentators suggested defining commercial development to include
upstream activities (exploration and extraction of resources)
only.\104\ Commentators noted that Section 13(q) is entitled
``Disclosure of Payments by Resource Extraction Issuers,'' and as such,
the statute ``is directed toward those issuers who are engaged in
extractive activities, or what are commonly referred to as `upstream
activities.' '' \105\ Commentators also noted that the EITI focuses on
upstream activities \106\ and that the statute directs the Commission
``to consider consistency with EITI guidelines in the rules it
develops.'' \107\ Several commentators noted they believed defining
commercial development to include only upstream activities would be
consistent with the Commission's existing definition of ``oil and gas
producing activities'' in Regulation S-X Rule 4-10.\108\ In addition,
commentators

noted that adopting a definition of commercial development that is
based on the definition of ``oil and gas producing activities'' in
Regulation S-X would align it with a widely understood and accepted
industry definition.\109\ According to commentators advocating this
approach, ``commercial development of oil, natural gas, or minerals''
would include ``exploration, extraction, field processing and
gathering/transportation activities to the first marketable
location.''\110\ Some commentators suggested clarifying, either in the
regulatory text or in the adopting release, that the definition would
include field processing activities prior to the refining or smelting
phase, such as upgrading of bitumen and heavy oil and crushing and
processing of raw ore, as well as transport activities related to the
export of oil, natural gas, or minerals to the first marketable
location.\111\ In focusing exclusively on mining activities, one
commentator stated that the definition of ``commercial development''
should include exploration, extraction, and production, and activities
of processing and export to the extent that they are associated with
production.\112\ Under that approach, the definition would include
steps in production prior to the smelting or refining phase, such as
crushing of raw ore, processing of the crushed ore, and export of
processed ore to the smelter, but would not include the actual smelting
or refining. Several commentators stated that the definition should
exclude transportation and other midstream or downstream activities,
including export.\113\ According to some of those commentators, ``
`export' activities are not always directly associated with oil and gas
producing activities, and can often be undertaken by issuers that are
not engaged in `resource extraction' at all.''\114\ They believed that
requiring the reporting of payments by such issuers goes beyond the
intended scope of the statute. One commentator urged us to state
explicitly that ``commercial development'' does not include
transportation activities and that transportation activities include
the underground storage of natural gas.\115\ Another commentator stated
that an issuer should be allowed to choose whether to include
transportation in the definition of ``commercial development'' as long
as it discloses the basis for its definition.\116\
---------------------------------------------------------------------------

    \103\ See, e.g., letters from API 1, AngloGold, BP 1, CRS,
Global Financial Integrity 2, NMA 2, and PWYP 1.
    \104\ See letters from API 1, AXPC, Barrick Gold, BP 1, Chevron,
ExxonMobil 1, NMA 2, Petrobras, PWC, RDS 1, and Statoil.
    \105\ See letters from API 1 and ExxonMobil 1.
    \106\ See, e.g., letters from API 1 and NMA 2.
    \107\ See letters from API 1 and ExxonMobil 1.
    \108\ See, e.g., letters from API 1, Chevron, ExxonMobil 1, and
RDS 1. Rule 4-10(a)(16) defines ``oil and gas producing activities''
to include:
    (A) The search for crude oil, including condensate and natural
gas liquids, or natural gas (``oil and gas'') in their natural
states and original locations;
    (B) The acquisition of property rights or properties for the
purpose of further exploration or for the purpose of removing the
oil or gas from such properties;
    (C) The construction, drilling, and production activities
necessary to retrieve oil and gas from their natural reservoirs,
including the acquisition, construction, installation, and
maintenance of field gathering and storage systems, such as:
    (1) Lifting the oil and gas to the surface; and
    (2) Gathering, treating, and field processing (as in the case of
processing gas to extract liquid hydrocarbons); and
    (D) Extraction of saleable hydrocarbons, in the solid, liquid,
or gaseous state, from oil sands, shale, coalbeds, or other
nonrenewable natural resources which are intended to be upgraded
into synthetic oil or gas, and activities undertaken with a view to
such extraction.
    (ii) Oil and gas producing activities do not include:
    (A) Transporting, refining, or marketing oil and gas;
    (B) Processing of produced oil, gas or natural resources that
can be upgraded into synthetic oil or gas by a registrant that does
not have the legal right to produce or a revenue interest in such
production;
    (C) Activities relating to the production of natural resources
other than oil, gas, or natural resources from which synthetic oil
and gas can be extracted; or
    (D) Production of geothermal steam. (Instructions omitted.)
    \109\ See letters from API 1 and ExxonMobil 1.
    \110\ See, e.g., letter from API 1.
    \111\ See letters from AXPC, API 1, Barrick Gold, BP 1, Chevron,
ExxonMobil 1, NMA 2, Petrobras, PWC, RDS 1, and Statoil.
    \112\ See letter from NMA 2.
    \113\ See letters from API 1, Barrick Gold, ExxonMobil 1,
National Fuel Gas Supply Corporation (March 1, 2011) (``National
Fuel''), and NMA 2.
    \114\ See letter from API 1. See also letter from ExxonMobil 1.
    \115\ See letter from National Fuel.
    \116\ See letter from Rio Tinto.
---------------------------------------------------------------------------

    Other commentators stated that, at a minimum, the definition of
``commercial development'' must include the activities of exploration,
extraction, processing, and export.\117\ One commentator argued that,
although the EITI does not include processing and export activities in
its minimum disclosure requirements, the definition of ``commercial
development'' must include those activities to be consistent with the
plain language of Section 13(q) and because Congress intended the
statute to go beyond the EITI's requirements.\118\ Another commentator
suggested expanding the proposed definition to include not just
upstream activities, but also midstream activities (activities involved
in trading and transport of resources), and downstream activities
(activities involved in refining, ore processing, and marketing of
resources).\119\ The commentator agreed with the proposal that the
definition should not include activities of a manufacturer of a product
used in the commercial development of oil, natural gas, or minerals.
---------------------------------------------------------------------------

    \117\ See letters from CRS and PWYP 1.
    \118\ See letter from PWYP 1.
    \119\ See letter from Calvert.
---------------------------------------------------------------------------

    Some commentators requested further clarification that covered
transport activities include not just those related to export, but
those related to the processing or marketing of resources, whether
intra-country or cross-border, and whether by pipeline, rail, road,
air, ship, or other means.\120\ Two commentators requested that the
Commission define ``transportation activities'' to include pipelines
and security arrangements associated with a pipeline within a host
country.\121\
---------------------------------------------------------------------------

    \120\ See letters from Calvert, CRS, Earthworks, EIWG, HURFOM 1,
PWYP pre-proposal, PWYP 1, and WRI.
    \121\ See letters from PWYP 1 and Syena; see also letter from Le
Billon (suggesting coverage of transportation in general, security
services, and trading).
---------------------------------------------------------------------------

    Some commentators agreed with the proposal that ``commercial
development'' should exclude activities that are ancillary or
preparatory to commercial development.\122\ One commentator suggested
that the term focus on activities that ``directly relate to, and
provide material support for, the physical process of extracting and
processing ore and producing minerals from that ore, including the
export of ore to the smelter.'' \123\ The commentator further noted
that activities that ``do not directly and materially further this
process, such as development of infrastructure and the community, as
well as security support, generally would fall outside this definition,
unless they include payments to governments that are expressly required
by concession, contract, law, or regulation.'' \124\ Another
commentator requested that we provide further detail about the
extractive activities to which the rules would apply.\125\
---------------------------------------------------------------------------

    \122\ See letters from NMA 2 and Statoil.
    \123\ Letter from NMA 2.
    \124\ Letter from NMA 2.
    \125\ See letter from Syena.
---------------------------------------------------------------------------

3. Final Rules
    Consistent with Section 13(q) and the proposal, the final rules
define ``commercial development of oil, natural gas, or minerals'' to
include the activities of exploration, extraction, processing, and
export, or the acquisition of a license for any such activity. As we
noted in the Proposing Release, the statutory language sets forth a
clear list of activities in the definition and gives us discretionary
authority to include other significant activities relating to oil,
natural gas, or minerals under the definition of ``commercial
development.'' As described above, the final rules we are adopting
generally track the language in the statute, and except for where the
language or approach of Section 13(q) clearly deviates from the EITI,
the final rules are consistent with the EITI. In

instances where the language or approach of Section 13(q) clearly
deviates from the EITI, the final rules track the statute rather than
the EITI. The definition of ``commercial development'' in Section 13(q)
is broader than the activities covered by the EITI and thus clearly
deviates from the EITI; therefore, we believe the definition of the
term in the final rules should be consistent with Section 13(q).
    As noted above, we received significant comment on this aspect of
the proposal. Some commentators sought a more narrow definition than
proposed, while other commentators sought a broader definition. We are
not persuaded that we should narrow the scope of the definition in
Section 13(q) by re-defining ``commercial development'' to only include
upstream activities \126\ or using the definition of ``oil and gas
producing activities'' in Rule 4-10.\127\ Nor are we persuaded that we
should expand the covered activities \128\ beyond those identified in
the statute.\129\ Under the final rules, the definition of commercial
development includes all of the activities specified in the statutory
definition, even though the statute includes activities beyond what is
currently contemplated by the EITI.\130\
---------------------------------------------------------------------------

    \126\ See note 104 and accompanying text.
    \127\ See note 108 and accompanying text.
    \128\ See note 119 and accompanying text.
    \129\ We believe the phrase ``as determined by the Commission''
at the end of the definition of ``commercial development'' in
Section 13(q) requires the Commission to identify any ``other
significant actions'' that would be covered by the rules. See 15
U.S.C. 78m(q)(1)(A). As noted above, we are not expanding the list
of activities covered by the definition of ``commercial
development.'' Therefore, to avoid confusion as to the scope of the
activities covered by the rules, the final rules do not include the
phrase ``and other significant actions relating to oil, natural gas,
or minerals.''
    \130\ In the Proposing Release, we noted our understanding that
the EITI criteria primarily focus on exploration and production
activities. See, e.g., Implementing the EITI, at 24. We note that
although export payments are not typically included under the EITI,
some EITI programs have reported export taxes or related duties. See
the 2005 EITI Report of Guinea, the 2008-2009 EITI Report of
Liberia, and the 2006-2007 EITI Report of Sierra Leone, available at
http://eiti.org/document/eitireports.
---------------------------------------------------------------------------

    Section 13(q) grants us the discretionary authority to include
other significant activities relating to oil, natural gas, or minerals
under the definition of ``commercial development.'' \131\ In deciding
whether to expand the statutory list of covered activities, we have
considered both commentators' views and the need to promote consistency
with EITI principles. We are not persuaded that we should extend the
rules to activities beyond the statutory list of activities comprising
``commercial development'' because we are mindful of imposing
additional costs resulting from adopting rules that extend beyond
Congress' clear directive.
---------------------------------------------------------------------------

    \131\ See 15 U.S.C. 78m(q)(1)(A).
---------------------------------------------------------------------------

    As noted in the Proposing Release, the definition of ``commercial
development'' is intended to capture only activities that are directly
related to the commercial development of oil, natural gas, or minerals.
It is not intended to capture activities that are ancillary or
preparatory to such commercial development. Accordingly, we would not
consider a manufacturer of a product used in the commercial development
of oil, natural gas, or minerals to be engaged in the commercial
development of the resource. For example, in contrast to the process of
extraction, manufacturing drill bits or other machinery used in the
extraction of oil would not fall within the definition of commercial
development.
    In response to commentators' requests for clarification of the
activities covered by the final rules, we also are providing examples
of activities covered by the terms ``extraction,'' ``processing,'' and
``export.'' We note, however, that whether an issuer is a resource
extraction issuer will depend on its specific facts and circumstances.
    As we noted in the Proposing Release, ``extraction'' includes the
production of oil and natural gas as well as the extraction of
minerals. Under the final rules, ``processing'' includes field
processing activities, such as the processing of gas to extract liquid
hydrocarbons, the removal of impurities from natural gas after
extraction and prior to its transport through the pipeline, and the
upgrading of bitumen and heavy oil. Processing also includes the
crushing and processing of raw ore prior to the smelting phase. We do
not believe that ``processing'' was intended to include refining or
smelting,\132\ and we note that refining and smelting are not
specifically listed in Section 13(q). In addition, as some commentators
noted, including refining or smelting within the final rules under
Section 13(q) would go beyond what is currently contemplated by the
EITI, which does not include refining and smelting activities.\133\
---------------------------------------------------------------------------

    \132\ The Commission's oil and gas disclosure rules identify
refining and processing separately in the definition of ``oil and
gas producing activities,'' which excludes refining and processing
(other than field processing of gas to extract liquid hydrocarbons
by the company and the upgrading of natural resources extracted by
the company other than oil or gas into synthetic oil or gas). See
Rule 4-10(a)(16)(ii) of Regulation S-X [17 CFR 210.4-10(a)(16)(ii)]
and note 108. In addition, we note that in another statute adopted
by Congress, the Sudan Accountability and Divestment Act of 2007
(SADA), relating to resource extraction activities, the statute
specifically identifies ``processing'' and ``refining'' separately
in defining ``mineral extraction activities'' and ``oil-related
activities.'' 110 P.L. No. 174 (2007). Specifically, Section 2(7) of
SADA defines ``mineral extraction activities'' to mean ``exploring,
extracting, processing, transporting, or wholesale selling of
elemental minerals or associated metal alloys or oxides (ore) * *
*.'' Section 2(8) of SADA defines ``oil-related activities'' to mean
in part ``exporting, extracting, producing, refining, processing,
exploring for, transporting, selling, or trading oil * * *.'' The
inclusion of ``processing'' and ``refining'' in SADA, in contrast to
the language of Section 13(q), suggests that the terms have
different meanings. Absent designation by the Commission, we do not
believe that ``refining'' was intended to be included in the scope
of the express terms in Section 13(q).
    \133\ See, e.g., letters from API and NMA 2.
---------------------------------------------------------------------------

    We believe that ``export'' includes the export of oil, natural gas,
or minerals from the host country. We disagree with those commentators
who maintained that ``export'' means the removal of the resource from
the place of extraction to the refinery, smelter, or first marketable
location.\134\ Adopting such a definition would be contrary to the
plain meaning of export,\135\ and nothing in Section 13(q) or the
legislative history suggests that Congress meant ``export'' to have
such a meaning; \136\ thus, we believe such a definition would be
contrary to the intent of Section 13(q). We also are not persuaded by
the argument presented by some commentators \137\ that the final rules
should be limited only to upstream activities because the reference in
the title of Section 13(q) to ``Resource Extraction Issuers''
demonstrates Congressional intent that the statute should apply only to
issuers engaged in extractive activities.\138\ Accordingly, under the
final rules, ``commercial development'' includes the export of oil,
natural gas, or minerals and, therefore, the definition of

``resource extraction issuer'' will capture an issuer that engages in
the export of oil, natural gas, or minerals. We note that these
definitions could require companies that may only be engaged in
exporting oil, natural gas, or minerals and that may not have engaged
in exploration, extraction, or processing of those resources to provide
payment disclosure.
---------------------------------------------------------------------------

    \134\ See notes 111 and 112 and accompanying text.
    \135\ For example, Merriam-Webster dictionary defines ``export''
to mean ``to carry or send (as a commodity) to some other place (as
another country).'' Merriam-Webster Dictionary, http://www.merriam-webster.com/dictionary/export (last visited August 15, 2012). See
also letters from CRS, Global Financial Integrity 2, and PWYP 1
(stating that exclusion of export activities would be inconsistent
with plain language of statute).
    \136\ See note 118 and accompanying text.
    \137\ See note 105 and accompanying text.
    \138\ The statutory definition of ``commercial development''
includes activities, such as processing and export, that go beyond
mere extractive activities. In this regard, we note that ``the title
of a statute and the heading of a section cannot limit the plain
meaning of the text * * *. For interpretative purposes, they are of
use only when they shed light on some ambiguous word or phrase. They
are but tools available for the resolution of a doubt. But they
cannot undo or limit that which the text makes plain.'' Brotherhood
of Railroad Trainmen v. Baltimore & Ohio Railroad Co., 331 U.S. 519,
528-29 (1947); see also Intel Corporation v. Advanced Micro Devices,
Inc., 542 U.S. 241, 256 (2004) (quoting Trainmen).
---------------------------------------------------------------------------

    Consistent with the proposal, the definition of ``commercial
development'' in the final rules does not include transportation in the
list of covered activities.\139\ Section 13(q) does not include
transportation in the list of activities covered by the definition of
``commercial development.'' In addition, including transportation
activities within the final rules under Section 13(q) would go beyond
what is currently contemplated by the EITI, which focuses on
exploration and production activities and does not explicitly include
transportation activities.\140\ Thus, the final rules do not require a
resource extraction issuer to disclose payments made for transporting
oil, natural gas, or minerals for a purpose other than export.\141\ As
recommended by several commentators, transportation activities
generally would not be included within the definition \142\ unless
those activities are directly related to the export of the oil, natural
gas, or minerals. For example, under the final rules, transporting a
resource to a refinery or smelter, or to underground storage prior to
exporting it, would not be considered ``commercial development,'' and
therefore, an issuer would not be required to disclose payments related
to those activities.
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    \139\ Adopting a definition of ``commercial development'' that
does not include transport activities other than in connection with
export is consistent with the EITI, which generally does not require
the disclosure of transportation-related payments. See Implementing
the EITI, at 35.
    \140\ See letters from API 1, ExxonMobil 1, and NMA 2.
    \141\ In addition, we note that Section 13(q) does not include
transporting in the list of covered activities, unlike another
federal statute--the SADA--that specifically includes
``transporting'' in the definition of ``oil and gas activities'' and
``mineral extraction activities.'' The inclusion of ``transporting''
in SADA, in contrast to the language of Section 13(q), suggests that
the term was not intended to be included in the scope of Section
13(q).
    \142\ See, e.g., letters from API, Barrick Gold, National Fuel,
and NMA 2.
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    In an effort to emphasize substance over form or characterization
and to reduce the risk of evasion, as discussed in more detail below,
we are adding an anti-evasion provision to the final rules.\143\ The
provision requires disclosure with respect to an activity or payment
that, although not in form or characterization of one of the categories
specified under the final rules, is part of a plan or scheme to evade
the disclosure required under Section 13(q).\144\ Under this provision,
a resource extraction issuer could not avoid disclosure, for example,
by re-characterizing an activity that would otherwise be covered under
the final rules as transportation.
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    \143\ See Section II.D.1.c.
    \144\ See Instruction 9 to Item. 2.01 of Form SD.
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    Consistent with the proposal, the definition of ``commercial
development'' in the final rules would not include marketing in the
list of covered activities. Section 13(q) does not include marketing in
the list of activities covered by the definition of ``commercial
development.'' In addition, including marketing activities within the
final rules under Section 13(q) would go beyond what is currently
contemplated by the EITI, which focuses on exploration and production
activities and does not include marketing activities.\145\ Thus, the
final rules do not include marketing in the list of covered activities
in the definition of ``commercial development.'' \146\
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    \145\ See letters from API 1 and ExxonMobil 1.
    \146\ For similar reasons, the definition of ``commercial
development'' does not include activities relating to security
support. See Section II.D. below for a related discussion of
payments for security support.
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D. Definition of ``Payment''

    Section 13(q) defines ``payment'' to mean a payment that:
     Is made to further the commercial development of oil,
natural gas, or minerals;
     Is not de minimis; and
     Includes taxes, royalties, fees (including license fees),
production entitlements, bonuses, and other material benefits, that the
Commission, consistent with EITI's guidelines (to the extent
practicable), determines are part of the commonly recognized revenue
stream for the commercial development of oil, natural gas, or minerals.
1. Types of Payments
a. Proposed Rules
    In the Proposing Release, we explained that we interpret Section
13(q) to provide that the types of payments that are included in the
statutory language should be subject to disclosure under our rules to
the extent the Commission determines that the types of payments and any
``other material benefits'' are part of the ``commonly recognized
revenue stream for the commercial development of oil, natural gas, or
minerals.'' Consistent with Section 13(q), we proposed to require
resource extraction issuers to disclose payments of the types
identified in the statute because of our preliminary belief that they
are part of the ``commonly recognized revenue stream for the commercial
development of oil, natural gas, or minerals.'' We noted that the types
of payments listed in Section 13(q) generally are consistent with the
types of payments the EITI suggests should be disclosed and expressed
our belief that this is evidence that the payment types are part of the
commonly recognized revenue stream. As noted above, Section 13(q)
provides that our determination should be consistent with the EITI's
guidelines, to the extent practicable. Therefore, we are including all
the payments listed above in the final rules because they are included
in the EITI, which indicates they are part of the commonly recognized
revenue stream. Guidance for implementing the EITI suggests that a
country's disclosure requirements might include the following benefit
streams: \147\ Production entitlements; profits taxes; royalties;
dividends; bonuses, such as signature, discovery, and production
bonuses; fees, such as license, rental, and entry fees; and other
significant benefits to host governments, including taxes on corporate
income, production, and profits but excluding taxes on
consumption.\148\
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    \147\ Under the EITI, benefit streams are defined as being any
potential source of economic benefit which a host government
receives from an extractive industry. See EITI Source Book, at 26.
    \148\ EITI Source Book, at 27-28.
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    We did not propose specific definitions for each payment type,
although we stated that fees and bonuses identified as examples in the
EITI would be covered by the proposed rules. In addition, we provided
an instruction to the rules to clarify the taxes a resource extraction
issuer would be required to disclose. Under the proposal, resource
extraction issuers would have been required to disclose taxes on
corporate profits, corporate income, and production, but would not have
been required to disclose taxes levied on consumption, such as value
added taxes, personal income taxes, or sales taxes, because consumption
taxes are not typically disclosed under the EITI. We did not propose
any other ``material benefits'' that should be disclosed. Thus, we did
not propose to require disclosure of dividends, payments for
infrastructure improvements, or social or community payments because
those types of payments are not included in the statutory list of
payments. We recognized that it may be appropriate to

provide more specific guidance about the particular payments that
should be disclosed. We requested comment intended to elicit detailed
information about what types of payments should be included in, or
excluded from, the rules; what additional guidance may be helpful or
necessary; and whether there are ``other material benefits'' that
should be specified in the list of payments subject to disclosure
because they are part of the commonly recognized revenue stream for the
commercial development of oil, natural gas, or minerals.
b. Comments on the Proposed Rules
    Several commentators supported the proposal and stated that it was
not necessary to provide further guidance regarding the types of
payments covered or to define ``other material benefits'' that are part
of the commonly recognized revenue stream for the commercial
development of oil, natural gas, or minerals.\149\ Those commentators
noted that the proposed types of payments were largely consistent with
the benefit streams listed in the EITI Source Book and represented the
commonly recognized revenue stream for the commercial development of
oil, natural gas, or minerals. Another commentator agreed the payment
types should be based on the benefit streams outlined in the EITI
Source Book, and suggested that we provide some limited guidance on the
types of payments that should be disclosed to ``ensure consistency of
presentation and to facilitate the interpretation of the rules.'' \150\
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    \149\ See letters from API 1, Chevron, ExxonMobil 1, NMA 2,
PetroChina, RDS 1, and Statoil.
    \150\ See letter from BP 1.
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    Several other commentators, however, urged the Commission to adopt
a broader, more detailed, and non-exhaustive list of payment
types.\151\ For example, in addition to the statutory list of payments,
some commentators suggested the rule specify as fees required to be
disclosed a wide range of fees, including concession fees, entry fees,
leasing and rental fees, which are covered under the EITI, as well as
acreage fees, pipeline and other transportation fees, fees for
environmental, water and surface use, land use, and construction
permits, customs duties, and trade levies.\152\ Other commentators
opposed the disclosure of any fees or permits that are not unique to
the resource extraction industry or that represent ordinary course
payments for goods and services to government-owned entities acting in
a commercial capacity.\153\
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    \151\ See letters from Calvert, CRS, Earthworks, Global Witness
1, Le Billon, ONE, PWYP 1, TIAA, and WRI.
    \152\ See letters from Earthworks (supporting PWYP), CRS, Global
Witness 1, Le Billon, ONE, PWYP pre-proposal, and PWYP 1.
    \153\ See letters from Cleary and Vale.
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    Some commentators agreed that, as proposed, resource extraction
issuers should have to disclose taxes on corporate profits, corporate
income, and production, but should not be required to disclose taxes
levied on consumption.\154\ Commentators expressed concern, however,
that because corporate income taxes are measured at the entity level,
it would be difficult to derive a disaggregated, per project amount for
those tax payments.\155\ A couple of those commentators noted that
compounding this difficulty is the fact that the total amount of income
tax paid is a net amount reflecting tax credits and other tax
deductions included under commercial arrangements with the host
government. Tax credits and deductions may result from offsetting
results from one set of projects against credits and deductions of
other projects, according to some commentators, and therefore deriving
an income tax payment by individual project would be very
difficult.\156\ Other commentators opposed requiring the disclosure of
payments for corporate income taxes because those payments are
generally applicable to any business activity and are not specifically
made to further the commercial development of oil, natural gas, or
minerals.\157\ Still other commentators believed that issuers should
have to disclose payments for consumption and other types of taxes,
including value added taxes, withholding taxes, windfall or excess
profits taxes, and environmental taxes.\158\ One commentator believed
consumption and other taxes should be disclosed to the extent they are
``discriminatory taxes targeted at specific industries, as opposed to
taxes of general applicability.'' \159\
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    \154\ See letters from API 1, ExxonMobil 1, NMA 2, and RDS 1.
    \155\ See letters from API 1, BHP Billiton, BP 1, ExxonMobil 1,
IAOGP, Petrobras, Statoil, and Talisman.
    \156\ See letters from API 1 and ExxonMobil 1.
    \157\ See letters from Akin Gump Strauss Hauer & Feld LLP (March
2, 2011) and Cleary.
    \158\ See letters from Barrick Gold, Earthworks, and PWYP 1.
    \159\ Letter from AngloGold.
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    Several commentators requested expansion of the proposed list of
payment types to include specifically at least those types typically
disclosed under the EITI, such as signature, discovery, and production
bonuses, and dividends.\160\ With regard to dividends, commentators
noted that a government or government-owned company often owns shares
in a holding company formed to develop and produce resources.\161\ In
those situations, an issuer may pay dividends to the government or
government-controlled company in lieu of royalties or production
entitlements.\162\ One commentator further stated that, unlike the
equity share that a private operator would enjoy, in those situations
the government participates on a preferential basis not available to
other entities.\163\ According to commentators, dividends paid to the
government or government-owned company in those situations would be a
material benefit, reportable under the EITI, and part of the commonly
recognized revenue stream for the commercial development of oil,
natural gas, or minerals.\164\ Focusing on the mining industry, one
commentator explained that ``[o]wnership in the share capital of a
holding company that owns a mine is an alternative structure to a
production entitlement or royalty interest, and dividends paid are part
of the commonly recognized revenue stream for the commercial
development of oil, natural gas, or minerals.'' \165\
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    \160\ See letters from AngloGold, Barrick Gold, ERI 1,
Earthworks, ExxonMobil 1, Global Witness 1, ONE, and PWYP 1.
    \161\ See letters from API 1, AngloGold, ERI 1, and ExxonMobil
1.
    \162\ See letters from AngloGold and ERI 1.
    \163\ See letter from ERI 1. This commentator noted that a
significant portion of the revenue recognized by the government in
such cases comes from its ``equity stake in the operation--often
known as the production share--or from dividends.''
    \164\ See letters from API 1, AngloGold, ExxonMobil 1, and PWYP
1.
    \165\ See letter from AngloGold.
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    Other commentators, however, opposed requiring disclosure of
dividend payments.\166\ According to one commentator, dividends are
indirect payments that are outside the core elements of the revenue
stream for the commercial development of oil, natural gas or minerals,
and therefore should be excluded.\167\ Another commentator opposed the
inclusion of dividends because of its belief that dividend payments are
not generally associated with a particular project.\168\ A third
commentator believed that, because ``the term `dividends' relates to
amounts received by the host country government as a shareholder in a
state enterprise[,]'' dividend payments ``essentially are inter-
governmental transfers'' and therefore are more

appropriately reported by the government in an EITI reporting
country.\169\
---------------------------------------------------------------------------

    \166\ See letters from NMA 2, RDS 1, and Statoil.
    \167\ See letter from Statoil.
    \168\ See letter from RDS 1.
    \169\ Letter from NMA 2.
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    Many commentators supported the inclusion of in-kind payments,
particularly in connection with production entitlements.\170\ A couple
of commentators requested that the Commission add language to the rule
text to make explicit that issuers would be permitted to report
payments in cash or in kind.\171\ Another commentator stated that the
Commission should provide instructions concerning how to disclose a
production entitlement in kind, including which unit of measure to use,
whether to provide a monetary value, and, if so, which currency to
use.\172\ A couple of commentators suggested allowing companies to
report the payments at cost or, if not determinable, at fair market
value.\173\
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    \170\ See letters from API 1, AngloGold, Barrick Gold, ERI 1, EG
Justice (March 29, 2011), ExxonMobil 1, HURFOM 1, Le Billon, NMA 2,
Petrobras, RDS 1, TIAA, and WRI. One commentator noted that payments
in kind for ``infrastructure barter deals'' have greatly increased
over the past decade. See letter from Le Billon.
    \171\ See letters from ERI 1 and NMA 2.
    \172\ See letter from Petrobras.
    \173\ See letters from AngloGold and NMA 2. NMA also suggested
requiring companies to report in-kind payments in the currency of
the country in which it is made and not requiring conversion of all
payments to the reporting currency.
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    Some commentators did not believe that we need to further identify
``other material benefits'' that are part of the commonly recognized
revenue stream for the commercial development of oil, natural gas, or
minerals.\174\ Other commentators, however, either urged us to provide
a broad, non-exclusive definition of ``other material benefits'' or to
specify that certain types of payments should be included under that
category because they are part of the commonly recognized revenue
stream.\175\
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    \174\ See letters from API 1, ExxonMobil 1, PetroChina, and RDS
1.
    \175\ See, e.g., letters from AngloGold, Barrick Gold, ERI 1,
Earthworks, Global Witness 1, ONE, PWYP 1, Sen. Levin 1, and WRI.
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    Some commentators suggested that ``other material benefits'' should
include payments for infrastructure improvements because natural
resources are frequently located in remote or undeveloped areas, which
requires resource extraction issuers, particularly mining companies, to
make payments for infrastructure improvements that are generally viewed
as part of the cost of doing business in those areas.\176\ One
commentator stated that payments for infrastructure improvements should
be considered part of the commonly recognized revenue stream to the
extent that they constitute part of the issuer's overall relationship
with the government according to which the issuer engages in the
commercial development of oil, natural gas, or minerals, while
voluntary payments for infrastructure improvements should be
excluded.\177\ Another commentator believed that payments for
infrastructure improvements should be disclosed even if not required by
contract if an issuer undertakes them to build goodwill with the local
population.\178\
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    \176\ See, e.g., letters from ERI 1, Global Witness 1, and PWYP
1.
    \177\ See letter from AngloGold.
    \178\ See letter from ERI 1.
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    Other commentators opposed requiring the disclosure of payments for
infrastructure improvements.\179\ One commentator maintained that
voluntary payments for infrastructure improvements should not be
covered by the rules because they do not constitute part of the
commonly recognized revenue stream for the commercial development of
oil, natural gas, or minerals.\180\ Other commentators acknowledged
that infrastructure improvements are often funded by issuers as part of
the commercial development of oil and gas resources, but those
commentators nevertheless believed that such payments should be
excluded because they are typically not material compared to the
primary types of payments required to be disclosed under Section
13(q).\181\ Another commentator stated that payments for infrastructure
improvements are of a de minimis nature compared to the overall costs
of the commercial development of oil, natural gas, or minerals and, in
many cases, are paid to private parties and not to government
agencies.\182\
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    \179\ See letters from API 1, ExxonMobil 1, NMA 2, RDS 1, and
Statoil.
    \180\ See letter from NMA 2.
    \181\ See letters from API 1 and ExxonMobil 1. See also letter
from Statoil (stating that payments for infrastructure improvements
are indirect payments that are not part of the core elements of the
revenue stream for the commercial development of oil, natural gas,
or minerals).
    \182\ See letter from RDS 1.
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    Several commentators recommended defining ``other material
benefits'' to include social or community payments related to, for
example, improvements of a host country's schools, hospitals, or
universities.\183\ While some commentators believed that, at a minimum,
social or community payments should be included if required under the
investment contract or the law of the host country,\184\ other
commentators suggested that voluntary social or community payments
should be included as ``other material benefits'' because they
represent an in-kind contribution to the state that, given their
frequency, constitute part of the commonly recognized revenue stream of
resource extraction.\185\ One commentator noted that the Board of the
EITI approved a revision to the EITI rules that would encourage EITI
participants to disclose social payments that are material.\186\ Some
commentators also sought to include within the scope of ``other
material benefits'' other types of payments, such as payments for
security, personnel training, technology transfer, and local content
and supply requirements, if required by the production contract.\187\
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    \183\ See letters from AngloGold, Barrick Gold, ERI 1,
Earthworks, EG Justice, ONE, PWYP 1, Sen. Levin 1, and WRI.
    \184\ See letters from AngloGold, EG Justice (noting that in at
least one country, Equatorial Guinea, companies engaged in upstream
oil activities are required by that country's hydrocarbons law to
invest in the country's development), ONE, and PWYP 1.
    \185\ See letters from Barrick Gold, ERI 1, Earthworks, and WRI.
    \186\ See letter from PWYP 1.
    \187\ See, e.g., letters from ERI 1, Global Witness 1, and PWYP
1.
---------------------------------------------------------------------------

    Several other commentators, however, maintained that social or
community payments or other ancillary payments are considered indirect
benefits under EITI guidelines, are typically not material, and
therefore are not part of the commonly recognized revenue stream for
the commercial development of oil, natural gas, or minerals.\188\
Another commentator stated that payments for social and community needs
and ancillary payments should be excluded from the final rules unless
they are expressly required by the concession contract, law, or
regulation.\189\
---------------------------------------------------------------------------

    \188\ See letters from API 1, ExxonMobil 1, PetroChina, RDS 1,
and Statoil.
    \189\ See letter from NMA 2.
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c. Final Rules
    While we are adopting the list of payment types largely as
proposed, we are making some additions and clarifications to the list
of payment types in response to comments. Specifically, the final rules
are consistent with the definition of payment in Section 13(q) and
state that the term ``payment'' includes:
     Taxes;
     Royalties;
     Fees;
     Production Entitlements;
     Bonuses;
     Dividends; and

     Payments for infrastructure improvements.\190\
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    \190\ Under Section 13(q) and the final rules, the term
``payment'' is defined as a payment that is not de minimis, that is
made to further the commercial development of oil, natural gas, or
minerals, and includes specified types of payments. Thus, in
determining whether disclosure is required, resource extraction
issuers will need to consider whether they have made payments that
fall within the specified types and otherwise meet the definition of
payment.
---------------------------------------------------------------------------