located. Not all of the assets located in these host countries might
be related to resource extraction payments, which disclosure can
trigger their sale or loss; however, we choose the conservative
approach and err on the side of overestimating the losses.
---------------------------------------------------------------------------

    As we discuss above, we were able to identify a total of 49 issuers
that mentioned that they are active in these countries (some operate in
more than one country). The table below provides information from the
20 issuers, out of the 49 described above, that provide geographic
segment data detailed at the country level and that specifically
identify the value of assets in one of these four countries.\423\ We
expect that the actions in response to the foreign law prohibition and
the nature of costs that issuers might face would be different for
issuers domiciled in the United States and in foreign jurisdictions;
therefore, we consider these two types of filers separately.
---------------------------------------------------------------------------

    \423\ As noted above, we identified 49 issuers that discussed
their activities in at least one of the four countries, but only 20
of the issuers provided country-level geographic segment information
for those countries that was specific enough to use in our analysis
(some issuers may have determined that they were not required to
provide detailed information in their filings and others might not
have any assets in these countries). In the table, Country Assets
are defined as either Long-lived Assets, Identifiable Total Assets,
or Property, Plant & Equipment, whichever was disclosed; Country
Assets Fraction in Total Assets is Country Assets/Total Assets; and
Market Value Estimate of Country Assets is Country Assets Fraction
in Total Assets * Company Market Value, where Company Market Value
is calculated as Consolidated Company-Level Market Value of Common
Equity + Total Debt + Preferred Stock Liquidating Value - Deferred
Taxes and Investment Tax Credits if all these values were available.
For some issuers we were not able to identify their company-level
market values, and, thus, we were not able to determine their Market
Value Estimate of Country Assets. All Compustat data is the latest
annual data disclosed on or before the date of the company's 2014
Form 10-K or 20-F filing.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Country assets   Market value
                                              Domicile (business                          Country assets   Total assets     fraction in     estimate of
          Issuer               Form type           address)             Host country          ($ mil)         ($ mil)      total assets   country assets
                                                                                (percent)        ($ mil)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.........................            10-K  Foreign..............  China................            23.2            23.2           100.0  ..............
2.........................            10-K  Foreign..............  China................           309.2           309.2           100.0            93.8
3.........................            10-K  Foreign..............  China................           195.9           195.9           100.0            75.8
4.........................            10-K  Foreign..............  China................            25.1            25.1           100.0            19.5
5.........................            10-K  Foreign..............  China................            17.1            17.1           100.0            91.6
6.........................            20-F  Foreign..............  China................           499.6           499.6           100.0            82.2
7.........................            20-F  Foreign..............  China................         8,712.2        21,054.6            41.4  ..............
8.........................            20-F  Foreign..............  China................       276,542.6       386,889.0            71.5  ..............
9.........................            10-K  U.S..................  Angola...............         8,262.0       346,808.0             2.4         9,674.4
10........................            10-K  U.S..................  Angola...............            11.5           308.2             3.7            14.7
11........................            10-K  U.S..................  Cameroon.............           166.5         4,507.2             3.7           168.2
12........................            10-K  U.S..................  China................           388.0        35,742.0             1.1           209.5
13........................            10-K  U.S..................  China................           355.0         4,084.0             8.7           369.9
14........................            10-K  U.S..................  China................           542.0         9,321.0             5.8           343.5
15........................            10-K  U.S..................  China................           125.1           125.1           100.0            46.9
16........................            10-K  U.S..................  China................            96.5            96.5           100.0             1.5
17........................            10-K  U.S..................  China................         2,143.0       118,057.0             1.8         1,689.2
18........................            10-K  U.S..................  China................            15.0           845.2             1.8            28.8
19........................            10-K  U.S..................  China................            53.1         3,006.8             1.8            50.4

20........................            10-K  U.S..................  Qatar................         2,605.0        69,443.0             3.8         2,830.0
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The magnitude of potential total loss of assets in the host
countries is represented in the last column of the table, the estimated
market value of country assets. For the 12 issuers domiciled in the
United States that have assets in one of these four host countries, the
estimated total loss range is between $1.5 million and $9.7 billion,
with a median loss of $188.8 million. The aggregate fraction of total
assets that might be affected is 2.5%.\424\ We note that these
estimates apply only to issuers that have assets in one of the host
countries.
---------------------------------------------------------------------------

    \424\ Total assets of all U.S.-based firms located in these host
countries divided by total worldwide assets of the same firms.
---------------------------------------------------------------------------

    As shown in the table above, eight issuers have a foreign address
associated with their Form 10-K or 20-F filing. As we discussed above,
issuers that are domiciled in foreign countries might face different
types of costs. For example, they are more likely to decide it is
necessary to delist from an exchange in the United States, deregister,
and cease reporting with the Commission, thus incurring a higher cost
of capital and potentially limited access to capital in the future,
rather than to sell their assets abroad. Due to limited data
availability, we cannot reliably quantify these costs.
    Even though our analysis was limited to less than half of issuers
that are active in these four countries, these estimates suggest that
commenters' concerns about such host country laws potentially adding
billions of dollars of costs to affected issuers could be warranted.
Additional costs at that scale could have a significant impact on
resource extraction issuers' profitability and competitive position.
The analysis above assumes that a total loss of assets located in the
host countries would occur. In a more likely scenario, however, these
issuers would be forced to sell their assets in the above-mentioned
host countries at fire sale prices. While we do not have data on fire
sale prices for the industries of the affected issuers, economic
studies on fire sales of real assets in other industries could provide
some estimates to allow us to quantify the potential costs to affected
issuers from having to sell assets at fire sale prices. For example, a
study on the airline industry finds that planes sold by financially
distressed airlines bring 10 to 20 percent lower prices than those sold
by undistressed airlines.\425\ Another study on aerospace plant
closings finds that all groups of equipment sold for significant
discounts relative to estimated replacement cost.\426\ The discounts on
machine tools, instruments, and miscellaneous equipment were estimated
to be between 63 and 69 percent. The analysis also suggests that the
most specialized equipment appears to have suffered substantially
higher discounts than the least specialized equipment, which may be
relevant to the extractive industry to the extent that a project would
not have many potential alternative suitors should it need to be
disposed of due to a conflict between the proposed rules and foreign
laws. Other studies provide estimates of fire sale discounts for forced
house sales (about 3-7 percent for forced sales due to death or
bankruptcy and about 27 percent for foreclosures) \427\ and sales of
stand-alone private firms and subsidiaries (15-30 percent relative to
comparable public acquisition targets).\428\ These estimates suggest a
possible range for the fire sale discount from 3 to 69 percent.
---------------------------------------------------------------------------

    \425\ See Todd Pulvino 1998. ``Do Fire-Sales Exist? An Empirical
Study of Commercial Aircraft Transactions.'' Journal of Finance,
53(3): 939-78.
    \426\ See Ramey, V.A., Shapiro, M.D. 2001. ``Displaced Capital:
A Study of Aerospace Plant Closings.'' Journal of Political Economy,
109: 958-92.
    \427\ See Campbell, John Y., Stefano Giglio, and Parag Pathak
2011. ``Forced Sales and House Prices.'' American Economic Review,
101: 2108-31.
    \428\ See Officer, M.S. 2007. ``The Price of Corporate
Liquidity: Acquisition Discounts for Unlisted Targets.'' Journal of
Financial Economics, 83: 571-98.
---------------------------------------------------------------------------

    To understand how relevant these discounts are to the resource
extraction issuers affected by the rule, we examine the ease with which
real assets could be disposed of in different industries. If the forced
disposal of real assets is more easily facilitated in the resource
extraction industries compared to other industries (i.e., there is a
more liquid market for those assets), then the lower range of the fire
sale discounts will be more appropriate to estimate potential losses
due to the foreign law prohibitions. We measure the ease with which
issuers in a given industry could sell their assets by a liquidity
index.\429\ The index is defined as the ratio of the value of corporate
control transactions \430\ in a given year to the total book value of
assets of firms in the industry for that year. We believe that this
ratio captures the general liquidity of assets in an industry because
it measures the volume of the type of transactions that companies rely
on when divesting real assets. Additionally, one economic study finds
that the liquidity of the market for corporate assets, as measured by
the liquidity index, plays an important role in explaining assets
disposals by companies.\431\
---------------------------------------------------------------------------

    \429\ See Frederic Schlingemann, Rene Stulz, and Ralph Walkling
2002. ``Divestitures and the Liquidity of the Market for Corporate
Assets.'' Journal of Financial Economics, 64: 117-144. The index
value is between 0 and 1. A higher value of the index for an
industry indicates that this is an industry with a more liquid
market for corporate assets and a firm in that industry would be
able to sell its real assets easier and at smaller loss than a firm
in an industry with a lower liquidity index.
    \430\ As corporate control transactions, we consider all
completed or pending leveraged buyouts, tender offers, spinoffs,
exchange offers, minority stake purchases, acquisitions of remaining
interest, privatizations, and equity carve-outs of U.S. targets. We
exclude buybacks (e.g., repurchases and self-tenders) from the
sample. Data on these transactions comes from Thomson Financial's
Mergers & Acquisitions and New Issues databases. Data on the book
value of total assets is taken from Compustat.
    \431\ See Frederic Schlingemann, Rene Stulz, and Ralph Walkling
2002. ``Divestitures and the Liquidity of the Market for Corporate
Assets.'' Journal of Financial Economics, 64: 117-144.
---------------------------------------------------------------------------

    We note, however, that the index, as constructed, will also reflect
the industry's typical financial leverage, not just the liquidity of
its assets. To the extent that different industries have different
leverages, these differences in leverage could explain some of the
cross-industry variation of the index. Additionally, the index measures
the ease with which ownership of assets is changed over the time period
under consideration. Hence, the index is expected to adjust to
intertemporal changes in the ease with which assets in a certain
industry can be disposed of, which is important because it is well-
established that control transactions tend to be cyclical in
nature.\432\
---------------------------------------------------------------------------

    \432\ Gregor Andrade, and Erik Stafford, 2004. ``Investigating
the economic role of mergers.'' Journal of Corporate Finance 10: 1-
36.
---------------------------------------------------------------------------

    We construct the index for all industries, identified by three-
digit SIC codes. For each industry, after

estimating the value of the index in each year during the period 2010-
2014, we calculate the average over the five year period. Several
industries have a liquidity index greater than 1; in those cases we cap
the index level at 1.
    The table below presents summary statistics for the liquidity index
for all industries and the resource extraction industries during the
period 2010-2014.

------------------------------------------------------------------------
                                                             Index value
------------------------------------------------------------------------
All other industries:
  Mean.....................................................         0.11
  Median...................................................         0.03
  Top quartile.............................................         0.09
  Bottom quartile..........................................         0.01
Industries with similar financial leverage:
  Mean.....................................................         0.08
  Median...................................................         0.02
  Top quartile.............................................         0.10
  Bottom quartile..........................................         0.01
Resource extraction issuers:
  Mean.....................................................         0.02
  Median...................................................         0.01
------------------------------------------------------------------------

    The results in the table show that the liquidity of real assets in
the resource extraction industries is low (an average liquidity index
of 0.02) compared with the liquidity in other industries (an average
liquidity index of 0.11). That is, it is harder to dispose of assets in
the extractive industries relative to other industries. In fact, the
liquidity index of resource extraction industries is in the lowest
quartile of the distribution of the index for all industries. As
mentioned above, this could reflect the fact that resource issuers have
higher financial leverage than other industries. All other things being
equal, higher financial leverage will result in a lower liquidity
index. To control for the effects of financial leverage, we compare the
liquidity index of resource extraction industries to that of industries
with similar leverage.\433\ As the results of this comparison show,
resource extraction industries have lower liquidity index values even
when compared to industries with similar levels of financial leverage:
A median of 0.01 for the resource extraction industries compared to a
median of 0.02 for industries with similar financial leverage.\434\
This suggests that affected issuers may still experience difficulty in
disposing of some of their real assets relative to other industries
with similar leverage levels when a need arises. It should be noted,
however, that the liquidity index estimates the liquidity of the real
assets at the industry level, not at the level of a country with
disclosure prohibition laws. It is possible that in some of these
countries the ability of an affected issuer to dispose of assets could
be more or less constrained than that at the industry level.
---------------------------------------------------------------------------

    \433\ We first estimate the median market leverage of the
resource extraction industries during the period 2010-2014. Market
leverage is defined as the ratio Total debt/(Total debt + Market
value of equity). We then classify as similar those industries whose
median market leverage that is within -/+ 10% of the median market
leverage of the resource industries for the same time period, There
are six industries that are similar to the resource extraction
industries based on this criterion. Data on total debt and market
value of equity comes from Compustat.
    \434\ We note that many factors may drive the choice of leverage
within a given industry, and some of these factors may also affect
the industry's liquidity index. Thus, the industries that have
leverage that is similar to that of the resource extraction
industries may be very different in some other aspects (e.g., growth
opportunities or intensity of competition) and that could explain
the differences in their liquidity indices and the liquidity index
of the resource extraction industries.
---------------------------------------------------------------------------

    Because we lack data to construct the liquidity index at the
country level, we cannot quantify the liquidity of the single-country
market for real assets. The table below lists the number of corporate
control transactions in each of the four countries under consideration
from 2010 through 2014, broken down by type of industry.\435\ As seen
from the table, China is by far the most active market for corporate
control transactions among the four countries, although on a percentage
basis more deals involving resource extraction industries occur in
Angola, Cameroon, and Qatar. Although the number of relevant
transactions gives some indication of how liquid the market in each
country is, without knowing the size of the discounts and the types of
companies involved in these deals (e.g., small or large) we cannot
conclusively say in which country the cost associated with fire sale
prices would be lower. These costs would likely depend on country-level
factors such as a country's regulatory framework governing such
transactions (e.g., how quickly a transaction can get approved), the
degree of competition in the resource extraction industry, availability
of capital (e.g., availability and cost of debt and stock market
valuations), and changes in currency exchange rates. For example, a
recent study documents that companies from countries whose stock market
has increased in value and whose currency has recently appreciated are
more likely to be purchasers of corporate assets.\436\ In a certain
country, a more competitive resource extraction industry is likely to
be associated with lower fire sale discounts.
---------------------------------------------------------------------------

    \435\ Corporate control transactions are defined as in footnote
430. Data on the transactions comes from Thomson Financial's Mergers
& Acquisitions.
    \436\ See Isil Erel, Rose Liao, and Michael Weisbach 2012.
``Determinants of Cross-Border Mergers and Acquisitions,'' Journal
of Finance 67: 1045-82.

------------------------------------------------------------------------
                                                             Number of
                                                           transactions
                         Country                             (% of all
                                                           transactions)
------------------------------------------------------------------------
Angola:
  Resource extraction industries........................         6 (54%)
  All other industries..................................         7 (46%)
Cameroon:
  Resource extraction industries........................        10 (63%)
  All other industries..................................         6 (37%)
China:
  Resource extraction industries........................        885 (6%)
  All other industries..................................    14,304 (94%)
Qatar:
  Resource extraction industries........................          5 (8%)
  All other industries..................................        54 (92%)
------------------------------------------------------------------------

    Given the lower liquidity of the market for the real assets of
resource extraction issuers, we believe that the upper limit of the
fire sale discount range would be more appropriate when estimating the
fire sale prices at which affected issuers could dispose of their
assets in countries with disclosure prohibition laws, should such need
arise. If we apply those discount percentages to the market value of
the issuers' assets in these host countries, this would reduce our
estimates of their potential losses. For the U.S.-based issuers, if we
apply the highest discount of 69 percent, the range of losses would be
between $1 million and $6.7 billion, with a median loss of $130.3
million. If the true fire sale discounts in the countries with
disclosure prohibition laws are lower than our highest estimate, the
losses of affected issuers would be lower. In addition to the dollar
costs, the process of disposing of assets could involve substantial
time, which could further increase the total cost of the restructuring.
We acknowledge, however, that the fire sale discount estimates are
based on data from other industries that are very different from the
industries of affected issuers. Thus, our estimates may not accurately
reflect the true fire sale discounts that affected issuers could face.
    Alternatively, an issuer could redeploy these assets to other
projects that would generate cash flows. If an issuer could redeploy
these assets relatively quickly and without a significant cost to
projects that generate similar rates of returns as those in the above-
mentioned countries, then the issuer's loss from the presence of such
host country laws would be minimal. The more difficult and costly it is
for an

issuer to do so, and the more difficult it is to find other projects
with similar rates of return, the larger the issuer's losses would be.
However, we do not have enough data to quantify more precisely the
potential losses of issuers under those various circumstances.
Likewise, if there are multiple potential buyers (e.g., companies not
subject to the proposed rules, the EU Directives, or ESTMA), and if the
issuer could sell those assets to one of such buyers, then the buyer
might pay the fair market value for those assets, resulting in minimal
to no loss for the issuer.
    Overall, the results of our analysis are consistent with
commenters' assertions that the presence of host country laws that
prohibit the type of disclosure required under the proposed rules could
be costly, although, as mentioned in the above paragraph, in some
instances there may be mitigating factors that could decrease those
costs. It is also possible that under certain circumstances affected
issuers could lose 100% of their assets in a given country. The size of
the potential loss to issuers would depend on the presence of other
similar opportunities, third parties willing to buy the assets at fair-
market values in the above-mentioned host countries, and the ability of
issuers to avoid fire sales of these assets. Finally, as we discussed
above at the beginning of this section, a number of other factors
should substantially mitigate the competitive burdens arising from the
required disclosure, including our intent to consider exemptive relief
on a case-by-case basis.
2. Alternative Reporting
    In a change from the 2012 Adopting Release, the proposed rules
would allow resource extraction issuers subject to a foreign
jurisdiction's resource extraction payment disclosure requirements that
we have determined are substantially similar to our requirements to
satisfy their filing obligations by filing the report required by that
foreign jurisdiction with the Commission. This proposed approach would
decrease the compliance costs for issuers that are cross-listed or
incorporated in a foreign jurisdiction and have to satisfy at least one
similar foreign disclosure requirement. Those issuers would save on
compliance costs associated with filing a Form SD pursuant to Section
13(q). We estimated above that approximately 268 issuers would be
subject to other regulatory regimes that may allow them to utilize the
proposed provision.\437\
---------------------------------------------------------------------------

    \437\ These are issuers that have a business address, are
incorporated, or are listed on markets in the EEA or Canada and that
have to provide similar disclosure to the European or Canadian
authorities.
---------------------------------------------------------------------------

    As an alternative, we could have decided not to propose such a
provision. Such an alternative would have increased the compliance
costs for issuers that are subject to similar foreign disclosure
requirements. These issuers would have to comply with multiple
disclosure regimes and bear compliance costs for each regime, although
it is possible that the marginal costs for complying with an additional
disclosure regime would not be high given the potential similarities
that may exist between these reporting regimes and the final rules that
we may adopt.
3. Definition of Control
    Section 13(q) requires resource extraction issuers to disclose
payments made by a subsidiary or entity under the control of the
issuer. As discussed above in Section II.D above, we are proposing
rules that would define the term ``control'' based on accounting
principles. Alternatively, we could have used a definition based on
Exchange Act Rule 12b-2 as in the 2012 Rules.\438\ We believe that the
approach we are proposing would be less costly for issuers to comply
with because issuers are currently required to apply the definition on
at least an annual basis for financial reporting purposes. Using a
definition based on Rule 12b-2 would require issuers to undertake an
additional process to the one currently required for financial
reporting purposes.\439\ In addition, there are several other benefits
from using the proposed definition based on accounting principles.
There would be audited financial statement disclosure of an issuer's
significant consolidation accounting policies in the footnotes to its
audited financial statements contained in its Exchange Act annual
reports, and an issuer's determination of control under the proposed
rules would be subject to the audit process as well as subject to the
internal accounting controls that issuers are required to have in place
with respect to reporting audited financial statements filed with the
Commission.\440\ All of these benefits may lead to more accurate,
reliable, and consistent reporting of subsidiary payments, therefore,
enhancing the quality of the reported data.
---------------------------------------------------------------------------

    \438\ See note 175 above and accompanying text.
    \439\ See note 179 above and accompanying text.
    \440\ See Section II.D above.
---------------------------------------------------------------------------

    Under the definition we adopted in the 2012 Rules, a resource
extraction issuer would have been required to make a factual
determination as to whether it has control of an entity based on a
consideration of all relevant facts and circumstances. This alternative
would have required issuers to engage in a separate analysis of which
entities are included within the scope of the required disclosures
(apart from the consolidation determinations made for financial
reporting purposes) and could have increased the compliance costs for
issuers compared to the approach we are proposing.
4. Definition of ``Commercial Development of Oil, Natural Gas, or
Minerals''
    As in the 2012 Rules, the proposed rules define ``commercial
development of oil, natural gas, or minerals'' to include exploration,
extraction, processing, and export, or the acquisition of a license for
any such activity. As described above, the rules that we are proposing
generally track the language in the statute. We are sensitive to the
fact that a broader definition of ``commercial development of oil,
natural gas, or minerals'' could increase issuers' costs. We are also
sensitive to the fact that expanding the definition in a way that is
broader than other reporting regimes could potentially lead to a
competitive disadvantage for those issuers covered only by our proposed
rules. Further, we recognize that limiting the definition to these
specified activities could potentially negatively affect those using
the payment information if disclosure about payments made for
activities not included in the list of specified activities, such as
refining, smelting, marketing, or stand-alone transportation services
(that is, transportation that is not otherwise related to export),
would be useful to users of the information.
    As noted above, to promote the transparency goals of Section 13(q),
the proposed rules include an anti-evasion provision that requires
disclosure with respect to an activity or payment that, although not in
form or characterization one of the categories specified under the
proposed rules, is part of a plan or scheme to evade the disclosure
required under Section 13(q).\441\ We recognize that adding this
requirement may increase the compliance costs for some issuers;
however, we believe this provision is appropriate in order to minimize
evasion and improve the effectiveness of the disclosure.
---------------------------------------------------------------------------

    \441\ See proposed Rule 13q-1(b).
---------------------------------------------------------------------------

    In response to commenters' request for clarification of the
activities covered by the proposed rules, we also are providing
guidance about the activities covered by the terms ``extraction,''
``processing,'' and ``export.'' The

guidance should reduce uncertainty about the scope of the activities
that give rise to disclosure obligations under Section 13(q) and the
related rules, and therefore should facilitate compliance and help
lessen the costs associated with the disclosure requirements.
5. Types of Payments
    As in the 2012 Rules, the proposed rules would add two categories
of payments to the list of payment types identified in the statute that
must be disclosed: Dividends and payments for infrastructure
improvements. We include these payment types in the proposed rules
because, based on the comments we have received, we believe they are
part of the commonly recognized revenue stream. For example, payments
for infrastructure improvements have been required under the EITI since
2011. Additionally, we note that the EU Directives and ESTMA also
require only these payment types to be disclosed. Thus, including
dividends and payments for infrastructure improvements (e.g., building
a road) in the list of payment types required to be disclosed under the
proposed rules would promote consistency with the EU Directives and
ESTMA and should improve the effectiveness of the disclosure, thereby
furthering international transparency promotion efforts. Including
dividends and payments for infrastructure improvements also could help
alleviate competitiveness concerns by potentially imposing disclosure
requirements on a wider range of issuers.
    As discussed earlier, under the proposed rules, resource extraction
issuers would incur costs to provide the payment disclosure for the
payment types identified in the statute. For example, there would be
costs to modify the issuers' core enterprise resource planning systems
and financial reporting systems so that they can capture and report
payment data at the project level, for each type of payment, government
payee, and currency of payment.\442\ The addition of dividends and
payments for infrastructure improvements to the list of payment types
for which disclosure is required may marginally increase some issuers'
costs of complying with the final rules. For example, issuers may need
to add these types of payments to their tracking and reporting systems.
We understand that these types of payments are more typical for mineral
extraction issuers than for oil issuers,\443\ and therefore only a
subset of the issuers subject to the final rules might be affected.
---------------------------------------------------------------------------

    \442\ See note 356 and accompanying text.
    \443\ See, e.g., letters from PWYP 1 and Global Witness 1; see
also Chapter 19 ``Advancing the EITI in the Mining Sector:
Implementation Issues'' by Sefton Darby and Kristian Lempa, in
Advancing the EITI in the Mining Sector: A Consultation with
Stakeholders (EITI 2009).
---------------------------------------------------------------------------

    The proposed rules do not require disclosure of certain other types
of payments, such as social or community payments. We recognize that
excluding those payments reduces the overall level of disclosure. We
have not, however, proposed requiring disclosure of those payments
because we do not believe they are part of the commonly recognized
revenue stream for the commercial development of oil, natural gas, or
minerals.\444\ In addition, by not including these types of payments,
the proposed rules avoid potentially imposing additional compliance
costs on issuers. We acknowledge that some issuers might characterize
some of their payments as social or community payments instead of other
types of payment with the intent of avoiding or obfuscating disclosure.
To the extent that such characterization is done for the purpose of
evading the proposed disclosure requirement, it would be a violation of
the anti-evasion provision discussed above.\445\ Alternatively, if such
payment is genuinely made for the benefit of the local community, it
could, in certain circumstances, support the statutory intent of
reducing corruption.
---------------------------------------------------------------------------

    \444\ We note that commenters disagreed on whether such payment
types are part of the commonly recognized revenue stream. See 2012
Adopting Release, n.185 and accompanying discussion (citing
commenters suggesting that social or community payments constitute
part of the commonly recognized revenue stream of resource
extraction) and 2012 Adopting Release, n.188 and accompanying
discussion (citing commenters maintaining that social or community
payments are not part of the commonly recognized revenue stream for
the commercial development of oil, natural gas, or minerals). See
also Section II.C.1 above.
    \445\ See note 441 above and accompanying text.
---------------------------------------------------------------------------

    Under the proposed rules, issuers may disclose payments that are
made for obligations levied at the entity level, such as corporate
income taxes, at that level rather than the project level. This
accommodation also should help reduce compliance costs for issuers
without significantly interfering with the goal of achieving increased
payment transparency.
    Under the proposed rules, issuers must disclose payments made in-
kind. The EU Directives and ESTMA require disclosure of in-kind
payments. This requirement is also consistent with the EITI and should
help further the goal of supporting international transparency
promotion efforts and enhance the effectiveness of the disclosure. At
the same time, this requirement could impose costs if issuers have not
previously had to value their in-kind payments. To minimize the
potential additional costs, the proposed rules provide issuers with the
flexibility of reporting in-kind payments at cost, or if cost is not
determinable, at fair market value. We believe this approach could
lower the overall compliance costs associated with our decision to
include the disclosure of in-kind payments within the proposed rules.
6. Definition of ``Not De Minimis''
    Section 13(q) requires the disclosure of payments that are ``not de
minimis,'' leaving that term undefined. Consistent with the 2012 Rules,
the proposed rules define ``not de minimis'' to mean any payment,
whether made as a single payment or a series of related payments, that
equals or exceeds $100,000, or its equivalent in the issuer's reporting
currency. Although we considered leaving ``not de minimis'' undefined,
we believe that defining this term should help to promote consistency
in payment disclosures and reduce uncertainty about what payments must
be disclosed under Section 13(q) and the related rules, and therefore
should facilitate compliance.\446\ As noted above, because the primary
purpose of Section 13(q) is to further international transparency
efforts for payments to governments for the commercial development of
oil, natural gas, or minerals, we believe that whether a payment is
``not de minimis'' should be considered in relation to a host country.
We recognize, however, that issuers may have difficulty assessing the
significance of particular payments for particular countries or
recipient governments. Therefore, we are proposing a $100,000 threshold
that would provide clear guidance about payments that are ``not de
minimis'' and promote the transparency goals of the statute.
---------------------------------------------------------------------------

    \446\ See 2012 Adopting Release, n.223, n.231, and n.233 and
accompanying text.
---------------------------------------------------------------------------

    We considered proposing a definition of ``not de minimis'' that was
based on a qualitative principle or a relative quantitative measure
rather than an absolute quantitative standard. We chose the absolute
quantitative approach for several reasons. An absolute quantitative
approach should promote consistency of disclosure and, in addition,
would be easier for issuers to apply than a definition based on either
a qualitative principle or relative quantitative measure.\447\
Moreover, using an absolute dollar amount threshold for disclosure
purposes

should reduce compliance costs by reducing the work necessary to
determine what payments must be disclosed.
---------------------------------------------------------------------------

    \447\ See 2012 Adopting Release, n.252 and accompanying text.
---------------------------------------------------------------------------

    In choosing the $100,000 ``de minimis'' threshold, we selected an
amount that we believe strikes an appropriate balance in light of
varied commenters' concerns and the purpose of the statute. Although
commenters suggested various thresholds,\448\ no commenter provided
data to assist us in determining an appropriate threshold amount. In
addition, our proposed threshold is very similar to the payment
thresholds of other resource extraction disclosure laws.\449\ For
issuers (or their subsidiaries) that are already providing payment
information under those resource extraction disclosure laws, our
definition of ``not de minimis'' would likely decrease compliance costs
(compared to other threshold choices) associated with determining which
payments should be reported because these issuers would already have
systems tailored to this threshold. We considered other absolute
amounts but chose $100,000 as the quantitative threshold in the
definition of ``not de minimis.'' We decided not to propose a lower
threshold because we are concerned that such an amount could result in
undue compliance burdens and raise competitive concerns for many
issuers. We also considered defining ``not de minimis'' either in terms
of a materiality standard or by using a larger number, such as
$1,000,000. Both of these might have resulted in lower compliance costs
and might have lessened competitive concerns. In determining not to
propose these options, however, we were mindful that they could leave
important payment streams undisclosed, reducing the potential benefits
to be derived from the proposed rule. In short, we believe the $100,000
threshold strikes an appropriate balance between concerns about the
potential compliance burdens of a lower threshold and the need to
fulfill the statutory directive for resource extraction issuers to
disclose payments that are ``not de minimis.''
---------------------------------------------------------------------------

    \448\ See 2012 Adopting Release, n.235 and n.243 and
accompanying text.
    \449\ See note 166 above.
---------------------------------------------------------------------------

7. Definition of ``Project''
    Section 13(q) requires a resource extraction issuer to disclose
information about the type and total amount of payments made to a
foreign government or the Federal Government for each project relating
to the commercial development of oil, natural gas, or minerals, but it
does not define the term ``project.'' As noted above, in a change from
the 2012 Rules, the proposed rules define ``project'' as operational
activities governed by a single contract license, lease, concession, or
similar legal agreement, which forms the basis for payment liabilities
with a government. The definition is based on the definition in the EU
Directives and the draft ESTMA definition, but allows for greater
flexibility when operational activities governed by multiple legal
agreements may be deemed a project.
    Compared to the 2012 Rules, the proposed definition of ``project''
should help reduce costs for issuers listed in both the United States
and the European Union or in Canada by not requiring different
disaggregation of project-related costs due to different definitions of
the term. It also likely would reduce the competitive disadvantage for
issuers that could be required to make more granular disclosure of
information than their competitors under a narrower definition. Our
proposed approach also would provide more flexibility in, and reduce
the burdens associated with, disaggregating payments made for
activities that relate to multiple agreements that are both
operationally and geographically interconnected.
    Our proposed approach may, however, increase the compliance costs
for issuers that would be required to implement systems to track
payments at a different level of granularity than what they currently
track. In a similar vein, it may increase the risk of sensitive
contract information being released, thus increasing the likelihood of
competitive harm for some affected issuers. At the same time, the
ability of issuers to define as a ``project'' agreements that do not
have substantially similar terms may reduce the risk of sensitive
information being released.
    As an alternative, we could have proposed to leave ``project''
undefined, as in the 2012 Rules. Leaving the term ``project'' undefined
could have provided issuers more flexibility in applying the term to
different business contexts depending on factors such as the particular
industry or business in which the issuer operates or the issuer's size.
Under such an approach, however, resource extraction issuers could have
incurred costs in determining their ``projects.'' Moreover, leaving the
term undefined could result in higher costs for some resource
extraction issuers than others if an issuer's determination of what
constitutes a ``project'' would result in more granular information
being disclosed than another issuer's determination of what constitutes
a ``project.'' In addition, leaving the term ``project'' undefined may
not be as effective in achieving the transparency benefits contemplated
by the statute because resource extraction issuers' determinations of
what constitutes a ``project'' may differ, which could reduce the
comparability of disclosure across issuers.
    Finally, we could have adopted the API definition of project, which
would have defined project-level reporting to allow issuers to combine
as one ``project'' all of the similar extraction activities within a
major subnational political jurisdiction. We acknowledge that this
aggregated disclosure could potentially impose fewer costs on resource
extraction issuers--particularly those issuers with many similar
resource extraction activities occurring within a subnational
jurisdiction--as the API suggested definition would not require issuers
to expend the time and resources necessary to achieve the type of
granular reporting that our proposed rules would require.\450\ However,
as discussed above in Section II.E, we believe that such a high-level
definition, as opposed to the proposed definition, would not
appropriately serve the anticorruption and transparency objectives that
Congress intended when it enacted Section 13(q).
---------------------------------------------------------------------------

    \450\ While it is possible that industry practice regarding the
scope of resource extraction contracts could change in response to
the proposed rules (e.g., by entering into contracts that cover
subnational political jurisdictions), we do not believe such broad
contracts reflect current industry practice. See also note 204 and
accompanying discussion.
---------------------------------------------------------------------------

8. Annual Report Requirement
    Section 13(q) provides that the resource extraction payment
disclosure must be ``include[d] in an annual report.'' The proposed
rules require an issuer to file the payment disclosure in an annual
report on new Form SD, rather than furnish it in one of the existing
Exchange Act annual report forms. Form SD would be due no later than
150 days after the end of the issuer's most recent fiscal year. This
should lessen the burden of compliance with Section 13(q) and the
related rules because issuers generally would not have to incur the
burden and cost of providing the payment disclosure at the same time
that they must fulfill their disclosure obligations with respect to
Exchange Act annual reports.\451\ An additional benefit is that this
requirement would provide information

to users in a standardized manner for all issuers rather than in
different annual report forms depending on whether a resource
extraction issuer is a domestic or foreign filer. In addition,
requiring the disclosure in new Form SD, rather than in issuers'
Exchange Act annual reports, should alleviate any concerns and costs
associated with the disclosure being subject to the officer
certifications required by Exchange Act Rules 13a-14 and 15d-14.
---------------------------------------------------------------------------

    \451\ For example, a resource extraction issuer may potentially
be able to save resources to the extent that the timing of its
obligations with respect to its Exchange Act annual report and its
obligations to provide payment disclosure allow for it to allocate
its resources, in particular personnel, more efficiently.
---------------------------------------------------------------------------

    Resource extraction issuers would incur costs associated with
preparing and filing each Form SD. We do not believe, however, that the
costs associated with filing each Form SD instead of furnishing the
disclosure in an existing form would be significant. Requiring covered
issuers to file, instead of furnish, the payment information in Form SD
may create an incremental risk of liability in litigation under Section
18 of the Exchange Act. This incremental risk of legal liability could
be a benefit to users of the information to the extent that issuers
would be more attentive to the information they file, thereby
increasing the quality of the reported information. However, we note
that Section 18 does not create strict liability for ``filed''
information.\452\
---------------------------------------------------------------------------

    \452\ See Exchange Act Section 18 [15 U.S.C. 78r]. A plaintiff
asserting a claim under Section 18 would need to meet the elements
of the statute to establish a claim, including purchasing or selling
a security in reliance on the misstatement and incurring damages
caused by that reliance.
---------------------------------------------------------------------------

    Finally, the proposed rules do not require the resource extraction
payment information to be audited or provided on an accrual basis. Not
requiring the payment information to be audited or provided on an
accrual basis may result in lower compliance costs than otherwise would
be the case if resource extraction issuers were required to provide the
information on an accrual basis or audited information.\453\
---------------------------------------------------------------------------

    \453\ See 2012 Adopting Release, n.405 and accompanying text.
---------------------------------------------------------------------------

9. Exhibit and Interactive Data Requirement
    Section 13(q) requires the payment disclosure to be electronically
formatted using an interactive data format. Consistent with the 2012
Rules, the proposed rules would require a resource extraction issuer to
provide the required payment disclosure in an XBRL exhibit to Form SD
that includes all of the electronic tags required by Section 13(q) and
the proposed rules.\454\ We believe that requiring the specified
information to be presented in XBRL format would benefit issuers and
users of the information by promoting consistency and standardization
of the information and increasing the usability of the payment
disclosure. Providing the required disclosure elements in a human-
readable and machine-readable (electronically-tagged) format would
allow users to quickly examine, extract, aggregate, compare, and
analyze the information in a manner that is most useful to them. This
includes searching for specific information within a particular
disclosure as well as performing large-scale statistical analysis using
the disclosures of multiple issuers and across date ranges.
---------------------------------------------------------------------------

    \454\ Users of this information should be able to render the
information by using software available on our Web site at no cost.
---------------------------------------------------------------------------

    Our choice of XBRL as the required interactive data format may
increase compliance costs for some issuers. The electronic formatting
costs would vary depending upon a variety of factors, including the
amount of payment data disclosed and an issuer's prior experience with
XBRL. While most issuers are already familiar with XBRL because they
use it for their annual and quarterly reports filed with the
Commission, issuers that are not already filing reports using XBRL
(i.e., foreign private issuers that report using IFRS) \455\ would
incur some start-up costs associated with that format. We do not
believe that the ongoing costs associated with this data tagging would
be significantly greater than filing the data in XML.\456\
---------------------------------------------------------------------------

    \455\ We estimate that 13 of the 471 affected issuers fall into
this category.
    \456\ See Section II.G.5 above.
---------------------------------------------------------------------------

    Consistent with the statute, the proposed rules require a resource
extraction issuer to include an electronic tag that identifies the
currency used to make the payments. Under the proposed rules, if
multiple currencies are used to make payments for a specific project or
to a government, a resource extraction issuer may choose to provide the
amount of payments made for each payment type and the total amount per
project or per government in either U.S. dollars or the issuer's
reporting currency.\457\ We recognize that a resource extraction issuer
could incur costs associated with converting payments made in multiple
currencies to U.S. dollars or its reporting currency. Nevertheless,
given the statute's tagging requirements and requirements for
disclosure of total amounts, we believe reporting in one currency is
necessary.\458\ The proposed rules provide flexibility to issuers in
how to perform the currency conversion, which may result in lower
compliance costs because it enables issuers to choose the option that
works best for them. To the extent issuers choose different options to
perform the conversion, it may result in less comparability of the
payment information and, in turn, could result in costs to users of the
information.
---------------------------------------------------------------------------

    \457\ See Instruction 2 to Item 2.01 of Form SD.
    \458\ See discussion in Section II.G.5 above.
---------------------------------------------------------------------------

D. Request for Comments

    We request comment on the potential costs and benefits of the
proposed rules and whether the rules, if adopted, would promote
efficiency, competition, and capital formation or have an impact or
burden on competition. In particular, we request comments on the
potential effect on efficiency, competition, and capital formation
should the Commission not adopt certain exceptions or accommodations.
Commenters are requested to provide empirical data, estimation
methodologies, and other factual support for their views, in
particular, on costs and benefits estimates. Our specific questions
follow.

71. We seek information that would help us quantify or otherwise
qualitatively assess the benefits of the proposed rules. Please
provide any studies or other evidence that show a causal link
between transparency efforts, particularly the EITI, EU Directives
or ESTMA, and societal outcomes.
72. Do smaller reporting companies account for a significant portion
of the total payments made to governmental entities for the
extraction of natural resources? Do emerging growth companies
account for a significant portion of such payments? Generally, what
is the distribution of reportable payments across issuers of
different sizes? Are larger issuers more likely to make such
payments as compared to smaller reporting companies or emerging
growth companies?
73. We seek information that would help us quantify compliance costs
(both initial and ongoing) more precisely. In particular, we invite
issuers and other commenters that have had experience with the costs
associated with reporting under the EU Directives to provide us with
information about those costs. What are actual compliance costs for
issuers that have started to comply with regulations transposed
under the EU Directives?
74. What is the breakdown of various compliance costs, such as,
legal fees, direct administrative costs, information technology/
consulting costs, training costs, travel costs, etc.?
75. Is our approach to cost estimates accurate? What is the
proportion of fixed costs in the direct compliance costs structure
of potentially affected resource extraction issuers? Would smaller
resource extraction issuers incur proportionally lower compliance
costs than larger resource extraction issuers? Why or why not? Would
affiliated

issuers be able to save on fixed costs of developing compliance
systems through sharing such costs? If so, what is the estimate of
such savings?
76. Is our approach to identify small issuers that likely do not
make any payments above the proposed de minimis amount of $100,000
to any government entity accurate? Are annual revenues and net cash
flows from investing activities taken together an appropriate
measure for such purpose?
77. What are the compliance costs of converting a resource
extraction payment report in the format required by EU or Canadian
regulations (e.g., XLS or PDF) to the report format required by the
proposed rules (i.e., XBRL)?
78. What are the costs and benefits arising from confidential
submission of the payment information? What are the costs and
benefits arising from public disclosure of the payment information?
How do the potential costs of public disclosure to issuers compare
to its potential benefits to users of the information?
79. What are the estimated losses of projects (either total loss or
fire sale discount) in the host countries that prohibit payment
disclosure? Is our methodology to estimate such losses accurate?
What industry-specific and country-specific factors affect the
magnitude of losses in these cases and how can we quantify the
impact of such factors? Are there any estimates based on the
experience of issuers subject to EU or other disclosure rules that
operate in such countries?
80. Are there studies on the potential effects of the proposed
rules, the EU or Canadian disclosure rules, or EITI compliance on
efficiency, competition, and capital formation? What are potential
competitive effects of the proposed rules and how might they be
impacted when the regulations promulgated pursuant to the EU
Directives and ESTMA come into full effect? What fraction of
international extractive companies would be affected by at least one
of the U.S., EU, or Canadian rules?
81. What are the benefits and costs of an alternative reporting
option for issuers that are subject to a foreign jurisdiction's
resource extraction payment disclosure requirements that are
determined to be substantially similar to our requirements? How much
would such issuers save in compliance costs if they have the option
to satisfy their filing obligations by filing the report required by
that foreign jurisdiction with the Commission?
82. Are there additional benefits associated with the proposed
rules? For example, would disclosure of payment information required
by the proposed rules be useful to investors in smaller reporting
companies who may not otherwise receive disclosure about country-
specific risk? Why or why not?

IV. Paperwork Reduction Act

A. Background

    Certain provisions of the proposed rules contain ``collection of
information'' requirements within the meaning of the Paperwork
Reduction Act of 1995 (``PRA'').\459\ The Commission is submitting the
proposal to the Office of Management and Budget (``OMB'') for review in
accordance with the PRA.\460\ An agency may not conduct or sponsor, and
a person is not required to respond to, a collection of information
unless it displays a currently valid OMB control number. The title for
the collection of information is:
---------------------------------------------------------------------------

    \459\ 44 U.S.C. 3501 et seq.
    \460\ 44 U.S.C. 3507(d) and 5 CFR 1320.11.
---------------------------------------------------------------------------

     ``Form SD'' (OMB Control No. 3235-0697).
    Form SD is currently used to file Conflict Minerals Reports
pursuant to Rule 13p-1 of the Exchange Act. We are proposing amendments
to Form SD to accommodate disclosures required by Rule 13q-1, which
would require resource extraction issuers to disclose information about
payments made by the issuer, a subsidiary of the issuer, or an entity
under the control of the issuer to foreign governments or the U.S.
Federal Government for the purpose of the commercial development of
oil, natural gas, or minerals. Form SD would be filed on EDGAR with the
Commission.
    The proposed rules and amendment to the form would implement
Section 13(q) of the Exchange Act, which was added by Section 1504 of
the Act. 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.'' \461\ Section 13(q) also mandates the submission of
the payment information in an interactive data format, and provides the
Commission with the discretion to determine the applicable interactive
data standard.\462\ We are proposing to require that the mandated
payment information be provided in an XBRL exhibit to Form SD. The
disclosure requirements would apply equally to U.S. issuers and foreign
issuers meeting the definition of ``resource extraction issuer.''
---------------------------------------------------------------------------

    \461\ 15 U.S.C. 78m(q)(2)(A).
    \462\ 15 U.S.C. 78m(q)(2)(C) and (D).
---------------------------------------------------------------------------

    Compliance with the rules by affected issuers would be mandatory.
Responses to the information collections would not be kept confidential
and there would be no mandatory retention period for the collection of
information.

B. Estimate of Issuers

    The number, type, and size of the issuers that would be required to
file the payment information required in Form SD, as proposed to be
amended, is uncertain, but, as discussed in the economic analysis
above, we estimate that the number of potentially affected issuers is
877.\463\ Of these issuers, we have identified 268 that may be subject
to similar resource extraction payment disclosure rules in other
jurisdictions by the time the proposed rules are adopted and 138
smaller issuers that are unlikely to make any payments that would be
subject to the proposed disclosure requirements.\464\ For the issuers
subject to similar disclosure rules in other jurisdictions, the
additional costs to comply with our proposed rules would be much lower
than costs for other issuers.\465\ For the smaller issuers that are
unlikely to be subject to the proposed rules, we believe there would be
no additional costs associated with

our proposed rules. Accordingly, we estimate that 471 issuers would
bear the full costs of compliance with the proposed rules, with 268
bearing significantly lower costs.
---------------------------------------------------------------------------

    \463\ See Section III.A above. As discussed above, we derived
877 potentially affected issuers using data from 2014 to estimate
the number of issuers that might make payments covered by the
proposed rules. This number does not reflect the number of issuers
that actually made resource extraction payments to governments.
    \464\ See Section III.B.2.b above (describing in more detail how
we identified issuers that may be subject to foreign reporting
requirements and how we used revenues and net cash flows from
investing activities to identify issuers that would be unlikely to
make payments exceeding the proposed de minimis threshold).
    \465\ Under the proposed rules, a determination by the
Commission that another jurisdiction's reporting requirements are
substantially similar to ours would lower an issuer's compliance
burden. More significantly, if the issuer is subject to the EU
Directives or ESTMA it would already have gathered, or have systems
in place to gather, resource extraction payment data by the time it
would have to comply with the proposed rules. Although for purposes
of our economic analysis the costs to the 268 issuers that may
already be subject to similar resource extraction payment disclosure
rules would be negligible, we have included them in our estimate of
issuers for PRA purposes because under the proposed rules they would
continue to have an obligation to file a report on Form SD, although
with a significantly lower associated burden. See Section III.B.2.b
above.
---------------------------------------------------------------------------

C. Estimate of Issuer Burdens

    After considering the comments in connection with the 2010
Proposing Release, international developments, and the differences
between the proposed rules and the 2012 Rules, we have revised our PRA
estimates from those discussed in the 2012 Adopting Release.\466\ We
continue, however, to derive our burden estimates by estimating the
average number of hours it would take an issuer to prepare and file the
required disclosure.\467\ In deriving our estimates, we recognize that
the burdens would likely vary among individual issuers based on a
number of factors, including the size and complexity of their
operations and whether they are subject to similar disclosure
requirements in other jurisdictions.
---------------------------------------------------------------------------

    \466\ Although the comments we received with respect to our PRA
estimates related to the 2010 Proposing Release, which required the
disclosure in Forms 10-K, 20-F, and 40-F, among other differences,
we have considered these estimates in arriving at our PRA estimate
for Form SD because, although the disclosures would be provided
pursuant to a new rule and on Form SD, the disclosure requirements
themselves are similar. We also believe that this is the more
conservative approach given that changes from the 2010 Proposing
Release and the 2012 Rules should generally reduce the burdens
contemplated by those earlier releases.
    \467\ As discussed above, Rule 13q-1 requires resource
extraction issuers to file the payment information required in Form
SD. The collection of information requirements are reflected in the
burden hours estimated for Form SD. Therefore, Rule 13q-1 does not
impose any separate burden.
---------------------------------------------------------------------------

    When determining the estimates described below, we have assumed
that 75% of the burden of preparation is carried by the issuer
internally and 25% of the burden of preparation is carried by outside
professionals retained by the issuer at an average cost of $400 per
hour.\468\ The portion of the burden carried by outside professionals
is reflected as a cost, while the portion of the burden carried by the
issuer internally is reflected in hours. In connection with the 2010
Proposing Release, we received estimates from some commenters expressed
in burden hours and estimates from other commenters expressed in dollar
costs.\469\ We expect that the rules' effect would be greatest during
the first year of their effectiveness and diminish in subsequent years.
To account for this expected diminishing burden, we believe that a
three-year average of the expected implementation burden during the
first year and the expected ongoing compliance burden during the next
two years is a reasonable estimate.
---------------------------------------------------------------------------

    \468\ We recognize that the costs of retaining outside
professionals may vary depending on the nature of the professional
services, but for purposes of this PRA analysis we estimate that
such costs would be an average of $400 per hour. This is the rate we
typically estimate for outside legal services used in connection
with public company reporting. We note that no commenters provided
us with an alternative rate estimate for these purposes in
connection with the 2010 Proposing Release.
    \469\ See 2012 Adopting Release at Section IV.B.
---------------------------------------------------------------------------

    In connection with the 2010 Proposing Release, some commenters
estimated implementation costs of tens of millions of dollars for large
filers and millions of dollars for smaller filers.\470\ These
commenters did not describe how they defined ``small'' and ``large''
filers. One commenter provided an estimate of $50 million in
implementation costs if the definition of ``project'' is narrow and the
level of disaggregation is high across other reporting parameters,
though it did not provide alternate estimates for different definitions
of ``project'' or different levels of disaggregation.\471\ We note that
the commenter that provided this estimate was among the largest 20 oil
and gas companies in world,\472\ and we believe that the estimate it
provided may be representative of the costs to companies of similar
large size rather than smaller companies.
---------------------------------------------------------------------------

    \470\ See letters from API 1 and ExxonMobil 1.
    \471\ See letter from ExxonMobil 1.
    \472\ See letter from API (Oct. 12, 2010) (ranking the 75
largest oil and gas companies by reserves and production).
---------------------------------------------------------------------------

    Generally, we note that some of the estimates we received may
reflect the burden to a particular commenter, and may not represent the
burden for other resource extraction issuers.\473\ Also, while we
received estimates for smaller companies and an estimate for one of the
largest companies, we did not receive data on companies of varying
sizes in between the two extremes. Finally, commenters' estimates on
the burdens associated with initial implementation and ongoing
compliance varied widely.\474\
---------------------------------------------------------------------------

    \473\ For example, one commenter's letter indicated that it had
approximately 120 operating entities. See letter from Rio Tinto.
    \474\ See letter from API 1 (estimating implementation costs in
the tens of millions of dollars for large filers and millions of
dollars for many smaller filers). This commenter did not explain how
it defined small and large filers.
---------------------------------------------------------------------------

    As discussed above, we estimate that 471 issuers would bear the
full costs of compliance and 268 issuers may be subject to similar
resource extraction payment disclosure rules by the time the proposed
rules are adopted, such that the additional costs to comply with our
proposed rules would be much lower than costs for other issuers. We
also estimate that 138 smaller issuers would bear no compliance costs
because it is likely that any payments they make for the purpose of the
commercial development of oil, natural gas, or minerals would be
considered de minimis under the proposed rules. We have used the cost
estimates provided by commenters to estimate the compliance burden for
affected issuers for PRA purposes. To distinguish between the burden
faced by the two groups of affected issuers described above, we have
assumed that the issuers who may already be complying with a similar
foreign disclosure regime would have compliance costs of approximately
five percent of the issuers that bear the full costs of compliance. For
issuers bearing the full costs, we note that Barrick Gold estimated an
initial compliance burden of 1,000 hours (500 hours for initial changes
to internal books and records and 500 hours for initial
compliance).\475\ Although we believe that initial implementation costs
would increase with the size of the issuer, as discussed in our
economic analysis above,\476\ we do not have any estimates on the
fraction of compliance costs that would be fixed versus variable. Also,
since commenters' cost estimates were based on policy choices made in
the 2010 Proposing Release, they might not reflect these commenters'
views on the proposed rules. Unfortunately, we are unable to reliably
quantify the reduction in these cost estimates based on the policy
changes reflected in the proposed rules. Thus, despite Barrick Gold
being a large accelerated filer and commenting on proposed rules that
we believe would have been more onerous than our current proposals, we
use its estimate of 1,000 hours as a conservative estimate pending
additional input from commenters on the proposed rules and other data
we may obtain on compliance burdens in similar, foreign disclosure
regimes.
---------------------------------------------------------------------------

    \475\ We use Barrick Gold's estimate because it is the only
commenter that provided a number of hours and dollar value estimates
for initial and ongoing compliance costs. Although in the economic
analysis above we used ExxonMobil's dollar value estimate to
calculate an upper bound of compliance costs, we are unable to
calculate the number of burden hours for purposes of the PRA
analysis using ExxonMobil's dollar value inputs.
    \476\ See Section III.B above.
---------------------------------------------------------------------------

    We believe that the burden associated with this collection of
information would be greatest during the implementation period to
account for initial set up costs, but that ongoing compliance costs
would be less because companies would have already made any necessary
modifications to their

systems to capture and report the information required by the proposed
rules. Two commenters provided estimates of ongoing compliance costs:
Rio Tinto provided an estimate of 5,000-10,000 burden hours for ongoing
compliance,\477\ while Barrick Gold provided an estimate of 500 burden
hours for ongoing compliance. Based on total assets, Rio Tinto is one
of the largest resource extraction issuers. We believe that, because of
Rio Tinto's size, the estimate it provided may be representative of the
burden for resource extraction issuers of a similar size, but may not
be a representative estimate for smaller resource extraction issuers.
Although in terms of total assets Barrick Gold is also among the top
five percent of resource extraction issuers that are Exchange Act
reporting companies, it is closer in size to the average issuer than is
Rio Tinto. As such, we believe that Barrick Gold's estimate is a better
estimate of the ongoing compliance burden hours. We acknowledge,
however, that using Barrick Gold's estimate is a conservative approach.
For example, the average total assets of issuers that we believe would
be bearing the full costs of the rules is only 15.6% of Barrick Gold's
total assets for 2014 ($5.8 billion/$37.4 billion).\478\
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    \477\ See letter from Rio Tinto. This commenter estimated 100-
200 hours of work at the head office, an additional 100-200 hours of
work providing support to its business units, and a total of 4,800-
9,600 hours by its business units. We arrived at the estimated range
of 5,000-10,000 hours by adding the estimates provided by this
commenter (100 + 100 + 4,800 = 5,000 and 200 + 200 + 9,600 =
10,000).
    \478\ The average estimated resource extraction issuer's total
assets compared to Rio Tinto's total assets ($111.0 billion for
2014) is 5.3%. See note 389 above for the source of this data.
---------------------------------------------------------------------------

    Thus, using the three-year average of the expected burden during
the first year and the expected ongoing burden during the next two
years, we estimate that the incremental collection of information
burden associated with the proposed rules would be 667 burden hours per
fully affected respondent (1000 + 500 + 500)/3 years). We estimate that
the proposed rules would result in an internal burden of approximately
235,618 hours (471 responses x 667 hours/response x .75) for issuers
bearing the full costs and 6,703 hours (268 responses x 33.35 hours/
response x .75) for issuers that are subject to similar resource
extraction payment disclosure rules in other jurisdictions, amounting
to a total incremental company burden of 242,321 hours (235,618 +
6,703).
    Outside professional costs would be $31,415,700 (471 responses x
667 hours/response x .25 x $400) for issuers bearing the full costs and
$893,780 (268 responses x 33.35 hours/response x .25 x $400) for
issuers that are subject to similar resource extraction payment
disclosure rules in other jurisdictions, amounting to total outside
professional costs of $32,309,480 ($31,415,700 + $893,780). Barrick
Gold also indicated that its initial compliance costs would include
$100,000 for IT consulting, training, and travel costs. Again, we
believe this to be a conservative estimate given the size of Barrick
Gold compared to our estimate of the average resource extraction
issuer's size. We do not, however, believe that these initial IT costs
would apply to the issuers that are already subject to similar resource
extraction payment disclosure rules, since those issuers should already
have such IT systems in place to comply with a foreign regime. Thus, we
estimate total IT compliance costs to be $47,100,000 (471 issuers x
$100,000). We have added the estimated IT compliance costs to the cost
estimates for other professional costs discussed above to derive total
professional costs for PRA purposes of $79,409,480 ($32,309,480 +
$47,100,000) for all issuers.\479\ The total burden hours and total
professional costs discussed above would be in addition to the existing
estimated hour and cost burdens applicable to Form SD as a result of
compliance with Exchange Act Rule 13p-1.
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    \479\ We note that this PRA cost estimate serves a different
purpose than the economic analysis and, accordingly, estimates costs
differently. See note 390 above. One of these differences is that
the economic analysis estimates average total compliance costs for
affected issuers without dividing such costs between internal burden
hours and external cost burdens. See Section III.B above.
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D. Solicitation of Comments

    We request comments in order to evaluate: (1) Whether the proposed
collection of information is necessary for the proper performance of
the functions of the agency, including whether the information would
have practical utility; (2) the accuracy of our estimate of the burden
of the proposed collection of information; (3) whether there are ways
to enhance the quality, utility, and clarity of the information to be
collected; (4) whether there are ways to minimize the burden of the
collection of information on those who are to respond, including
through the use of automated collection techniques or other forms of
information technology; and (5) whether the proposed amendments would
have any effects on any other collections of information not previously
identified in this section.\480\
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    \480\ We request comment pursuant to 44 U.S.C. 3506(c)(2)(B).
---------------------------------------------------------------------------

    Any member of the public may direct to us any comments about the
accuracy of these burden estimates and any suggestions for reducing
these burdens. Persons submitting comments on the collection of
information requirements should direct the comments to the Office of
Management and Budget, Attention: Desk Officer for the Securities and
Exchange Commission, Office of Information and Regulatory Affairs,
Washington, DC 20503, and should send a copy to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090, with reference to File No. S7-25-15.
Requests for materials submitted to OMB by the Commission with regard
to these collections of information should be in writing, refer to File
No. S7-25-15, and be submitted to the Securities and Exchange
Commission, Office of FOIA Services, 100 F Street NE., Washington, DC
20549-2736. OMB is required to make a decision concerning the
collection of information between 30 and 60 days after publication of
this release. Consequently, a comment to OMB is best assured of having
its full effect if OMB receives it within 30 days of publication.

V. Small Business Regulatory Enforcement Fairness Act

    For purposes of the Small Business Regulatory Enforcement Fairness
Act of 1996,\481\ a rule is ``major'' if it has resulted, or is likely
to result in:
---------------------------------------------------------------------------

    \481\ 5 U.S.C. 801 et seq.
---------------------------------------------------------------------------

     An annual effect on the U.S. economy of $100 million or
more;
     a major increase in costs or prices for consumers or
individual industries; or
     significant adverse effects on competition, investment, or
innovation.
    We request comment on whether our proposal would be a ``major
rule'' for purposes of the Small Business Regulatory Enforcement
Fairness Act. We solicit comment and empirical data on:
     The potential effect on the U.S. economy on an annual
basis;
     any potential increase in costs or prices for consumers or
individual industries; and
     any potential effect on competition, investment, or
innovation.

VI. Initial Regulatory Flexibility Act Analysis

    This Initial Regulatory Flexibility Act Analysis has been prepared
in accordance with 5 U.S.C. 603. It relates to proposed rule and form
amendments to implement Section 13(q) of the Exchange Act, which
concerns certain disclosure obligations of resource

extraction issuers. As defined by Section 13(q), a resource extraction
issuer is 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.

A. Reasons for, and Objectives of, the Proposed Action

    The proposed rule and form amendments are designed to implement the
requirements of Section 13(q), which was added by Section 1504 of the
Dodd-Frank Act. Specifically, the proposed rule and form amendments
would require a resource extraction issuer to disclose in an annual
report certain information relating to any payment made by the issuer,
a subsidiary of the issuer, or an entity under the issuer's control to
a foreign government or the United States Federal Government for the
purpose of the commercial development of oil, natural gas, or minerals.
An issuer would have to include that information in an exhibit to Form
SD. The exhibit would have to be formatted in XBRL.

B. Legal Basis

    We are proposing the rule and form amendments pursuant to Sections
3(b), 12, 13, 15, 23(a), and 36 of the Exchange Act.

C. Small Entities Subject to the Proposed Rules

    The proposals would affect small entities that are required to file
an annual report with the Commission under Section 13(a) or Section
15(d) of the Exchange Act, and are engaged in the commercial
development of oil, natural gas, or minerals. Exchange Act Rule 0-10(a)
\482\ defines an issuer (other than an investment company) to be a
``small business'' or ``small organization'' for purposes of the
Regulatory Flexibility Act if it had total assets of $5 million or less
on the last day of its most recent fiscal year. The proposals would
affect small entities that meet the definition of resource extraction
issuer under Section 13(q). Based on a review of total assets for
Exchange Act registrants filing under certain SICs,\483\ we estimate
that there are approximately 311 companies that would be considered
resource extraction issuers under the proposed rules and that may be
considered small entities.
---------------------------------------------------------------------------

    \482\ 17 CFR 240.0-10(a).
    \483\ See Section III.B above for a discussion of how we
estimated the number of ``resource extraction issuers'' under the
proposed rules.
---------------------------------------------------------------------------

D. Reporting, Recordkeeping, and Other Compliance Requirements

    The proposed rule and form amendments would add to the annual
disclosure requirements of companies meeting the definition of resource
extraction issuer, including small entities, by requiring them to
provide the payment disclosure mandated by Section 13(q) in Form SD.
That information must include:
     The type and total amount of payments made for each
project of the issuer relating to the commercial development of oil,
natural gas, or minerals; and
     the type and total amount of those payments made to each
government.
    The same payment disclosure requirements would apply to U.S. and
foreign resource extraction issuers.

E. Duplicative, Overlapping, or Conflicting Federal Rules

    We believe there are no federal rules that duplicate, overlap, or
conflict with the proposed rules.

F. Significant Alternatives

    The Regulatory Flexibility Act directs us to consider significant
alternatives that would accomplish the stated objectives, while
minimizing any significant adverse impact on small entities. In
connection with the proposals, we considered the following
alternatives:
    (1) Establishing different compliance or reporting requirements
which take into account the resources available to smaller entities;
    (2) Exempting smaller entities from coverage of the disclosure
requirements, or any part thereof;
    (3) The clarification, consolidation, or simplification of
disclosure for small entities; and
    (4) Use of performance standards rather than design standards.
    Section 13(q) does not contemplate separate disclosure requirements
for small entities that would differ from the proposed reporting
requirements, or exempting them from those requirements. The statute is
designed to enhance the transparency of payments by resource extraction
issuers to governments and providing different disclosure requirements
for small entities or exempting them from the coverage of the
requirements may impede the transparency and comparability of the
disclosure mandated by Section 13(q). We have requested comment as to
whether we should provide an exemption or delayed compliance for
smaller reporting companies.
    The proposed rules would require clear disclosure about the
payments made by resource extraction issuers to foreign governments and
the U.S. Federal Government, which may result in increased transparency
about those payments. The required electronic formatting of the exhibit
would simplify the search and retrieval of payment information about
resource extraction issuers, including small entities, for users of the
information.
    We have used design rather than performance standards in connection
with the proposed amendments because the statutory language, which
requires electronic tagging of specific items, contemplates specific
disclosure requirements. We further believe that the proposed rules
would be more useful to users of the information if there are specific
disclosure requirements that promote transparent and comparable
disclosure among all resource extraction issuers. Such requirements
should help further the statutory goal of supporting international
transparency promotion efforts.

G. Request for Comment

    We encourage the submission of comments with respect to any aspect
of this Initial Regulatory Flexibility Analysis. In particular, we
request comments regarding:
     How the proposed rule and form amendments can achieve
their objective while lowering the burden on small entities;
     the number of small entity companies that may be affected
by the proposed rule and form amendments;
     the existence or nature of the potential impact of the
proposed rule and form amendments on small entity companies discussed
in the analysis; and
     how to quantify the impact of the proposed rule and form
amendments.

Respondents are asked to describe the nature of any impact and provide
empirical data supporting the extent of the impact. Such comments will
be considered in the preparation of the Final Regulatory Flexibility
Analysis, if the proposed rules are adopted, and will be placed in the
same public file as comments on the proposed rules themselves.
    We are proposing the rule and form amendments contained in this
document under the authority set forth in Sections 3(b), 12, 13, 15,
23(a), and 36 of the Exchange Act.

List of Subjects in 17 CFR Parts 240 and 249b

    Reporting and recordkeeping requirements, Securities.

    In accordance with the foregoing, we are proposing to amend Title
17, Chapter II of the Code of Federal Regulations as follows:

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934

0
1. The authority citation for part 240 continues to read in part as
follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3,
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f,
78g, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 78o, 78o-4,
78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 78dd, 78ll, 78mm,
80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b&4, 80b-11, 7201 et seq.,
and 8302; 7 U.S.C. 2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C. 1350;
and Pub. L. 111-203, 939A, 124 Stat. 1376 (2010), unless otherwise
noted.
* * * * *
0
2. Section 240.13q-1 is revised to read as follows:

Sec.  240.13q-1  Disclosure of payments made by resource extraction
issuers.

    (a) A resource extraction issuer must file a report on Form SD (17
CFR 249b.400) within the period specified in that Form disclosing the
information required by the applicable items of Form SD as specified in
that Form.
    (b) Disclosure is required under this section in circumstances in
which an activity related to the commercial development of oil, natural
gas, or minerals, or a payment or series of payments made by a resource
extraction issuer to a foreign government or the Federal Government for
the purpose of commercial development of oil, natural gas, or minerals
is not, in form or characterization, within one of the categories of
activities or payments specified in Form SD, but is part of a plan or
scheme to evade the disclosure required under this section.
    (c) Definitions. For the purpose of this section the terms
``resource extraction issuer,'' ``commercial development of oil,
natural gas, or minerals,'' ``foreign government,'' and ``payment'' are
defined in Form SD.

PART 249b--FURTHER FORMS, SECURITIES EXCHANGE ACT OF 1934

0
3. The authority citation for part 249b is amended by revising the sub-
authority for Sec.  249b.400 to read as follows:

    Authority: 15 U.S.C. 78a et seq., unless otherwise noted.
* * * * *
    Section 249b.400 is also issued under secs. 1502 and 1504,
Public Law 111-203, 124 Stat. 2213 and 2220.
* * * * *
0
4. Amend Form SD (referenced in Sec.  249b.400) by:
0
a. Adding a check box for Rule 13q-1;
0
b. Revising instruction A. under ``General Instructions'';
0
c. Redesignating instruction B.2. as B.3 and adding new instructions
B.2. and B.4. under the ``General Instructions''; and
0
d. Redesignating Section 2 as Section 3, adding new Section 2, and
revising newly redesignated Section 3 under the ``Information to be
Included in the Report''.
    The addition and revision read as follows:

    Note: The text of Form SD does not, and this amendment will not,
appear in the Code of Federal Regulations.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM SD

Specialized Disclosure Report

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(Exact name of the registrant as specified in its charter)

-----------------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)

-----------------------------------------------------------------------
(Commission File Number)

-----------------------------------------------------------------------
(I.R.S. Employer Identification No.)

-----------------------------------------------------------------------
(Full mailing address of principal executive offices)

-----------------------------------------------------------------------
(Name and telephone number, including area code, of the person to
contact in connection with this report.)

Check the appropriate box to indicate the rule pursuant to which this
Form is being filed, and provide the period to which the information in
this Form applies:

___ Rule 13p-1 under the Securities Exchange Act (17 CFR 240.13p-1) for
the reporting period from January 1 to December 31, ___

___ Rule 13q-1 under the Securities Exchange Act (17 CFR 240.13q-1) for
the fiscal year ended___
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GENERAL INSTRUCTIONS

A. Rule as to Use of Form SD.

    This Form shall be used for a report pursuant to Rule 13p-1 (17 CFR
240.13p-1) and Rule 13q-1 (17 CFR 240.13q-1) under the Securities
Exchange Act of 1934 (the ``Exchange Act'').

B. Information to be Reported and Time for Filing of Reports.

    1. * * *
    2. Form filed under Rule 13q-1. File the information required by
Section 2 of this form on EDGAR no later than 150 days after the end of
the issuer's most recent fiscal year.
    3. If the deadline for filing this Form occurs on a Saturday,
Sunday or holiday on which the Commission is not open for business,
then the deadline shall be the next business day.
    4. The information and documents filed in this report shall not be
deemed to be incorporated by reference into any filing under the
Securities Act or the Exchange Act, unless the registrant specifically
incorporates it by reference into such filing.
* * * * *

INFORMATION TO BE INCLUDED IN THE REPORT

* * * * *

Section 2--Resource Extraction Issuer Disclosure

Item 2.01 Resource Extraction Issuer Disclosure and Report

    (a) Required Disclosure. A resource extraction issuer shall file an
annual report on Form SD with the Commission, and include as an exhibit
to this Form SD, information relating to any payment made during the
fiscal year covered by the annual report 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. The issuer must provide a
statement in the body of the Form SD that the specified payment
disclosure required by this Form is included in such exhibit. The
resource extraction issuer must include the following information in
the exhibit, which must present the information in the eXtensible
Business Reporting Language (XBRL) electronic format:
    (1) 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;

    (2) The type and total amount of such payments for all projects
made to each government;
    (3) The total amounts of the payments, by category listed in
paragraph (c)(9)(iii) of this Item;
    (4) The currency used to make the payments;
    (5) The financial period in which the payments were made;
    (6) The business segment of the resource extraction issuer that
made the payments;
    (7) The governments (including any foreign government or the
Federal Government) that received the payments and the country in which
each such government is located;
    (8) The project of the resource extraction issuer to which the
payments relate;
    (9) The particular resource that is the subject of commercial
development; and
    (10) The subnational geographic location of the project.
    (b) Alternate Reporting. A resource extraction issuer may satisfy
its disclosure obligations under paragraph (a) of this Item by
including as an exhibit to this Form SD a report complying with the
reporting requirements of any alternative reporting regime that are
deemed by the Commission to be substantially similar to the
requirements of Rule 13q-1 (17 CFR 240.13q-1). The issuer must state in
the body of the Form SD that it is relying on this provision and
identify the alternative reporting regime for which the report was
prepared. The issuer must also specify that the payment disclosure
required by this Form is included in an exhibit to this Form SD and
state where the report was originally filed.
    (c) Definitions. For purposes of this item, the following
definitions apply:
    (1) Business segment means a business segment consistent with the
reportable segments used by the resource extraction issuer for purposes
of financial reporting.
    (2) Commercial development of oil, natural gas, or minerals means
exploration, extraction, processing, and export of oil, natural gas, or
minerals, or the acquisition of a license for any such activity.
    (3) Control means that the resource extraction issuer consolidates
the entity or proportionately consolidates an interest in an entity or
operation under the accounting principles applicable to the financial
statements included in the resource extraction issuer's periodic
reports filed pursuant to the Exchange Act (i.e., under generally
accepted accounting principles in the United States (U.S. GAAP) or
International Financial Reporting Standards as issued by the
International Accounting Standards Board (IFRS), but not both). A
foreign private issuer that prepares financial statements according to
a comprehensive set of accounting principles, other than U.S. GAAP or
IFRS, and files with the Commission a reconciliation to U.S. GAAP must
determine control using U.S. GAAP.
    (4) Export means the movement of a resource across an international
border from the host country to another country by a company with an
ownership interest in the resource. Cross-border transportation
activities by an issuer that is functioning solely as a service
provider, with no ownership interest in the resource being transported,
would not be considered to be export.
    (5) Extraction means the production of oil and natural gas as well
as the extraction of minerals.
    (6) Financial period means the fiscal year in which the payment was
made.
    (7) Foreign government means a foreign government, a department,
agency, or instrumentality of a foreign government, or a company at
least majority owned by a foreign government. As used in this Item
2.01, 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.
    (8) Not de minimis means any payment, whether made as a single
payment or a series of related payments, which equals or exceeds
$100,000, or its equivalent in the issuer's reporting currency, during
the fiscal year covered by this Form SD. In the case of any arrangement
providing for periodic payments or installments, a resource extraction
issuer must consider the aggregate amount of the related periodic
payments or installments of the related payments in determining whether
the payment threshold has been met for that series of payments, and
accordingly, whether disclosure is required.
    (9) Payment means an amount paid that:
    (i) Is made to further the commercial development of oil, natural
gas, or minerals;
    (ii) Is not de minimis; and
    (iii) Is one or more of the following:
    (A) Taxes;
    (B) Royalties;
    (C) Fees;
    (D) Production entitlements;
    (E) Bonuses;
    (F) Dividends; and
    (G) Payments for infrastructure improvements.
    (10) Project means operational activities that are governed by a
single contract, license, lease, concession, or similar legal
agreement, which form the basis for payment liabilities with a
government. Agreements that are both operationally and geographically
interconnected may be treated by the resource extraction issuer as a
single project.
    (11) Resource extraction issuer means an issuer that:
    (i) Is required to file an annual report with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act (15 U.S.C. 78m or
78o(d)); and
    (ii) Engages in the commercial development of oil, natural gas, or
minerals.
    (12) Subsidiary means an entity controlled directly or indirectly
through one or more intermediaries.

Instructions to Item 2.01

Disclosure by Subsidiaries and Other Controlled Entities

    (1) If a resource extraction issuer is controlled by another
resource extraction issuer that has filed a Form SD disclosing the
information required by Item 2.01 of this Form for the controlled
entity, then such controlled entity shall not be required to file the
disclosure required by this Item 2.01 separately. In such
circumstances, the controlled entity must file a notice on Form SD
indicating that the required disclosure was filed on Form SD by the
controlling entity, identifying the controlling entity and the date it
filed the disclosure. The reporting controlling entity must note that
it is filing the required disclosure for a controlled entity and must
identify the controlled entity on its Form SD filing.

Currency Disclosure and Conversion

    (2) An issuer must report the amount of payments made for each
payment type, and the total amount of payments made for each project
and to each government, during the reporting period in either U.S.
dollars or the issuer's reporting currency. If an issuer has made
payments in currencies other than U.S. dollars or its reporting
currency, it may choose to calculate the currency conversion between
the currency in which the payment was made and U.S. dollars or the
issuer's reporting currency, as applicable, in one of three ways: (a)
by translating the expenses at the exchange rate existing at the time
the payment is made; (b) using a weighted average of the exchange rates
during the period; or (c) based on the exchange rate as of the issuer's
fiscal year end. A resource extraction issuer

must disclose the method used to calculate the currency conversion.

Subnational Geographic Location Tagging

    (3) The ``geographic location of the project'' as used in Item
2.01(a)(10) must be sufficiently detailed to permit a reasonable user
of the information to identify the project's specific, subnational,
geographic location. In identifying the location, resource extraction
issuers may use subnational jurisdiction(s) (e.g., a state, province,
county, district, municipality, territory, etc.) and/or a commonly
recognized, subnational, geographic or geological description (e.g.,
oil field, basin, canyon, delta, desert, mountain, etc.). More than one
descriptive term may be necessary when there are multiple projects in
close proximity to each other or when a project does not reasonably fit
within a commonly recognized, subnational geographic location. In
considering the appropriate level of detail, resource extraction
issuers may need to consider how the relevant contract identifies the
location of the project.

Entity Level Disclosure and Tagging

    (4) If a government levies a payment obligation, such as a tax or a
requirement to pay a dividend, at the entity level rather than on a
particular project, a resource extraction issuer may disclose that
payment at the entity level. To the extent that payments, such as
corporate income taxes and dividends, are made for obligations levied
at the entity level, an issuer may omit certain tags that may be
inapplicable (e.g., project tag, business segment tag) for those
payment types as long as it provides all other electronic tags,
including the tag identifying the recipient government.

Payment Disclosure

    (5) When a resource extraction issuer proportionately consolidates
an entity or operation under U.S. GAAP or IFRS, as applicable, and must
disclose payments made by such entity or operation pursuant to this
Item, such payments must be disclosed on a proportionate basis and must
describe the proportionate interest.
    (6) Although an entity providing only services to a resource
extraction issuer to assist with exploration, extraction, processing or
export would generally not be considered a resource extraction issuer,
where such a service provider makes a payment that falls within the
definition of ``payment'' to a government on behalf of a resource
extraction issuer, the resource extraction issuer must disclose such
payment.
    (7) ``Processing,'' as used in this Item 2.01, would include, but
is not limited to, midstream activities such as the processing of gas
to remove liquid hydrocarbons, the removal of impurities from natural
gas prior to its transport through a pipeline, and the upgrading of
bitumen and heavy oil, through the earlier of the point at which oil,
gas, or gas liquids (natural or synthetic) are either sold to an
unrelated third party or delivered to a main pipeline, a common
carrier, or a marine terminal. It would also include the crushing and
processing of raw ore prior to the smelting phase. It would not include
the downstream activities of refining or smelting.
    (8) A resource extraction issuer must disclose payments made for
taxes on corporate profits, corporate income, and production.
Disclosure of payments made for taxes levied on consumption, such as
value added taxes, personal income taxes, or sales taxes, is not
required.
    (9) Fees include license fees, rental fees, entry fees, and other
considerations for licenses or concessions. Bonuses include signature,
discovery, and production bonuses.
    (10) Dividends paid to a government as a common or ordinary
shareholder of the issuer that are paid to the government under the
same terms as other shareholders need not be disclosed. The issuer,
however, must disclose any dividends paid in lieu of production
entitlements or royalties.
    (11) If a resource extraction issuer makes an in-kind payment of
the types of payments required to be disclosed, the issuer must
disclose the payment. When reporting an in-kind payment, an issuer must
determine the monetary value of the in-kind payment and tag the
information as ``in-kind'' for purposes of the currency. For purposes
of the disclosure, an issuer may report the payment at cost, or if cost
is not determinable, fair market value and should provide a brief
description of how the monetary value was calculated.

Interconnected Agreements

    (12) The following is a non-exclusive list of factors to consider
when determining whether agreements are ``operationally and
geographically interconnected'' for purposes of the definition of
``project'': (a) whether the agreements relate to the same resource and
the same or contiguous part of a field, mineral district, or other
geographic area; (b) whether the agreements will be performed by shared
key personnel or with shared equipment; and (c) whether they are part
of the same operating budget.

Section 3--Exhibits

Item 3.01 Exhibits

    List below the following exhibits filed as part of this report:
    Exhibit 1.01--Conflict Minerals Report as required by Items 1.01
and 1.02 of this Form.
    Exhibit 2.01--Resource Extraction Payment Report as required by
Item 2.01 of this Form.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the duly authorized undersigned.

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(Registrant)

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By (Signature and Title)*

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(Date)

    *Print name and title of the registrant's signing executive officer
under his or her signature.
* * * * *
* * * * *

    By the Commission.

    Dated: December 11, 2015.
Brent J. Fields,
Secretary.
[FR Doc. 2015-31702 Filed 12-22-15; 8:45 am]
 BILLING CODE P