citizens know the amount of money the government receives, not the
companies that make each individual payment.'' \356\ We have also
carefully considered the API's related assertion that the Commission
has failed ``to connect [Section 13(q)'s] objectives to the specific
approach in the proposed rule--mandatory public disclosure by issuers
in their annual reports, as

opposed to confidential disclosure by issuers followed by a public
compilation produced by the Commission.'' \357\ For the reasons
discussed below, we do not agree with either of these assertions.
---------------------------------------------------------------------------

    \356\ See letter from API 1.
    \357\ See id.
---------------------------------------------------------------------------

    We believe that disclosing an issuer's identity is important to
help achieve the objectives of Section 13(q). In this regard, we note
that one of the proponents of the API's approach stated that ``[f]or
the API model to work,'' each payer's identity must be revealed.\358\
We further note that, after a decade of experience, the EITI (to which
the API and many of its members are active participants) has now
determined that company-specific, project-level disclosure is necessary
to further the EITI's goals.\359\
---------------------------------------------------------------------------

    \358\ See letter from ASP.
    \359\ See Proposing Release, Section II.E.1, n.194, and Section
II.G.2.
---------------------------------------------------------------------------

    Furthermore, as we explained in the Proposing Release, the record
supports a number of specific ways in which company-specific public
disclosures can facilitate the twin goals of helping to reduce
corruption in the extractives sector and promoting governmental
accountability. For example, public disclosure of company-specific,
project-level payment information may help assist citizens, civil
society groups, and others to monitor individual issuer's contributions
to the public finances and ensure firms are meeting their payment
obligations. We explained that such data may also help various actors
ensure that the government is properly collecting and accounting for
payments.\360\ We also explained that, relatedly, an important
additional benefit of company-specific and project-level transparency
is that it would act as a strong deterrent to issuers underpaying
royalties' or other monies owed. We believe the record also supports
the potential that the public disclosure of company-specific, project-
level data may reduce the willingness of resource extraction issuers to
participate in deals where they believe the revenues may be corruptly
diverted from the government coffers.\361\ With our decision to include
contractually required social and community payments among the required
disclosures, we now perceive an additional potential benefit of
company-specific, project-level public disclosure.\362\ Local
communities may be able to ensure that they are in fact receiving the
promised payments and that those payments are being used by the
governments receiving the funds for the benefit of the community. We
believe much the same is true with respect to contractual obligations
regarding in-kind infrastructure development.\363\
---------------------------------------------------------------------------

    \360\ See Proposing Release, Section I.E.2.
    \361\ See letter from Publish What You Pay--US (second of three
letters on Mar. 8, 2016) (``PWYP-US 3'') (explaining that a resource
extraction issuer took part in a transaction in Nigeria knowing that
the revenues were going to be diverted from the Nigerian government
to a Nigerian oil minister, and explaining that aggregation and
anonymization of such payments would have made it more difficult for
the public and civil society ``to trace where the payment ended up
or even find out that it had been made''). See generally U.S. Senate
Permanent Subcommittee on Investigations, Committee on Government
Affairs, Money Laundering and Foreign Corruption: Enforcement and
Effectiveness of the Patriot Act, Case Study Involving Riggs Bank
Report, at 98-111 (July 14, 2004) (providing examples of the roles
that resource extraction companies can play in facilitating the
suspect or corrupt practices of foreign officials seeking to divert
resource extraction payments that belong to the government).
    \362\ See Section II.C above.
    \363\ See, e.g., letter from PWYP-US 1 (explaining that in
Equatorial Guinea, ``the government has used social payments as
cover under which to approach U.S.-listed oil and gas companies
about financing projects that appear to have been motivated by the
whims of individual government officials and had little to do with
social development. . . . This raises concerns that social payments,
if allowed to remain opaque, could be misused to channel corrupt
payments, special favors, and kickbacks, creating a gray zone of
illicit payments that may not be easily monitored or policed by the
[Foreign Corrupt Practices Act].''). See also letter from ASP
(``Even with an explicit legal prohibition on bribery, however, it
is not always clear what constitutes corruption, as contracts can be
written that favor individuals or companies. . . '').
---------------------------------------------------------------------------

    We note that the API asserts that ``Section 13(q) was passed to
increase the accountability of governments, not to force public
companies to pay more to develop natural resources, or to expose them
to activism by special interest groups.'' \364\ While we recognize the
API's point, we nonetheless believe that its view of the anti-
corruption and accountability objectives underlying Section 13(q) is
unduly narrow. In our view, the U.S. foreign policy interest in helping
citizens to hold their governments accountable for the management of
the public's natural resources (and preventing corruption in connection
with the extraction of those resources) \365\ includes, among other
things, providing transparency to help ensure that the transactions
that the government enters are producing a return that the citizens
believe is appropriate, and providing transparency to citizens and
members of civil society to help ensure that the transactions do not
involve suspect or corrupt payment arrangements. We thus agree with the
position advanced by USAID that ``[i]t is through disaggregated data,
which includes the identity of the payer and the location and type of
the project, that transparency will be promoted.'' \366\ As USAID
explained in its comment:
---------------------------------------------------------------------------

    \364\ See letter from API 1.
    \365\ See 156 Cong. Rec. S3816 (May 17, 2010) (Sen. Lugar)
(explaining that Section 13(q) is intended to ``help empower
citizens to hold their governments to account for the decisions made
by their governments in the management of valuable oil, gas, and
mineral resources and revenues''). See also id. at S5873 (July 15,
2010) (Sen. Cardin) (explaining that Section 13(q) will help
citizens ``ensure that their country's natural resource wealth is
used wisely for the benefit of the entire nation and for future
generations'').
    \366\ See letter from USAID. See also letter from BHP
(``Transparency by governments and companies alike regarding revenue
flows from the extraction of natural resources in a manner which is
meaningful, practical, and easily understood by stakeholders reduces
the opportunity for corruption.'')

    [T]ransparency about corporate payments to governments is a
prerequisite to the effective engagement of citizens to ensure that
such revenues are managed responsibly and for the benefit of a
country's citizens. Such engagement is only possible if the citizens
know which company is paying what kind of payment to which
government entity relating to which project in which location.
Aggregate data about multiple resources, projects, or geographic
locations does not allow citizens of a particular[ ] region to speak
up and insist that the revenues associated with the project
impacting them be used for their benefit, rather than to personally
benefit potentially corrupt government officials.\367\
---------------------------------------------------------------------------

    \367\ See letter from USAID. See also id. (``Aggregated
information that contains numerous companies' payment histories does
not allow for citizens to understand or engage with extraction
companies operating in their geographical area.''); letter from
State Department (expressing ``approval'' of the proposed rule's
``company-specific, project-level public disclosure'' provisions and
explaining that ``[t]his level of transparency required by the
proposed rule is key for ensuring that citizens have the necessary
means to hold their governments accountable. . . . [T]he rule's
requirements directly advance the United States' foreign policy
interests in increasing transparency and reducing corruption in the
oil, gas, and minerals sectors and strengthen the United States'
credibility and ability to fight corruption more broadly. . . .).

    In addition, we believe that providing an issuer's Form SD filings
to the public through the searchable, online EDGAR system, which will
enable users of the information to produce their own up-to-date
compilations in real time, is both consistent with the goals of the
statute and the Commission's obligation, to the extent practicable, to
``make available online, to the public, a compilation of the
information required to be submitted'' by issuers.\368\ Under this

approach, all the filings will be separately searchable on EDGAR and
the information provided can be extracted and viewed on an individual
basis or as a compilation. Indeed, this approach provides users of the
disclosure with more current and immediately available information than
the API's proposed compilation, which would provide only one annual
update.\369\ That said, we appreciate that some commenters have
asserted that the statutory language could be read to require that the
Commission periodically make available its own compilation of the
information that issuers provide in their annual reports on Form
SD.\370\ Accordingly, we are including a provision in the final rules
providing that the Commission's staff will periodically make a separate
public compilation of the payment information submitted in issuers'
Forms SD available online. Under the final rules, the staff may
determine the form, manner, and timing of each compilation, except that
no information included therein may be anonymized.\371\
---------------------------------------------------------------------------

    \368\ The legislative history surrounding the adoption of
Section 13(q) indicates that Congress likely did not intend for the
public compilation requirement to serve as a substitute for the
public disclosure of an issuer's annual reports. Rather, the public
compilation requirement, added to an earlier version of the
legislation that became Section 13(q), was intended for the
convenience of the users of that data--many of whom were not seeking
the information for purposes of investment activity and thus would
potentially be unfamiliar with locating information in the extensive
annual reports that issuers file. In the earlier versions of the
draft legislation, the resource extraction payment disclosures were
required to be made in the annual report that each issuer was
already required to file under the securities laws. See, e.g.,
Extractive Industries Transparency Disclosure Bill (H.R. 6066) (May
2008) (``requir[ing] that each issuer required [to] file an annual
report with the Commission shall disclose in such report'' the
resource extraction payments that the issuer makes) (emphasis
added). For the convenience of non-investor users of the data, the
provision included a separate section entitled ``Public Availability
of Information'' that provided in pertinent part: ``The Securities
and Exchange Commission shall, by rule or regulation, provide that
the information filed by all issuers . . . be compiled so that it is
accessible by the public directly, and in a compiled format, from
the Web site of the Commission without separately accessing . . .
the annual reports of each issuer filing such information.'' Id.
(emphasis added). As the proposed legislative language was later
being incorporated into the Exchange Act, the Commission's staff
gave technical advice that led to the modification of the
legislative text to provide the Commission with additional
flexibility to permit the disclosures in an annual report other than
``the annual report'' that issuers already file so as to avoid
unnecessarily burdening issuers. See 156 Cong. Rec. S3815 (May 17,
2010) (Statement of Senator Cardin) (``We have been working with a
lot of groups on perfecting this amendment, and we have made some
changes that will give the SEC the utmost flexibility in defining
how these reports will be made so that we get the transparency we
need without burdening the companies.''). Our decision to utilize
Form SD rather than to require the disclosures in an issuer's annual
report, when coupled with the functionality that the EDGAR system
provides, in our view sufficiently addresses the Congressional
concern that originally led to the separate requirement of a
publicly available compilation.
    \369\ Our recommended approach would provide investors with
information that would be immediately available to all users upon
filing. In contrast, under the API Proposal, users of the
information could have to wait to access the information for months
after an issuer files its Form SD (when the Commission publishes its
next periodic compilation). For example, assume that the Commission
issues a compilation annually on December 1st of each year. If an
issuer files its annual Form SD on January 1st, the information in
that report would not be publicly available for another eleven
months if the Forms SD were held confidentially. Under the approach
being adopted, however, the information will be made publicly
available as soon as the Form SD is filed on EDGAR.
    \370\ See letter from API 1 (discussing the compilation
requirements in Section 13(q)(3)).
    \371\ See Rule 13q-1(e). We do not anticipate that the staff
will produce such a compilation more frequently than once a year.
---------------------------------------------------------------------------

    In sum, we believe that public disclosure of each issuer's Form SD
is important to further Section 13(q)'s foreign policy objectives of
helping to reduce corruption and enhance the ability of citizens to
hold their governments accountable for the management of the natural
resources in their country and the use of the revenues generated by
those resources.\372\ We therefore have exercised our discretion under
Section 13(q) to require issuers to disclose publicly their Forms SD.
---------------------------------------------------------------------------

    \372\ The API contends that, ``[b]y requiring disaggregated,
contract-level public disclosures,'' our rule ``will make it more
difficult for parties seeking information about how much governments
are ultimately receiving to obtain that information.'' Letter from
API 1. The API claims that, by contrast, a ``public compilation that
aggregates the total amount of money paid to governments for oil,
gas, and minerals'' would be ``more informative.'' Id. We note that,
in advancing this contention, the API appears to assume that the
Section 13(q) disclosures are designed only to provide information
about how much governments are ultimately receiving. Nevertheless,
as we have described above, we believe that the transparency
provided by the disaggregated, project-level disclosures
significantly advances broader anti-corruption and accountability
goals. Even so, we note that to the extent a particular user is
focused on learning about how much money governments are ultimately
receiving, EDGAR's functionality will allow them to generate this
information from the filed annual reports.
---------------------------------------------------------------------------

I. Exemption From Compliance

1. Proposed Rules
    In the Proposing Release, we noted that many commenters previously
had requested exemption from Section 13(q)'s disclosure requirements,
in particular in cases where the required payment disclosure is
prohibited under the host country's laws. We noted that some commenters
had identified specific countries that they claimed prohibit disclosure
while other commenters challenged those statements. Given commenters'
conflicting positions and representations, and consistent with the EU
Directives and ESTMA, we did not propose any blanket or per se
exemptions. Instead, we indicated that we would consider using our
existing authority under the Exchange Act to provide exemptive relief
at the request of issuers, if and when warranted.\373\ We stated our
belief that a case-by-case approach to exemptive relief using our
existing authority was preferable to either adopting a blanket
exemption or providing no exemptions. We also stated that, among other
things, such an approach would permit us to tailor the exemptive relief
to the particular facts and circumstances presented, such as by
permitting some alternative form of disclosure that might comply with
the foreign country's law or by phasing out the exemption over an
appropriate period of time.\374\
---------------------------------------------------------------------------

    \373\ See Section 36(a) of the Exchange Act (15 U.S.C. 78mm(a)).
    \374\ For example, if a resource extraction issuer were
operating in a country that enacted a law that prohibited the
detailed public disclosures required under our proposal, the
Commission could potentially issue a limited exemptive order (in
substance and/or duration). The order could be tailored to either
require some form of disclosure that would not conflict with the
host country's law and/or provide the issuer with time to address
the factors resulting in non-compliance.
---------------------------------------------------------------------------

2. Comments on the Proposed Rules
    In the Proposing Release we solicited comment on whether a case-by-
case exemptive process was a better alternative than providing a rule-
based blanket exemption for specific countries or other circumstances,
or providing no exemptions. We also asked whether any foreign laws
prohibit the disclosure that would be required by the proposed rules,
or if there was any information that had not been previously provided
by commenters that supports an assertion that such prohibitions exist
and are not limited in application. We also asked whether the EU
Directives' and ESTMA's lack of an exemption for situations when
disclosure is prohibited under host country law had presented any
problems for resource extraction issuers subject to those reporting
regimes.
    A number of commenters supported the proposed approach.\375\ One of
these commenters, while ``strongly support[ing]'' our approach, urged
the Commission to consider existing commercial relationships when
responding to requests for exemptive relief.\376\ This commenter noted
that contractual confidentiality clauses usually allow the contractual
parties to provide confidential information requested by court order or
regulatory

bodies, but condition such disclosure on the maintenance of
confidentiality by the receiving entity.
---------------------------------------------------------------------------

    \375\ See letters from ACTIAM et al. (Calvert separately
commenting that it preferred no exemption despite being a signatory
to this letter); Bean; Cleary; and Petrobras.
    \376\ See letter from Petrobras.
---------------------------------------------------------------------------

    Many other commenters supported the proposed approach, but
preferred not providing any exemptions.\377\ A number of these
commenters recommended granting an exemption only if the request
relates to a foreign law prohibition pre-dating the passage of Section
1504.\378\ Commenters also disputed claims that foreign law
prohibitions exist or that they would have competitive harm.\379\
---------------------------------------------------------------------------

    \377\ See letters from ACEP; Calvert; Global Witness 1; Oxfam 1;
PWYP-US 1; Sen. Cardin et al.; Sen. Lugar et al.; TI-USA; and USSIF.
    \378\ See letters from Sen. Cardin et al.; Sen. Lugar et al.
    \379\ See letters from Global Witness (Mar. 8, 2016) (``Global
Witness 2'') (``Nor is there any persuasive evidence of the
existence of secrecy laws that are in conflict with Section 13(q),
as the Commission itself determined in 2012, and as we and others
have argued.''); Natural Resource Governance Institute (Second of
two letters on Feb. 16, 2016) (``NRGI 2'') (``In practice, there is
therefore no blanket exclusion of covered companies from awards in
[Angola, Cameroon, China, and Qatar]. Our findings further show that
the covered companies have not been significantly affected in their
ability to secure contracts in [those] countries after the adoption
of Section 1504.''); McCarthy (stating that Angola's Production
Sharing Agreements provide a standard exception from confidentiality
to comply with any applicable laws or regulations and disputing any
competitive harm to companies required to report payments to host
governments in Angola, Cameroon, China, or Qatar); Oxfam 2 (noting
the disclosure of payments to governments in China and Qatar in the
RDS Report and providing additional evidence of a lack of foreign
law prohibition on payment disclosure under Qatari law); Oxfam-ERI
(``No country prohibits disclosure, and the Commission should not
grant any categorical exemptions.''); PWYP-US 1 (``There are no
foreign laws prohibiting disclosure of the information required
under Section 13(q).''); TI-USA (``[W]hile it has been alleged that
Angolan law prohibits the disclosure of resource extraction payments
. . . Statoil publicly reports such payments to the Angolan
government.''); PWYP-US 5 (noting the disclosure of payments to
governments in China and Qatar in the Total Report and Tullow
Report).
---------------------------------------------------------------------------

    Numerous commenters recommended not providing any exemptions.\380\
For example, the Department of Interior noted that federal leases for
natural resource development on federal lands and waters are public and
do not contain confidentiality provisions. This commenter stated that,
consistent with the contract transparency provisions under the EITI
Standard, USEITI reporting includes disclosure of these leases and that
providing an exemption would contravene the transparency objectives of
Section 13(q) and the Federal Government.
---------------------------------------------------------------------------

    \380\ See Form Letter A; Form Letter B and letters from
Department of Interior; Peck & Chayes; Quinones; and NRGI 1.
---------------------------------------------------------------------------

    Several commenters supported blanket exemptions instead of the
proposed case-by-case approach.\381\ These commenters sought exemptions
for disclosure that would violate a host country's laws, conflict with
the terms of existing contracts, or reveal commercially sensitive
information. These commenters also sought an exemption for disclosure
that would jeopardize the safety of an issuer's personnel.\382\ They
were concerned that the cost of not receiving an exemption,
particularly when a foreign law prohibition was in place, could be very
high if the issuer was required to cease operations in the host country
as a result of the prohibition and liquidate its fixed assets at a
steep discount. They also noted the volatility of the regions in which
they operate, the potential for terrorist attacks, and the existence of
confidentiality provisions in older resource extraction agreements.
---------------------------------------------------------------------------

    \381\ See letters from API 1; Chevron; ExxonMobil 1; and
Nouveau.
    \382\ See 2012 Adopting Release, n.69 and accompanying text. See
also letters from API 1 and Chevron. Other commenters opposed such
an exemption and stated that increased transparency would instead
increase safety for employees. See 2012 Adopting Release, n.70 and
accompanying text. See also letter from Oxfam-ERI.
---------------------------------------------------------------------------

    The API and certain other industry commenters sought various
blanket exemptions.\383\ With respect to an exemption for foreign law
prohibitions on disclosure, these commenters asserted that both Qatar
and China prohibit the required disclosure.\384\ They were also
concerned that it would be difficult to obtain timely exemptive relief
on a case-by-case basis if exemptions would have to be granted by the
full Commission. To address these concerns, they recommended the
following three alternatives to the proposed approach, in order of
preference: (1) Exempting issuers from reporting payments in any
country whose laws prohibit the disclosure; (2) exempting issuers from
reporting payments in any country whose laws prohibited the
disclosures, so long as those laws existed before the Commission
adopted its rules; and (3) exempting issuers from reporting payments in
specific countries where the risk to issuers is particularly acute.
---------------------------------------------------------------------------

    \383\ See letters from API 1; Chevron; and ExxonMobil 1.
    \384\ We note in this regard that the API did not reiterate its
previous assertions that Angola and Cameroon have laws prohibiting
the disclosure of payment information.
---------------------------------------------------------------------------

    As for disclosure that would reveal commercially sensitive
information, these commenters recommended allowing issuers to redact
payment information temporarily until a later time when the disclosure
would be less harmful (e.g., after news of a new discovery is public
knowledge). The API explained that such an exemption would be
particularly appropriate for exploratory activities and new finds, but
acknowledged that the commercial terms of older projects are generally
publicly known (even if the contracts are not technically publicly
disclosed), thus suggesting that an exemption would generally not be
necessary to protect commercially sensitive information for older
projects. They also recommended exempting disclosure in situations
where revealing payment information would breach contractual
obligations that existed before Congress passed Section 13(q) or when
it might jeopardize the safety of an issuer's employees (including
physical harm or criminal prosecution) or the national security of a
host nation.
    In addition to these broader recommendations about the types of
exemptions that should be included in the rules, commenters also made
recommendations with respect to the process for granting exemptions. A
few commenters were concerned that the exemption requests would be
considered in a public forum, which could result in disclosure of
competitively sensitive information or violate host country law.\385\
One of these commenters requested, at a minimum, that the rules follow
an exemptive approach where any claimed exemption would require issuers
to make reasonable efforts to obtain permission for disclosure, file
legal opinions supporting any non-disclosure, and be subject to review
by the Commission, but would otherwise be self-executing.\386\ Another
commenter recommended using a no-action letter process with delegated
authority to the Division of Corporation Finance, which it believed
would be both flexible and practical.\387\
---------------------------------------------------------------------------

    \385\ See letters from Cleary and ExxonMobil 1.
    \386\ See letter from ExxonMobil 1.
    \387\ See letter from Cleary.
---------------------------------------------------------------------------

    Numerous commenters recommended a public process for exemption
applications.\388\ Many of these commenters specifically called for a
process that involved notice and comment.\389\ Some of them
specifically recommended requiring issuers to apply for exemptions
using Exchange Act Rule 0-12.\390\ Some of these commenters

recommended that the rules provide clear guidance on the criteria that
would be used to evaluate applications for exemptions.\391\ One of them
also recommended an instruction clarifying that exemptions will be
granted rarely and only for extremely compelling reasons.\392\
---------------------------------------------------------------------------

    \388\ See letters from ACEP; ACTIAM et al.; Bean; Calvert;
Global Witness 1; Oxfam 1; PWYP-US 1; Sen. Cardin et al.; Sen. Lugar
et al.; TI-USA; and USSIF.
    \389\ See letters from ACEP; Bean; Calvert; Global Witness 1;
Oxfam 1; PWYP-US 1; Sen. Cardin et al.; Sen. Lugar et al.; TI-USA;
and USSIF.
    \390\ See letter from PWYP-US 1. See also letters from ACEP;
Global Witness 1; and Oxfam 1.
    \391\ See letters from Bean and USSIF.
    \392\ See letter from Bean.
---------------------------------------------------------------------------

    A number of commenters made specific recommendations for the types
of supporting documentation the rules should require from those seeking
an exemption due to a foreign law prohibition on disclosure.\393\ These
commenters recommended requiring the text of the relevant law, a legal
opinion identifying the conflicts with the disclosure rules, and a
description of the steps taken by the issuer to obtain permission from
the host country to disclose, such as waivers, exceptions, or
exemptions. Some of these commenters also recommended requiring a
description of the penalties or sanctions for violating the foreign
legal provision, including information about whether the prohibition
has been enforced in the past.\394\ One of them also recommended
requiring that the issuer provide the text of the foreign law and the
legal opinion in English and also provide the date of enactment or
promulgation of the foreign law or rule.\395\
---------------------------------------------------------------------------

    \393\ See letters from ACEP; Bean; Global Witness 1; Oxfam 1;
PWYP-US 1; Sen. Cardin et al. and Sen. Lugar et al.
    \394\ See letter from PWYP-US 1. See also letters from ACEP;
Global Witness 1; and Oxfam 1.
    \395\ See letter from Bean.
---------------------------------------------------------------------------

3. Final Rules
    While we continue to believe, for the reasons discussed below, that
a case-by-case approach to providing exemptions under our existing
authority is generally preferable in this context, we are also
including a targeted exemption for payments related to exploratory
activities.\396\ We believe this exemption, as described and discussed
below, should help mitigate any potential competitive harm that issuers
might experience while not materially reducing the overall benefits of
the disclosure to its users. To address any other potential bases for
exemptive relief, beyond the exemptions for payments related to
exploratory activities and recently acquired companies, issuers may
apply for exemptions on a case-by-case basis using, as recommended by
certain commenters,\397\ the procedures set forth in Rule 0-12 of the
Exchange Act.\398\ This approach will allow the Commission to determine
if and when exemptive relief may be warranted and how broadly it should
apply, based on the specific facts and circumstances presented in the
application.\399\
---------------------------------------------------------------------------

    \396\ See Item 2.01(b) of Form SD. As discussed above in Section
II.G.3, the final rules also include transitional relief for certain
recently acquired companies.
    \397\ See letters from ACEP; Global Witness 1; Oxfam; and PWYP-
US 1. See also note 388 and accompanying text.
    \398\ 17 CFR 240.0-12.
    \399\ For example, an issuer claiming that a foreign law
prohibits the required payment disclosure under Section 13(q) will
be able to make the case that it would suffer substantial commercial
or financial harm if relief is not granted. An issuer could also
apply for an exemption in situations where disclosure would conflict
with the terms of a material preexisting contract, reveal
commercially sensitive information not otherwise available to the
public, or have a substantial likelihood of jeopardizing the safety
of an issuer's personnel, among other possible bases for an
exemption. The Commission could then determine the best approach to
take based on the facts and circumstances, including denying an
exemption, providing an individual exemption, providing a broader
exemption for all issuers operating in a particular country, or
providing some other appropriately tailored exemption. See letters
from ACEP; ACTIAM et. al.; Bean; Calvert; Cleary; Oxfam 1; Oxfam-
ERI; Petrobras; PWYP-US 1; Sen. Cardin et al.; Sen. Lugar et al.;
TI-USA and USSIF (each supporting a case-by-case exemptive approach,
although some expressed a preference for not providing any
exemptions).
---------------------------------------------------------------------------

    With respect to the request for a blanket exemption in countries
where the law may prohibit the disclosure, however, we believe that
there continues to be sufficient uncertainty in the record such that
this approach is not necessary or appropriate at this time. For
example, while the API initially identified four countries whose laws
would prohibit Section 13(q) disclosures, its most recent comment
letter listed only two of those countries as currently prohibiting such
disclosures.\400\ In addition, with respect to those two remaining
countries, we note that several large resource extraction issuers have
recently made payment disclosures related to those jurisdictions.\401\
We think this state of uncertainty, which at a minimum raises questions
about the existence and scope of disclosure prohibitions in these
foreign jurisdictions, counsels against adoption of any blanket
exemptions for foreign law conflicts at this time. Moreover, as more
companies begin to report under the EU Directives and ESTMA, the
existence of alleged conflicts between those disclosure regimes and
foreign laws may be clarified prior to any reports being due under the
rules we are adopting today.\402\ This, along with the fact that
issuers will have a two-year period before any reports are due under
our rules in which to submit an exemptive application (along with
appropriate supporting materials), further supports the conclusion that
a case-by-case exemptive approach is preferable.
---------------------------------------------------------------------------

    \400\ See letter from API 1.
    \401\ See note 299 above.
    \402\ For example, reports under the United Kingdom's
implementation of the EU Directives will be due by November 2016 at
the latest (with certain reports due by June 2016) covering payments
made in fiscal 2015; and reports under Canada's ESTMA will be due
for many issuers (i.e., for those issuers with fiscal years ending
December 31, 2016) in May 2017 covering payments made in 2016.
Significantly, we note that several reports that already have been
filed pursuant to the EU Directives have disclosed payments made to
the governments of Angola, China, and Qatar, which commenters
previously indicated prohibited such disclosure. See BHP Report
(China); Shell Report (China and Qatar), Statoil Report (Angola);
and Total Report (Angola, China, Qatar). See also note 302 above. As
additional reports are filed, we expect to gain further insight into
the permissibility and feasibility of disclosure in these and other
jurisdictions.
---------------------------------------------------------------------------

    Separately, we also believe that the case-by-case exemptive
approach is significantly less likely than a blanket approach to
encourage foreign governments to enact laws prohibiting the Section
13(q) disclosures. A blanket exemption could lead a foreign government
contemplating such a law to conclude that enactment of the law would
have its intended effect of preventing the disclosures. With a case-by-
case exemptive approach, however, that foreign government would not be
able to reach that conclusion, as it would face a number of
uncertainties concerning the potential results of enacting such a law.
Specifically, the foreign government would not have any basis to assume
that the Commission would grant exemptive relief, and, even if it did
so, whether such relief would apply on a permanent basis or in a more
limited fashion (such as a grandfathering provision or a time-limit to
allow issuers to divest their interests in the country in an orderly
manner). This uncertainty about whether the law would have its intended
effect, in our view, should help to discourage foreign governments from
adopting such a law. Relatedly, we note that one commentator opposed
the case-by-case exemptive approach because of the uncertainty that it
may cause issuers.\403\ While we appreciate this concern, we believe
that it is on balance outweighed by the countervailing considerations
discussed above, and elsewhere in this release and the Proposing
Release, which counsel against our adopting most of the blanket
exemptions that commenters proposed.
---------------------------------------------------------------------------

    \403\ See letter from API 1 (``issuers need the certainty of
knowing how the rule will affect them now'').
---------------------------------------------------------------------------

    With respect to the request for an exemption to prevent the
disclosure of

commercially sensitive information, we are persuaded that a targeted
exemption for payments made in connection with exploratory activities,
in line with commenters' suggestions, is appropriate.\404\
Specifically, issuers will not be required to report payments related
to exploratory activities in the Form SD for the fiscal year in which
payments are made but can instead delay reporting such payments in the
Form SD until the fiscal year following the fiscal year in which the
payments were made. In this regard, we believe that the likelihood of
competitive harm (in regards to a new discovery) from the disclosure of
payment information related to exploratory activities diminishes over
time starting from when the exploratory activities on the property or
any adjacent property have begun.\405\
---------------------------------------------------------------------------

    \404\ See letter from API 1 (asserting as an example of
competitive harm payments to local governments in connection with
``high-potential exploratory territory'' and maintaining that case-
by-case exemptions would be insufficient to protect against
competitive harm in such situations).
    \405\ See note 406 below.
---------------------------------------------------------------------------

    For purposes of this exemption, we consider payments to be related
to exploratory activities if they are made as part of the process of
identifying areas that may warrant examination or examining specific
areas that are considered to have prospects of containing oil and gas
reserves, or as part of a mineral exploration program. In all cases,
however, exploratory activities are limited to activities conducted
prior to the development or extraction of the oil and gas or minerals
that are the subject of the exploratory activities. Furthermore, this
targeted exemption is not permitted for payments related to exploratory
activities on the property or any adjacent property once the issuer has
commenced development or extraction activities anywhere on the
property, on any adjacent property, or on any property that is part of
the same project.
    In providing this exemption, we also considered the fact that the
total payment streams from the first year of exploration that would be
covered by the exemption should often be relatively small compared to,
for example, the annual payment streams that would likely occur once an
issuer commences development and production. Given this likelihood, we
believe, on balance, that any diminished transparency as a result of
the one-year delay in reporting of such payments that we are permitting
is justified by the potential competitive harms that we anticipate may
be avoided as a result of this exemptive relief. Nevertheless, we have
limited the exemption to one year because we believe that the
likelihood of competitive harm related to a new discovery from
disclosing the payment information diminishes over time once
exploratory activities on the property or any adjacent property have
begun.\406\
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    \406\ We appreciate that the exploratory phase may vary from
project to project, and that this variance can depend on such
considerations as the geographic area in which the exploration is
being undertaken and the type of resource being sought. In
determining to provide a one-year reporting delay, we looked to
considerations in the oil and gas industry in particular as oil and
gas industry commenters asserted a specific need for the exemptive
relief. We understand that the exploratory period for oil and gas
generally involves a seismic survey/analysis phase followed by an
exploratory drilling phase. We further understand that, while the
time periods for those activities can vary considerably, conducting
seismic surveys and analyzing the data can take six months or more,
while (at least for conventional onshore hydrocarbons) exploratory
drilling and site clearance can potentially take a similar length of
time. These considerations lead us to believe that one year is an
appropriate period for a delay in reporting exploratory payments.
---------------------------------------------------------------------------

    Beyond these accommodations for exploratory activities and certain
recently acquired companies, we are not persuaded that we should adopt
exemptions for other purposes in the final rules. As a threshold
matter, we note that many commenters advanced credible arguments
challenging the claims raised by industry commenters for broad
exemptive relief in these areas.\407\ Further, we are mindful that
global resource extraction payment transparency touches on a host of
issues that are constantly changing and evolving and as such do not
lend themselves to static exemptive regimes. In this regard, we note
the enactment of significant transparency laws in major economic
markets, the expanding implementation of the EITI, the increasing
prevalence of voluntary payment disclosure, evolution in the terms
typically included in agreements with host governments, and the
constantly changing geopolitical security landscape.\408\ As such, we
believe that crafting exemptions that balance the transparency goals of
Section 13(q) with the myriad concerns that could arise is best done
through a flexible facts-and-circumstances based approach. Furthermore,
although we have included only two targeted exemptions in the final
rules, nothing prevents the Commission from using its existing
exemptive authority to provide broader relief if the facts and
circumstances should warrant such action in the future.\409\
---------------------------------------------------------------------------

    \407\ See Section II.I.2 above.
    \408\ We note in this regard that, in contrast to the 2012
Rules, commenters have not reiterated previous assertions that
Cameroon and Angola prohibit the disclosure of resource extraction
payments.
    \409\ See Section 36(a) of the Exchange Act (15 U.S.C. 78mm(a)).
We contemplate relying on Section 36(a) and the application process
set forth in Rule 0-12 as the principal means of considering
exemptive relief from the requirements of the final rules, except
that, where exigent circumstances warrant, the staff, acting
pursuant to delegated authority from the Commission, may rely on
Section 12(h) of the Exchange Act (15 U.S.C. 78l(h) for the limited
purpose of providing interim relief while the Commission is
considering a Section 36(a) exemptive application.
---------------------------------------------------------------------------

    A separate but related consideration is that developing objective
criteria for exemptive relief for potential competitive harm (beyond
the exploratory phase) or safety that could be uniformly applied would
be difficult. In our view, issues related to such competitive and
safety concerns are inherently case-specific, requiring an analysis of
the underlying facts and circumstances. We are therefore concerned that
adopting a broad exemption with respect to competitive concerns (beyond
the exploratory phase) or safety concerns could result in issuers
applying the exemption in an overly broad way. Specifically, the
effective and appropriate utilization of broad exemptions in these
areas would be dependent on the independent assessment and good faith
implementation by issuers, potentially producing inconsistent
application, if not overuse.\410\ With a case-by-case exemptive
approach, however, the Commission can ensure that exemptions are
afforded only where the facts and circumstances warrant.
---------------------------------------------------------------------------

    \410\ Cf. generally letter from API 1 (noting potential
difficulties when rule text is ``susceptible to varying
interpretations'' among issuers).
---------------------------------------------------------------------------

    Finally, we are not persuaded that there is a need for an exemption
in the final rules for contracts that may prohibit the disclosure. We
note that various commenters opposing such an exemption provided
evidence indicating that many contracts allow for disclosure of payment
information where it is required by law.\411\ Moreover, we

believe that the two-year period that we are providing issuers before
the reporting obligation takes effect should allow most issuers a
sufficient opportunity to obtain the necessary modifications to
existing contracts so that they can make the required disclosures. With
respect to any future contracts that issuers may enter, we anticipate
that issuers can and should include express provisions permitting them
to make the disclosures required under Section 13(q).
---------------------------------------------------------------------------

    \411\ Several commenters provided persuasive evidence
demonstrating that exceptions to confidentiality for laws or stock
exchange requirements that require disclosure are frequently a
standard component of oil, gas and mining contracts. See letter from
PWYP-US 3. For instance, we understand that the Association of
International Petroleum Negotiators (AIPN) has included this type of
exception to confidentiality in its model contract used by its
members for the last two decades. See letter from Oxfam America
(Mar. 20, 2012) (``Oxfam 2 (pre-proposal)'') (noting that the AIPN
Model Form Confidentiality Agreement authorizes the disclosure of
otherwise confidential information that is required ``under
applicable law, including by stock exchange regulations or by a
governmental order, decree, regulation or rule.''). Another
commenter provided a database of over 800 contracts from 73
countries and reported that over half of the contracts in the
database explicitly allow for disclosure when required by law. See
letter from OpenOil UG (Oct. 26, 2015) (``OpenOil (pre-proposal)'').
---------------------------------------------------------------------------

    Commenters were also divided about whether the exemptive
application process should be public (with notice and comment) or
confidential. We agree that public input can be beneficial in
understanding the complexities of the resource extraction industry.
Accordingly, Rule 0-12 allows the Commission to provide notice in the
Federal Register and to receive public comment on applications for
exemptions when it deems such an approach appropriate. Notwithstanding
our appreciation for public input, we also do not believe it is
appropriate to require an issuer to reveal the very information it
seeks to protect in order to apply for an exemption. In this regard, we
note that although an applicant would need to describe the particular
payment disclosure it seeks to omit and the specific facts and
circumstances that warrant an exemption, it need not include specific
payment amounts to support its application. We believe that in most
cases the application could present sufficient information to describe
the circumstances warranting an exemption and the corresponding harm
without revealing the precise information that the issuer seeks to keep
confidential. We also note that Rule 0-12 does allow applicants to
request temporary confidential treatment to the extent provided under
Rule 81,\412\ which may further alleviate concerns by delaying public
access to the exemptive application for up to 120 days from the time of
the Commission's response. Further, issuers will be permitted to
withdraw their application if it appears to the staff that the request
for confidential treatment should be denied, in which case the
application would remain in the Commission's files but would not be
made public.\413\
---------------------------------------------------------------------------

    \412\ 17 CFR 200.81.
    \413\ 17 CFR 200.81(b). The information could be subject to a
request made pursuant to the Freedom Of Information Act (FOIA). In
this regard, however, we note that FOIA provides an exemption from
public release for ``trade secrets and commercial or financial
information obtained from a person and privileged or confidential.''
See 5 U.S.C. 552(b)(4).
---------------------------------------------------------------------------

    Finally, we note that Rule 0-12 requires an application to be made
in writing, including ``any supporting documents necessary to make the
application complete.'' Commenters were divided on whether the
Commission should require certain specified documentation as part of
the application or whether we should follow a more flexible, non-
prescriptive approach, where the registrant would initially determine
what supporting information is appropriate. We believe a non-
prescriptive, flexible process is more appropriate given that we are
adopting a case-by-case approach to exemptions that is driven by
particular facts and circumstances. We do note, however, that the
Commission, through the Division of Corporation Finance, may request,
as appropriate, supporting documentation such as a legal opinion, the
text of applicable foreign laws (translated as necessary),
representations as to the public availability of the information in
question, or a description of the steps taken by the issuer to obtain
permission to disclose.\414\ Failure to provide such information upon
request could cause the application to be deemed incomplete or denied.
We note that, as with any exemptive application, the burden is on the
applicant to demonstrate that such relief is necessary and appropriate
in the public interest.
---------------------------------------------------------------------------

    \414\ See Rule 0-12(a), (f) [17 CFR 240.0-12(a), (f)].
---------------------------------------------------------------------------

J. Alternative Reporting

1. Proposed Rules
    As noted in the Proposing Release, several jurisdictions have
implemented resource extraction payment disclosure laws since the 2012
Rules.\415\ Around the time of the Proposing Release, the USEITI also
published its first report.\416\ In light of these developments and
with a view towards reducing compliance costs, we proposed a provision
that would allow issuers to meet the requirements of the proposed rules
by providing disclosure that complies with a foreign jurisdiction's
rules or that meets the USEITI's reporting requirements, if the
Commission has determined that those rules or requirements are
substantially similar to the rules adopted under Section 13(q).\417\
The Proposing Release contemplated that the Commission would be able to
make a determination about the similarity of a foreign jurisdiction's
or the USEITI's disclosure requirements either unilaterally or pursuant
to an application submitted by an issuer, jurisdiction, or other
party.\418\
---------------------------------------------------------------------------

    \415\ See Section I.C above.
    \416\ See note 87 above.
    \417\ Proposed Item 2.01(b) of Form SD.
    \418\ See Proposing Release, Section II.G.4.
---------------------------------------------------------------------------

    We proposed requiring resource extraction issuers to file the
substantially similar report as an exhibit to Form SD with a statement
in the body of its filing that it was relying on the accommodation and
identifying the alternative reporting regime for which the report was
prepared (e.g., a foreign jurisdiction or the USEITI).
2. Comments on the Proposed Rules
    In the Proposing Release we solicited comment on whether we should
include an alternative reporting process that would allow for an issuer
that is subject to the reporting requirements of a foreign jurisdiction
or the USEITI to submit those reports in satisfaction of our
requirements. In addition, we solicited comment on whether a
``substantially similar'' standard was appropriate and which criteria
should apply when evaluating the similarity of another jurisdiction's
reporting requirements. We also solicited comment on various aspects of
the procedures surrounding an alternative reporting process, such as
whether the Commission should unilaterally make the determination, what
types of parties should be allowed to submit an application for
alternative reporting, what supporting evidence should be required, and
what application procedures should be implemented. For example, we
requested comment on whether Exchange Act Rule 0-13 would provide
appropriate procedures for requesting alternative reporting. We also
solicited comment on whether the Commission should recognize certain
foreign reporting requirements or the USEITI reporting framework as
substantially similar when the final rule is adopted.
    All of the commenters that addressed this aspect of the Proposing
Release supported the concept of alternative reporting in some
form.\419\ Despite general support, several commenters recommended
using a standard different from ``substantially similar,'' such as
``equivalent,'' \420\ ``substantially equivalent,'' \421\ ``broadly
similar,'' \422\ or

``broadly comparable.'' \423\ Several commenters also recommended
criteria that the Commission should focus on when assessing the
similarity of other regimes. For example, one commenter recommended
using the two criteria set forth in Canada's substitution policy.\424\
A variety of other recommendations were made by other commenters, such
as comparing (1) the types of payments that are required to be
disclosed; (2) the types of payment recipients (including subnational
governments and entities controlled by the government); (3) whether
project-level disclosure is required and, if so, the definition of
``project;'' (4) whether the disclosure must be publicly filed and
whether it includes the identity of the issuer; (5) whether
subsidiaries under the control of and consolidated by the issuer are
reported; (6) the threshold for de minimis payments; (7) whether the
disclosure must be provided using an interactive data format that
includes electronic tags; (8) the availability of exemptions from
reporting; (9) frequency of reporting; (10) anti-evasion measures; and
(11) the availability of liability or penalties for violations of the
disclosure requirements.\425\
---------------------------------------------------------------------------

    \419\ See letters from ACEP; ACTIAM et al.; API 1; Bean; BHP;
BP; Calvert; Chevron; Cleary; Department of Interior; Encana;
ExxonMobil 1; Global Witness 1; Oxfam 1; PWYP-US 1; RDS; Ropes &
Gray; Sen. Cardin et al.; Sen. Lugar et al.; and Total.
    \420\ See letter from Cleary.
    \421\ See letter from PWYP-US 1. See also letters from ACEP;
Global Witness 1; and Oxfam 1.
    \422\ See letter from BP.
    \423\ Id.
    \424\ See letter from Cleary. For a discussion of Canada's
substitution policy, see Section I.C.2 above.
    \425\ No one commenter recommended all of these factors. See,
e.g., letters from PWYP-US 1 and Encana.
---------------------------------------------------------------------------

    One commenter recommended that the Commission not require issuers
to convert data into a different interactive data format as a condition
to alternative reporting.\426\ Another commenter recommended that the
EU Directives and ESTMA be deemed substantially similar requirements
despite not requiring inclusion of a tag for the particular resource
subject to commercial development.\427\
---------------------------------------------------------------------------

    \426\ See letter from BHP.
    \427\ See letter from Encana.
---------------------------------------------------------------------------

    Other commenters made specific recommendations on the procedures
that the Commission should follow when making an alternative reporting
determination. For example, several commenters supported using the
procedures set forth in Exchange Act Rule 0-13,\428\ while other
commenters supported a less prescriptive approach.\429\ A few
commenters also recommended allowing issuers, foreign jurisdictions,
and industry groups to submit applications supporting the substantial
similarity of other jurisdictions' requirements.\430\
---------------------------------------------------------------------------

    \428\ See letters from Calvert and PWYP-US 1. See also letters
from ACEP; Global Witness 1; and Oxfam 1.
    \429\ See letters from Cleary and Ropes & Gray.
    \430\ See letters from Cleary and Ropes & Gray.
---------------------------------------------------------------------------

    A number of commenters called for the Commission to recognize
substantially similar alternative reporting regimes in the adopting
release.\431\ Most of those commenters recommended recognizing the EU
Directives \432\ and/or Canada.\433\ Commenters also recommended the UK
specifically \434\ or Norway.\435\ The Department of Interior
recommended allowing for alternative reporting under the USEITI, with
several other commenters supporting that recommendation.\436\
---------------------------------------------------------------------------

    \431\ See letters from ACEP; BHP; BP; Cleary; Encana; Global
Witness 1; Oxfam 1; PWYP-US 1; RDS; Ropes & Gray; and Total.
    \432\ See letters from ACEP; BHP (recommending recognizing the
EU's reporting system for a finite period of five years); BP;
Cleary; Encana; Global Witness 1; Oxfam 1; PWYP-US 1; and Total.
    \433\ See letters from Cleary; Encana; and PWYP-US 1. See also
letters from ACEP; Global Witness 1; and Oxfam 1.
    \434\ See letters from BP; Cleary; and RDS. The letters from BP
and Cleary also recommended the European Union more generally.
    \435\ See letters from Cleary and PWYP-US 1. See also letters
from ACEP; Global Witness 1; and Oxfam 1.
    \436\ See letters from BP; Calvert; and PWYP-US 1.
---------------------------------------------------------------------------

3. Final Rules
a. Requirements for Alternative Reports
    We are adopting an alternative reporting mechanism similar to what
we proposed whereby issuers will be able to meet the requirements of
the final rules by providing disclosure that complies with a foreign
jurisdiction's or the USEITI's resource extraction payment disclosure
requirements if they are deemed ``substantially similar'' by the
Commission.\437\ As noted above, commenters broadly supported the
concept of alternative reporting despite differing opinions on how it
should be applied. The framework for alternative reporting in the final
rules allows a resource extraction issuer that has already prepared a
report pursuant to ``substantially similar'' requirements to avoid
costs associated with having to prepare a separate report meeting the
requirements of our disclosure rules.\438\ We are adopting the proposed
``substantially similar'' standard because we are not persuaded that
the alternative standards recommended by commenters would allow the
Commission to evaluate better whether a regime requires sufficient
disclosure to serve the underlying goals of Section 13(q) while also
avoiding unnecessary costs.\439\
---------------------------------------------------------------------------

    \437\ See Item 2.01(c) of Form SD.
    \438\ See Section III.C.2 below for a discussion of these costs.
    \439\ See notes 420-423 above and accompanying text.
---------------------------------------------------------------------------

    We note that the alternative reporting provision is generally
consistent with the approach taken in the EU Directives and ESTMA and
should promote international transparency efforts by incentivizing
foreign countries that are considering adoption of resource extraction
payment disclosure laws to provide a level of disclosure that is
consistent with our rules and the other major international
transparency regimes. Under the final rules, an issuer may only use an
alternative report for an approved foreign jurisdiction or regime if
the issuer is subject to the resource extraction payment disclosure
requirements of that jurisdiction or regime and has made the report
prepared in accordance with that jurisdiction's requirements publicly
available prior to filing it with the Commission.\440\ An issuer
choosing to avail itself of this accommodation must submit as an
exhibit to Form SD the same report that it previously made publicly
available in accordance with the approved alternative jurisdiction's
requirements.\441\ The issuer must include a statement in the body of
Form SD that it is relying on this accommodation and identifying the
alternative reporting regime for which the report was prepared.\442\
---------------------------------------------------------------------------

    \440\ See Item 2.01(c)(1)-(2) of Form SD.
    \441\ See Item 2.01(c)(2). The format of the report may differ
to the extent necessary due to the conditions placed by the
Commission on the alternative reporting accommodation. See id. For
example, the report may not have been originally submitted in the
home jurisdiction in XBRL or may not have been in English.
    \442\ See Item 2.01(c)(3) of Form SD.
---------------------------------------------------------------------------

    In addition, the alternative reports must be tagged using
XBRL.\443\ Although a commenter recommended not requiring issuers to
convert data into a different interactive data format to qualify for
alternative reporting,\444\ we believe that requiring a consistent data
format for all reports filed with the Commission will improve the
usefulness of the compilations created by the Commission and will
enhance the ability of users to create their own up-to-date
compilations in real time. We also do not believe that this requirement
will add significantly to the costs of alternative reporting given that
most of these costs are associated with collecting the required
information, not the particular data format.
---------------------------------------------------------------------------

    \443\ See Item 2.01(c)(4) of Form SD.
    \444\ See letter from BHP.
---------------------------------------------------------------------------

    An issuer relying on the alternative reporting accommodation must
also provide a fair and accurate English

translation of the entire report if prepared in a foreign
language.\445\ Project names may be presented in their original
language in addition to the English translation of the project name if
the issuer believes such an approach would facilitate identification of
the project by users of the disclosure.\446\
---------------------------------------------------------------------------

    \445\ See Item 2.01(c)(5) of Form SD. Rule 306 of Regulation S-T
(17 CFR 232.306) requires that all electronic filings and
submissions be in the English language. If a filing or submission
requires the inclusion of a foreign language document, Rule 306
requires that the document be translated into English in accordance
with Securities Act Rule 403(c) (17 CFR 230.403(c)) or Exchange Act
Rule 12b-12(d) (17 CFR 240.12b-12(d)). Both of these rules require
the submission of a fair and accurate English translation of an
entire foreign language document that is being submitted as an
exhibit or attachment if the document consists of certain specified
material. If the foreign language document does not consist of such
material, and the form permits it, a fair and accurate English
language summary may be provided in lieu of an English translation.
Given the level of specificity of the disclosure and the electronic
tagging required under Rule 13q-1 and Form SD, we do not believe it
would be appropriate to permit an English summary of a foreign
language document that is being provided as an alternative report.
We have therefore added a requirement to Form SD requiring a
registrant to provide a fair and accurate English translation of the
entire foreign language document being submitted as an exhibit to
Form SD pursuant to the alternative reporting provision.
    \446\ See Item 2.01(c)(5) of Form SD.
---------------------------------------------------------------------------

    As noted in the Proposing Release, the ``substantially similar''
standard would not require the alternative reporting regime to be
equivalent or identical. Under the final rules, the Commission could
consider the following criteria, among others, to make its
determination that another reporting regime is substantially similar:
(1) The types of activities that trigger disclosure; (2) the types of
payments that are required to be disclosed; (3) whether project-level
disclosure is required and, if so, the definition of ``project;'' (4)
whether the disclosure must be publicly filed and whether it includes
the identity of the issuer; and (5) whether the disclosure must be
provided using an interactive data format that includes electronic
tags. When considering whether to allow alternative reporting based on
a foreign jurisdiction's reporting requirements, the Commission will
likely also consider whether disclosure of payments to subnational
governments is required and whether there are any exemptions allowed
and, if so, whether there are any conditions that would limit the grant
or scope of the exemptions. This non-exclusive list of factors does not
preclude the Commission from considering other factors, such as those
recommended in the comments described above.\447\
---------------------------------------------------------------------------

    \447\ See Section II.J.2 above.
---------------------------------------------------------------------------

    As discussed above in Section I.C.2, Canada allows for substituted
reports to be filed according to the approved substitute jurisdiction's
deadline if the Department of Natural Resources Canada is notified by
email prior to the expiration of ESTMA's 150 day deadline.\448\ In
light of the requirement in the final rules that the alternative report
be publicly available in the alternative jurisdiction prior to the
submission of the alternative report to the Commission, we believe that
an approach similar to Canada's will increase the usefulness of the
alternative reporting accommodation.\449\ Therefore, an issuer filing
an alternative report prepared pursuant to foreign reporting regimes
recognized by the Commission as substantially similar may follow the
reporting deadline in the alternative jurisdiction.\450\ To do so,
however, it must submit a notice on Form SD-N on or before the due date
of its Form SD indicating its intent to submit the alternative report
using the alternative jurisdiction's deadline.\451\ To deter abuse of
this accommodation, the final rules provide that if an issuer fails to
submit such notice on a timely basis, or submits such a notice but
fails to submit the alternative report within two business days of the
alternative jurisdiction's deadline, it will become ineligible for the
alternative reporting accommodation for the following fiscal year.\452\
---------------------------------------------------------------------------

    \448\ See note 80-81 above and accompanying text.
    \449\ Although Canada uses the same 150 day deadline as the
final rules, the EU Directives leave the annual deadline to the
discretion of the member states. See note 56 above and accompanying
text.
    \450\ See Item 2.01(c)(6) of Form SD.
    \451\ See Item 2.01(c) of Form SD.
    \452\ Id.
---------------------------------------------------------------------------

b. Recognition of EU Directives, Canada's ESTMA, and the USEITI as
Alternative Reporting Regimes
    In conjunction with our adoption of the final rules, we are issuing
an order recognizing the EU Directives, Canada's ESTMA, and the USEITI
in their current forms as substantially similar disclosure regimes for
purposes of alternative reporting under the final rules, subject to
certain conditions. We have determined that these three disclosure
regimes are substantially similar to the final rules.\453\ For example,
all three regimes require annual, public disclosure, including the
identity of the filer; do not provide for any blanket exemptions;
include the same or similar activities when defining commercial
development of oil, natural gas, or minerals; require project-level
reporting at the contract level (or in the case of the USEITI, calls
for project-level reporting consistent with the European Union and
Commission definitions of ``project''); cover similar payment types;
cover similar controlled entities and subsidiaries; and require foreign
subnational payee reporting. Although we acknowledge differences
between these regimes and the final rules, we do not believe that such
differences, as identified and discussed above,\454\ support reaching a
different conclusion, particularly in light of the requirements we are
imposing on alternative reporting.\455\ We note that, among those
commenters who addressed the issue, there was agreement that the
Commission should allow alternative reporting under the EU Directives,
Canada's ESTMA, and the USEITI.\456\ This further persuades us that it
is appropriate at this time to grant these three regimes alterative
reporting status in their current form.
---------------------------------------------------------------------------

    \453\ For a lengthier discussion of significant aspects of these
regimes, see Section I.C above.
    \454\ See Section II.C.3 above (discussing variations in the
treatment of CSR payments under the final rules, the EU Directives,
and ESTMA) and Section II.E.3 above (discussing when multiple
agreements may be aggregated as a single project under the final
rules and how that differs from the approach used by the EU
Directives and the ESTMA Specifications). We recognize that our
decision to include CSR payments within the list of payment types
specifically covered by the final rules reflects a difference from
how CSR payments are treated under the European Union and Canadian
disclosure regimes. On balance, considering the benefits to users
and issuers from permitting alternative reporting and the fact that
the recent trend has been toward inclusion of such payments (the
EITI revised its standard to include CSR payments after the EU and
Canadian disclosure standards were developed), we do not feel this
difference should prevent us from recognizing the EU Directives and
ESTMA as ``substantially similar'' reporting regimes at this time.
In weighing whether to recognize these reporting regimes as
substantially similar, we also have considered that several
companies reporting under these regimes may provide disclosure about
CSR payments. See Section II.C.3 above. Furthermore, the ESTMA
Guidance indicates that CSR payments disclosure may be required in
Canada in certain circumstances, despite not being specifically
listed as a covered payment type. See note 212 and accompanying
text.
    \455\ For example, the final rules require alternative reports
to be submitted in XBRL format. See Section II.J.3.a above.
    \456\ See letters from ACEP; BHP (recommending recognizing the
EU's reporting system for a finite period of five years); BP;
Calvert; Cleary; Encana; Global Witness 1; Oxfam 1; PWYP-US 1; and
Total.
---------------------------------------------------------------------------

    Although we are recognizing the USEITI's requirements as
substantially similar, we are mindful of the more limited scope of
those requirements. For example, the USEITI does not cover payments to
foreign governments and currently uses calendar year reporting instead
of fiscal year reporting.\457\ Due to these limitations, as set forth
in the accompanying order, USEITI reports will only satisfy the
disclosure requirements in Rule 13q-1 for payments made by an issuer to
the

Federal Government, not to foreign governments. An issuer will have to
supplement its USEITI report by disclosing in its Form SD all payment
information to foreign governments required by the final rules. In
addition, the issuer may need to supplement its USEITI report so that
the required payment information is provided on a fiscal year
basis.\458\ We note that the requirement to provide fiscal year
reporting will have limited impact on issuers with a December 31 fiscal
year end. In this regard, the Department of Interior has stated that
``many'' U.S. EITI reporting companies use the calendar year as their
fiscal year.\459\
---------------------------------------------------------------------------

    \457\ See Section I.C.3 above.
    \458\ For example, in addition to covering any gaps between the
calendar year and fiscal year, the issuer will need to disclose any
series of payments that exceeded the de minimis threshold on a
fiscal year basis rather than on a calendar year basis. See Section
II.C above for a discussion of the de minimis threshold.
    \459\ See letter from Department of Interior.
---------------------------------------------------------------------------

c. Application Procedures
    With respect to applications to request recognition of other
jurisdictions' payment transparency rules as substantially similar,
applicants should follow the procedures set forth in Rule 0-13 of the
Exchange Act, which permits an application to be filed with the
Commission to request a ``substituted compliance order'' under the
Exchange Act. Although applicants should follow the procedures set
forth in Rule 0-13(b) through (i), applications may be submitted by
issuers, governments, industry groups, and trade associations.\460\ The
application must include supporting documents and will be referred to
the Commission's staff for review. The Commission must publish a notice
in the Federal Register that a complete application has been submitted
and allow for public comment. The Commission may also, in its sole
discretion, schedule a hearing before the Commission on the matter
addressed by the application.
---------------------------------------------------------------------------

    \460\ See Rule 13q-1(c).
---------------------------------------------------------------------------

K. Exhibits and Interactive Data Format Requirements

1. Proposed Rules
    The proposed rules required a resource extraction issuer to file
the required disclosure on EDGAR in an XBRL exhibit to Form SD.
Consistent with Section 13(q), the proposed rules required issuers to
submit the payment information using electronic tags--a taxonomy of
defined reporting elements--that identify, for any payment required to
be disclosed:
     The total amounts of the payments, by category; \461\
---------------------------------------------------------------------------

    \461\ For example, categories of payments could be bonuses,
taxes, or fees.
---------------------------------------------------------------------------

     the currency used to make the payments;
     the financial period in which the payments were made;
     the business segment of the resource extraction issuer
that made the payments;
     the government that received the payments and the country
in which the government is located; and
     the project of the resource extraction issuer to which the
payments relate.\462\
---------------------------------------------------------------------------

    \462\ See proposed Item 2.01(a) of Form SD.
---------------------------------------------------------------------------

    In addition to the electronic tags specifically required by the
statute, we proposed requiring issuers to provide and tag:

     The type and total amount of payments made for each
project,
     the type and total amount of payments for all projects
made to each government;
     the particular resource that is the subject of
commercial development, and
     the subnational geographic location of the project.

    For purposes of identifying the subnational geographic location of
the project, we proposed an instruction specifying that issuers must
provide information regarding the location of the project that is
sufficiently detailed to permit a reasonable user of the information to
identify the project's specific, subnational location.\463\ We stated
that, depending on the facts and circumstances, this could include the
name of the subnational governmental jurisdiction(s) (e.g., state,
province, county, district, municipality, territory, etc.) or the
commonly recognized subnational geographic or geologic location (e.g.,
oil field, basin, canyon, delta, desert, mountain, etc.) where the
project is located, or both. We anticipated that more than one
descriptive term would likely 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. We also stated that when considering the appropriate level of
detail, issuers may need to consider how the relevant contract
identifies the location of the project.\464\
---------------------------------------------------------------------------

    \463\ See proposed Instruction 3 to Item 2.01 of Form SD.
    \464\ See id.
---------------------------------------------------------------------------

    We also proposed an instruction to Form SD that would have required
issuers to report the amount of payments made for each payment type and
the total amount of payments made for each project and to each
government in U.S. dollars or in the issuer's reporting currency if not
U.S. dollars.\465\ The proposed rules allowed a resource extraction
issuer to calculate the currency conversion in one of three ways: (1)
By translating the expenses at the exchange rate existing at the time
the payment is made; (2) by using a weighted average of the exchange
rates during the period; or (3) based on the exchange rate as of the
issuer's fiscal year end.\466\ A resource extraction issuer was also
required to disclose the method used to calculate the currency
conversion.\467\
---------------------------------------------------------------------------

    \465\ See proposed Instruction 2 to Item 2.01 of Form SD.
Currently, foreign private issuers may present their financial
statements in a currency other than U.S. dollars for purposes of
Securities Act registration and Exchange Act registration and
reporting. See Rule 3-20 of Regulation S-X [17 CFR 210.3-20].
    \466\ See proposed Instruction 2 to Item 2.01 of Form SD.
    \467\ See id.
---------------------------------------------------------------------------

    Consistent with the statute, the proposed rules required a resource
extraction issuer to include an electronic tag that identified the
business segment of the resource extraction issuer that made the
payments. We proposed defining ``business segment'' as the reportable
segments used by the resource extraction issuer for purposes of
financial reporting.\468\
---------------------------------------------------------------------------

    \468\ See proposed Item 2.01(c)(1) of Form SD. The term
``reportable segment'' is defined in FASB ASC Topic 280, Segment
Reporting, and IFRS 8, Operating Segments.
---------------------------------------------------------------------------

    We also proposed that to the extent payments, such as corporate
income taxes and dividends, are made for obligations levied at the
entity level, issuers could omit certain tags that may be inapplicable
(e.g., project tag, business segment tag) for those payment types as
long as they provide all other electronic tags, including the tag
identifying the recipient government.\469\
---------------------------------------------------------------------------

    \469\ See 2012 Adopting Release, n.432 and accompanying text.
---------------------------------------------------------------------------

    Finally, we noted that Section 13(q)(3) directs the Commission, to
the extent practicable, to provide a compilation of the disclosure made
by resource extraction issuers. To satisfy this requirement, the
proposed rules required the disclosures to be filed on EDGAR in an XBRL
exhibit, which would allow the data to be searched and extracted by
users.
2. Comments on the Proposed Rules
    In the Proposing Release we solicited comment on a variety of
matters related to the format of the disclosure, the proposed tags, and
the related

instructions. For example, we asked how the total amount of payments
should be reported when payments are made in multiple currencies and
whether the three proposed methods for calculating the currency
conversion described above provide issuers with sufficient options to
address any possible concerns about compliance costs, the comparability
of the disclosure among issuers, or other factors. We also asked
whether XBRL is the most suitable interactive data standard, whether
``business segment'' should be defined differently, and whether the
non-statutory tags we proposed were appropriate. In addition, we
requested comment on whether the proposed ``reasonable user'' approach
to describing the geographic location of the project provided
sufficient detail to users of the disclosure when combined with the
other tagged information. Finally, we solicited comment on whether the
proposed approach to making a compilation available was consistent with
Section 13(q)(3) or whether a different compilation would be necessary.
    All of the commenters that addressed the proposed interactive data
format supported using XBRL.\470\ One of them generally recommended
that the rules provide issuers with the flexibility to present
information in either the body of the Form SD or on an exhibit, as well
as the flexibility to decide whether to summarize or include selected
information contained in the exhibit in the base Form SD.\471\
---------------------------------------------------------------------------

    \470\ See letters from AICPA; PWYP-US 1; and XBRL US.
    \471\ See letter from Ropes & Gray.
---------------------------------------------------------------------------

    One commenter specifically supported the proposed approach to
describing the geographic location of projects.\472\ Another commenter
recommended that, rather than relying on the concept of ``a reasonable
user,'' the rules require geographic locations to be disclosed as
specified in the agreement or multiple agreements which have been used
to establish the project for reporting purposes.\473\ By contrast, the
commenters that supported the API Proposal disagreed with tagging the
geographic location of the project at a level below the largest
subnational political jurisdiction.\474\ As described above, those
commenters recommended using ISO codes to standardize geographic
location tagging down to the first subnational geographic level.\475\
---------------------------------------------------------------------------

    \472\ See letter from Department of Interior.
    \473\ See letter from PWYP-US 1.
    \474\ See Section III.E. above.
    \475\ Id.
---------------------------------------------------------------------------

    Several commenters requested changes or clarifications to the data
tagging requirements.\476\ One of them recommended defining ``business
segment'' to mean the subsidiary or other entity under the control of
the issuer that makes payments to a government because that entity
often has a different name from the parent issuer that is reporting to
the Commission.\477\ This commenter stated that providing the name of
the entity making the payment would aid accountability and provide
users with the means to follow up locally when compared to the
Commission's proposed approach of defining ``business segment'' as a
reportable segment used for purposes of financial reporting. Other
commenters disagreed with this suggestion believing that it was outside
the scope of the statute.\478\
---------------------------------------------------------------------------

    \476\ See letters from AICPA; Encana; Petrobras; PWYP-US 1; and
XBRL US.
    \477\ See letter from PWYP-US 1.
    \478\ See letters from ExxonMobil 2 and Petrobras.
---------------------------------------------------------------------------

    Another commenter, noting our guidance on entity-level disclosure,
requested clarification of whether it could omit the project tag with
respect to its export activities, which it stated were not project-
specific.\479\ Another commenter was unclear on whether the tag for the
``particular resource that is the subject of commercial development''
should be assigned to each project or whether it should be assigned to
each government payee.\480\ This commenter recommended that, if the
particular resource must be disclosed, the tag should be associated
with a project rather than a government payee. This commenter also
noted that the proposed rules did not specify the level of granularity
at which the ``particular resource'' must be disclosed.\481\ This
commenter also had concerns that reporting payments at a particular
resource level would pose challenges for some issuers as development
projects often target more than one resource as the subject of
development and not all payments to a government payee are determined
or dependent on a particular resource (i.e., property taxes).
---------------------------------------------------------------------------

    \479\ See letter from Petrobras.
    \480\ See letter from Encana.
    \481\ For example, this commenter sought clarification of
whether the ``particular resource'' disclosure should be the primary
resource targeted, such as oil, natural gas, or natural gas liquids,
or if it should be the resource product types, such as coal bed
methane, natural gas liquids, bitumen, heavy oil, light crude oil,
and natural gas excluding natural gas liquids.
---------------------------------------------------------------------------

    Another commenter recommended adopting the AICPA Audit Data
Standards within the new XBRL taxonomy. This commenter stated that
using these standards would enable issuers and their auditors to share
``business operational, business and accounting data,'' creating
potential cost savings by reducing duplicative data standards used by
issuers and thereby leveraging the cost of complying with the rule for
a range of purposes including internal and external use in the audit
function.\482\
---------------------------------------------------------------------------

    \482\ See letter from AICPA.
---------------------------------------------------------------------------

    Another commenter recommended incorporating in EDGAR robust
validation of the data submitted in the XBRL exhibits for both
technical structure as well as content. \483\ This commenter stated
that doing so would ensure that the information provided to users is
accurate and reliable. This commenter also recommended publishing the
data as a set of CSV files to simplify automated analysis for some
users, similar to what the Commission does for XBRL financial data.
Generally this commenter thought that the Commission should seek input
on the draft taxonomy through a public review and comment process prior
to implementing the reporting requirements. Noting our statement in the
Proposing Release that Inline XBRL \484\ was another possible
alternative for providing the information in interactive data format,
the commenter questioned whether Inline XBRL would improve the
usability of the data, or whether it merely adds an additional burden
on filers to convert their data to HTML as well as XBRL.
---------------------------------------------------------------------------

    \483\ See letter from XBRL US.
    \484\ Inline XBRL would allow registrants to file the required
information and data tags in one document rather than requiring a
separate exhibit for the interactive data.
---------------------------------------------------------------------------

    One commenter stated that the three proposed methods for
calculating the currency conversion when payments are made in multiple
currencies provides issuers with sufficient options to address any
possible concerns about compliance costs and comparability of the
disclosure among issuers.\485\
---------------------------------------------------------------------------

    \485\ See letter from Petrobras.
---------------------------------------------------------------------------

    Finally, several commenters specifically supported the proposed
approach as meeting the statutory requirements to provide a
compilation.\486\ Other commenters stated that the proposed approach
abandons the Commission's statutory obligation to create a
compilation.\487\ We discuss our approach to providing a compilation in
Section II.H.3 above.
---------------------------------------------------------------------------

    \486\ See letter from PWYP-US 1. See also letters from ACEP;
Global Witness 1; and Oxfam 1.
    \487\ See letters from API 1; Chevron; ExxonMobil 1.
---------------------------------------------------------------------------

3. Final Rules
    We are adopting the proposed requirements regarding interactive
data

exhibits and tagging with limited modifications. The approach we are
adopting today provides the disclosure elements in a machine readable
(electronically-tagged) XBRL format that should enable users to search,
extract, aggregate, and analyze the information in a manner that is
most useful to them. As we discussed in the Proposing Release, this
approach will allow the information received from issuers to be
converted by EDGAR and other commonly used software and services into
an easily-readable tabular format.\488\ The final rules do not require
Inline XBRL. Given the nature of the disclosure required by the final
rules, which is primarily an exhibit with tabular data, we do not
believe that Inline XBRL would improve the usefulness or presentation
of the required disclosure. As noted above, commenters supported using
XBRL as the interactive data format but did not similarly support
Inline XBRL, with one commenter specifically questioning its usefulness
in this context. Unlike the comments we received on the 2010 Proposing
Release, none of commenters on the Proposing Release recommended that
the Commission allow issuers to use an interactive data format of their
preference.\489\
---------------------------------------------------------------------------

    \488\ The use of XBRL will allow the Commission to improve the
quality and usefulness of the data compilation on EDGAR by including
data validation measures to improve data quality. Given the
disbursement ledger nature of the Resource Extraction data, using
existing disbursement taxonomies would be relevant both for
minimizing implementation costs and also potentially enhancing the
reusability by different consumers (e.g., management, internal
auditors, external auditors, regulators). The AICPA Audit Data
Standards include disbursement ledger taxonomies and thereby may be
useful in this effort.
    \489\ See Section II.G.5 of the Proposing Release.
---------------------------------------------------------------------------

    Commenters were divided on how issuers should tag the subnational
geographic location of the project.\490\ On the one hand, those
supporting the API Proposal favored using the first order subnational
geographic location. Some of those commenters recommended using ISO
codes to standardize references to those subnational geographic
locations. These commenters were generally concerned that the proposed
method for describing the location of a project would cause confusion
and could potentially reduce transparency. On the other hand, many
other commenters, including those expressing the greatest interest in
using the disclosure to further the transparency goals of the statute,
disagreed with an approach that would only disclose the geographic
location of a project at the highest level of political organization
below the national level. For the reasons discussed in Section II.E.3
above, we agree with the latter commenters that additional granularity
is needed to accomplish the goals underlying Section 13(q).
Nevertheless, we are sympathetic to the concern that differing
descriptions of a project's location might make it more difficult to
sort the data compiled in EDGAR. For this reason, we believe it is
appropriate to add an additional tag for the subnational geographic
location that uses the ISO codes suggested by commenters.\491\ In this
way, users of the disclosure would be able to sort the data in the more
generalized fashion that industry commenters, such as the API, said
would be more useful while also having access to the more specific data
that many civil society organizations have supported. With respect to
the suggestion of one commenter to use the geographic locations
disclosed in the agreement(s) associated with a project, we believe the
proposed approach accomplishes the same purpose while providing the
issuer additional flexibility.\492\
---------------------------------------------------------------------------

    \490\ Commenters were also divided on how to name the project
for the ``project of the resource extraction issuer to which the
payments relate'' tag. We address issues relating to the definition
of ``project'' in Section II.E. above.
    \491\ Similarly, to enhance comparability, we are requiring
issuers to use the ISO 3166 code, if available, to identify the
country in which a payee government is located. See Instruction 3 to
Item 2.01 of Form SD.
    \492\ See letter from PWYP-US 1. See also letters from ACEP;
Global Witness 1; and Oxfam 1.
---------------------------------------------------------------------------

    With respect to the requirement to provide and tag the type and
total amount of payments made for each project and to each government,
we are adopting the three currency conversion methods as proposed.\493\
As discussed above, the one commenter that addressed these methods
thought that the options that were provided were sufficient to address
concerns about compliance costs and comparability of disclosure.\494\
Nevertheless, to avoid confusion, we are requiring that an issuer must
choose a consistent method for all such currency conversions within a
particular Form SD filing.\495\
---------------------------------------------------------------------------

    \493\ See Instruction 2 to Item 2.01 of Form SD.
    \494\ See letter from Petrobras.
    \495\ See Instruction 2 to Item 2.01 of Form SD.
---------------------------------------------------------------------------

    With respect to the required business segment tag, despite the
concerns of one commenter, we are adopting the proposed definition of
``business segment.'' \496\ We believe defining business segment in a
manner consistent with the reportable segments used by resource
extraction issuers for purposes of financial reporting provides
sufficient granularity when combined with the detailed geographic and
project-level information required to be disclosed by the final rules.
In addition, the proposed approach would have cost advantages by
aligning the disclosure requirements with the issuer's existing
financial reporting systems and procedures.
---------------------------------------------------------------------------

    \496\ See letter from PWYP-US 1 (recommending defining
``business segment'' as the subsidiary or entity under the control
of the issuer that makes payments to a government because that would
aid accountability and facilitate local follow-up by data users).
See also proposed Item 2.01(c)(1) of Form SD.
---------------------------------------------------------------------------

L. Treatment for Purposes of Securities Act and Exchange Act

1. Proposed Rules
    The statutory language of Section 13(q) does not specify that the
information about resource extraction payments must be ``filed.''
Rather, it states that the information must be ``include[d] in an
annual report[.]'' \497\ The proposed rules required resource
extraction issuers to file, rather than furnish, the payment
information on Form SD.
---------------------------------------------------------------------------

    \497\ 15 U.S.C. 78m(q)(2)(A).
---------------------------------------------------------------------------

2. Comments on the Proposed Rules
    In the Proposing Release we solicited comment on whether the
payment disclosure should be filed or furnished. We also asked whether
certain officers, such as the resource extraction issuer's principal
executive officer, principal financial officer, or principal accounting
officer, should certify the Form SD filing's compliance with the
requirements of Section 13(q) of the Exchange Act or that the filing
fairly presents the information required to be disclosed under Rule
13q-1.\498\
---------------------------------------------------------------------------

    \498\ We address responses to this request for comment and a
similar one in Section II.G. above.
---------------------------------------------------------------------------

    Commenters were divided on whether the disclosure should be filed
as proposed, thus incurring Section 18 liability, or whether it should
be furnished.\499\ The commenters supporting the proposed approach
stated that requiring the disclosure to be filed would ensure that it
could be used reliably for investment analysis and for other
purposes.\500\ The commenters that recommended allowing the disclosure
to be furnished stated that the rules were not material to the ``vast
majority of investors'' and that users of the data did not need the
level of protection associated with Section 18 liability.\501\ These
commenters expressed concern

about the costs issuers might incur from Section 18 liability.
---------------------------------------------------------------------------

    \499\ For those in favor of filing, see letters from Bean; PWYP-
US 1; TI-USA; and USSIF. For those in favor of furnishing, see
letters from API 1; Chevron; Encana; and ExxonMobil 1.
    \500\ See, e.g., letter from PWYP-US 1.
    \501\ See, e.g., letter from API 1.
---------------------------------------------------------------------------

    One commenter recommended allowing foreign private issuers to
furnish Form SD,\502\ while another commenter made a similar
recommendation for foreign private issuers that are providing
alternative reports.\503\ The latter commenter pointed to other
instances where foreign private issuers have been permitted to furnish
reports and noted that the antifraud provisions of the Exchange Act
would still apply. This commenter also stated that the courts in home
jurisdictions would be better suited to interpret the laws governing
the alternate report.
---------------------------------------------------------------------------

    \502\ See letter from BP.
    \503\ See letter from RDS.
---------------------------------------------------------------------------

    Another commenter recommended that to the extent an issuer wishes
to include additional, voluntary disclosures in its Form SD, it should
be permitted to furnish rather than file that information.\504\ This
commenter noted that many issuers avoid making elective disclosures in
Commission filings due to liability concerns and that issuers could
indicate what disclosure is being furnished under a separate heading or
using other explanatory text.
---------------------------------------------------------------------------

    \504\ See letter from Ropes & Gray.
---------------------------------------------------------------------------

3. Final Rules
    The rules we are adopting today require the disclosure to be filed
on Form SD. Section 13(q) does not state how the information should be
submitted and instead leaves that question to the Commission to
determine. We believe that the Form SD disclosure, including any
voluntary disclosure, will benefit from potential Section 18 liability
by providing issuers with further incentive to submit complete and
accurate information. Although several commenters argued that the
information is not material to investors and should therefore be
furnished, we note that other commenters, including a number of large
institutional investors who have expressed an intention to use the
Section 13(q) disclosures, continue to argue that the information is
material or important to investors.\505\ Given this disagreement, and
that materiality is a fact specific inquiry, we are not persuaded that
this is a reason to permit the information to be furnished. While we
are mindful of the costs associated with Section 18 liability, as we
noted in the Proposing Release, Section 18 does not create strict
liability for filed information.\506\ Rather, it states that a person
shall not be liable for misleading statements in a filed document if
such person can establish that he or she acted in good faith and had no
knowledge that the statement was false or misleading.\507\
---------------------------------------------------------------------------

    \505\ See letters from ACTIAM et al.; Bean; Calvert;
International Transport Workers' Federation (Mar. 7, 2016)
(``ITWF''); Oxfam 1; PWYP-US; Sen. Cardin et al.; Sen. Lugar et al.;
TI-USA; and USSIF.
    \506\ See Proposing Release, Section II.G.6.
    \507\ Exchange Act Section 18(a) provides: ``Any person who
shall make or cause to be made any statement in any application,
report, or document filed pursuant to this title or any rule or
regulation thereunder or any undertaking contained in a registration
statement as provided in subsection (d) of section 15 of this title,
which statement was at the time and in the light of the
circumstances under which it was made false or misleading with
respect to any material fact, shall be liable to any person (not
knowing that such statement was false or misleading) who, in
reliance upon such statement shall have purchased or sold a security
at a price which was affected by such statement, for damages caused
by such reliance, unless the person sued shall prove that he acted
in good faith and had no knowledge that such statement was false or
misleading. A person seeking to enforce such liability may sue at
law or in equity in any court of competent jurisdiction. In any such
suit the court may, in its discretion, require an undertaking for
the payment of the costs of such suit, and assess reasonable costs,
including reasonable attorneys' fees, against either party
litigant.'' A plaintiff asserting a claim under Section 18 would
need to meet the elements of the statute to establish a claim,
including reliance and damages.
---------------------------------------------------------------------------

    Although a commenter stated that in certain other contexts issuers
may furnish, rather than file, disclosure prepared in accordance with a
foreign jurisdiction's requirements, we note that the disclosure
furnished on Form 6-K, such as quarterly reports, is not required by
the Commission's reporting requirements.\508\ Instead, such reports
need only be furnished when they are made or required to be made public
in such issuer's home jurisdiction. Foreign private issuers must file,
and are not permitted to furnish, reports required by the Commission's
rules, such as annual reports on Form 20-F and Form 40-F, and Form 6-K
reports that have been specifically incorporated by reference into a
Securities Act registration statement.
---------------------------------------------------------------------------

    \508\ See letter from RDS. A foreign private issuer is required
to submit under cover of a Form 6-K (17 CFR 249.306) information
that the issuer: Makes or is required to make public pursuant to the
law of the jurisdiction of its domicile or in which it is
incorporated or organized; files or is required to file with a stock
exchange on which its securities are traded and which was made
public by that exchange; or distributes or is required to distribute
to its security holders. The Form 6-K report is deemed furnished,
and not filed for purposes of Section 18, unless it has been
specifically incorporated by reference into a previously filed
Securities Act or Exchange Act registration statement or Exchange
Act report, which is itself subject to Section 18.
---------------------------------------------------------------------------

M. Compliance Date

1. Proposed Rules
    Section 13(q) provides that, with respect to each resource
extraction issuer, the final rules issued under that section shall take
effect on the date on which the resource extraction issuer is required
to submit an annual report relating to the issuer's fiscal year that
ends not earlier than one year after the date on which the Commission
issues the final rules under Section 13(q).\509\ We proposed requiring
resource extraction issuers to comply with Rule 13q-1 and Form SD for
fiscal years ending no earlier than one year after the effective date
of the adopted rules.\510\ We also proposed selecting a specific
compliance date that corresponds to the end of the nearest calendar
quarter following the effective date, such as March 31, June 30,
September 30, or December 31.\511\
---------------------------------------------------------------------------

    \509\ 15 U.S.C. 78m(q)(2)(F).
    \510\ Adopted rules typically go into effect 60 days after they
are published in the Federal Register.
    \511\ See 2012 Adopting Release at 2 [77 FR 56365].
---------------------------------------------------------------------------

2. Comments on the Proposed Rules
    In the Proposing Release we asked whether we should provide a
compliance date linked to the end of the nearest commonly used
quarterly period following the effective date or whether we should
adopt a shorter or longer transition period. We also solicited comment
on whether the rules should provide for a longer transition period for
certain categories of resource extraction issuers, such as smaller
reporting companies or emerging growth companies.
    Several commenters opposed a longer transition period for any
category of issuer, including smaller reporting companies.\512\ These
commenters stated that issuers are generally on notice of the impending
requirements and that companies track the required payment types in the
normal course of doing business. They also noted that compliance costs
for smaller companies are likely to be significantly lower than for
large issuers since they usually have fewer payments to disclose. The
Department of Interior noted that the USEITI does not make distinctions
between issuers.
---------------------------------------------------------------------------

    \512\ See letters from Department of Interior and PWYP-US 1. See
also letters from ACEP; Global Witness 1; and Oxfam 1.
---------------------------------------------------------------------------

    Some commenters recommended delaying the effective date for all
issuers.\513\ One of these commenters recommended an effective date
beginning with a fiscal year ending no earlier than December 31,
2017,\514\ while another deferred to industry comments.\515\ Other
commenters

recommended delaying the effective date for specific categories of
issuers.\516\
---------------------------------------------------------------------------

    \513\ See letters from Encana and Ropes & Gray.
    \514\ See letter from Encana.
    \515\ See letter from Ropes & Gray.
    \516\ See letters from Cleary and Ropes & Gray. We address these
comments in Section II.G above.
---------------------------------------------------------------------------

3. Final Rules
    The final rules require a resource extraction issuer to comply with
Rule 13q-1 and Form SD for fiscal years ending no earlier than two
years after the effective date of the adopted rules. We believe that
this phase-in period is appropriate to provide all issuers with
sufficient time to establish the necessary systems and procedures to
capture and track all the required payment information before the
fiscal year covered by their first Form SD filing starts. It also
should afford issuers an appropriate opportunity to make any other
necessary arrangements (such as obtaining modifications to existing
contracts or seeking exemptive relief where warranted) to comply with
Section 13(q) and these rules. This compliance date should also provide
issuers with more time to consider the experience of companies
reporting under similar payment transparency regimes, such as the EU
Directives and ESTMA, which should reduce compliance costs.
    As proposed, we are also selecting a specific compliance date that
corresponds to the end of the nearest calendar quarter following the
effective date. Thus, under the final rules, the initial Form SD filing
for resource extraction issuers would cover the first fiscal year
ending on or after September 30, 2018 and would not be due until 150
days later. Since most issuers use a December 31 fiscal year end, the
filing deadline would not be until May 30, 2019 for most issuers. Given
the length of time between the adoption of these rules and the start of
the first fiscal year that must be reported, we do not believe any
additional accommodations are necessary for smaller reporting
companies, emerging growth companies, or other categories of issuers.
We note that not providing longer phase-in periods for specific
categories of issuers is consistent with the EITI and, for public
companies, with the EU Directives and ESTMA.

III. Economic Analysis

A. Introduction and Baseline

    We are adopting Rule 13q-1 and an amendment to Form SD to implement
Section 13(q), which was added to the Exchange Act by Section 1504 of
the Act. Section 13(q) directs the Commission to issue rules that
require a resource extraction issuer to disclose in an annual report
filed with the Commission certain information relating to payments made
by the issuer (including a subsidiary of the issuer or an entity under
the issuer's control) to a foreign government or the U.S. Federal
Government for the purpose of the commercial development of oil,
natural gas, or minerals.
    As discussed above, Congress intended that the rules issued
pursuant to Section 13(q) would help advance the important U.S. foreign
policy objectives of combatting global corruption and helping to
promote accountability, thereby potentially improving governance in
resource-rich countries around the world.\517\ The statute seeks to
achieve this objective by mandating a new disclosure provision under
the Exchange Act that requires resource extraction issuers to identify
and report payments they make to governments relating to the commercial
development of oil, natural gas, or minerals. While these objectives
and benefits differ from the investor protection benefits that our
rules typically strive to achieve, investors and other market
participants, as well as civil society in countries that are resource-
rich, may benefit from any increased economic and political stability
and improved investment climate that such transparency promotes.\518\
In addition, some commenters stated that the information disclosed
pursuant to Section 13(q) would benefit investors by, among other
things, helping them model project cash flows and assess political
risk, acquisition costs, and management effectiveness.\519\
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    \517\ See Section I.E of the Proposing Release.
    \518\ See also 156 Cong. Rec. S5873 (May 17, 2010) (Statement
from Senator Cardin) (``Transparency helps create more stable
governments, which in turn allows U.S. companies to operate more
freely--and on a level playing field--in markets that are otherwise
too risky or unstable.''); and 156 Cong. Rec. S3816 (May 17, 2010)
(Statement of Senator Lugar) (``Transparency empowers citizens,
investors, regulators, and other watchdogs and is a necessary
ingredient of good governance for countries and companies alike. . .
. Transparency also will benefit Americans at home. Improved
governance of extractive industries will improve investment climates
for our companies abroad, it will increase the reliability of
commodity supplies upon which businesses and people in the United
States rely, and it will promote greater energy security.'')
    \519\ See, e.g., letters from Calvert Investments (Mar. 1, 2011)
(``Calvert 1 (pre-proposal)''); California Public Employees
Retirement System (Feb. 28, 2011) (``CalPERS (pre-proposal)''); and
George Soros (Feb. 21, 2012) (``Soros (pre-proposal)'').
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    We are sensitive to the costs and benefits of the rules we adopt,
and Exchange Act Section 23(a)(2) requires us, when adopting rules, to
consider the impact that any new rule would have on competition. In
addition, Section 3(f) of the Exchange Act directs us, when engaging in
rulemaking that requires us to consider or determine whether an action
is necessary or appropriate in the public interest, to consider, in
addition to the protection of investors, whether the action will
promote efficiency, competition, and capital formation.\520\ We have
considered the costs and benefits that would result from the final
rules, as well as the potential effects on efficiency, competition, and
capital formation. Many of the potential economic effects of the final
rules would stem from the statutory mandate, while others would stem
from the discretion we are exercising in implementing the statutory
mandate. The discussion below addresses the costs and benefits that
might result from both the statute and our discretionary choices, as
well as the comments we received about these matters.\521\ In addition,
as discussed elsewhere in this release, we recognize that the final
rules could impose a burden on competition, but we believe that any
such burden that might result would be necessary and appropriate in
furtherance of the purposes of Exchange Act Section 13(q).
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    \520\ Some commenters incorrectly asserted that we are required
by statute to minimize costs. See, e.g., letter from API 1 at 15.
Although we do not agree with this assertion, in crafting the final
rules, we have sought to minimize costs to the extent possible, and
we have attempted to ensure that any costs we are imposing are
either necessary or appropriate in light of the foreign policy
interests underlying Section 13(q).
    \521\ As discussed above, our discretionary choices are informed
by the statutory mandate, and thus, discussion of the benefits and
costs of those choices will necessarily involve the benefits and
costs of the underlying statute.
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    As part of our analysis, we have quantified the potential economic
effects of the final rules wherever possible. Given both the nature of
the statute's intended benefits and the lack of data regarding the
benefits and the costs, in some cases we have been unable to provide a
quantified estimate. Nevertheless, as described more fully below, we
provide both a qualitative assessment of the potential effects and a
quantified estimate of the potential aggregate initial and aggregate
ongoing compliance costs. We reach our estimates by carefully
considering comments we received on potential costs and taking into
account additional data and information, including recent global
developments in connection with resource extraction payment
transparency. We rely particularly on those comment letters that
provided quantified estimates and were transparent about their
methodologies. As discussed in more detail below, after considering the
comment letters, we

determined that it was appropriate to modify and/or expand upon some of
the submitted estimates and methodologies to reflect data and
information submitted by other commenters, as well as our own judgment
and experience.
    The baseline the Commission uses to analyze the potential effects
of the final rules is the current set of legal requirements and market
practices.\522\ To the extent not already encompassed by existing
regulations and current market practices, the final rules likely will
have a substantial impact on the disclosure practices of, and costs
faced by, resource extraction issuers. The overall magnitude of the
potential costs of the final disclosure requirements will depend on the
number of affected issuers and individual issuers' costs of compliance.
We expect that the final rules will affect both U.S. issuers and
foreign issuers that meet the definition of ``resource extraction
issuer'' in substantially the same way, except for those issuers
already subject to similar requirements adopted in the EEA member
countries or Canada as discussed below in Section III.C.1. The
discussion below describes the Commission's understanding of the
markets that are affected by the final rules. We estimate the number of
affected issuers in this section and quantify their costs in Section
III.B.2 below.
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    \522\ See Section I above for a discussion of the current legal
requirements and significant international transparency regimes that
affect market practices.
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    To estimate the number of potentially affected issuers, we use data
from Exchange Act annual reports for 2015, the latest full calendar
year. We consider all Forms 10-K, 20-F, and 40-F filed in 2015 by
issuers with oil, natural gas, and mining Standard Industrial
Classification (``SIC'') codes \523\ and, thus, are most likely to be
resource extraction issuers. We also considered filings by issuers that
do not have the above mentioned oil, natural gas, and mining SIC codes
and added them to the list of potentially affected issuers if we
determined that they might be affected by the final rules.\524\ In
addition, we have attempted to remove issuers that use oil, natural
gas, and mining SIC codes but appear to be more accurately classified
under other SIC codes based on the disclosed nature of their business.
Finally, we have excluded royalty trusts from our analysis because we
believe it is uncommon for such companies to make the types of payments
that would be covered by the final rules. From these filings, we
estimate that the number of potentially affected issuers is 755.\525\
We note that this number does not reflect the number of issuers that
actually made resource extraction payments to governments in 2015, but
rather represents the estimated number of issuers that might make such
payments.
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    \523\ Specifically, the oil, natural gas, and mining SIC codes
considered are 1000, 1011, 1021, 1031, 1040, 1041, 1044, 1061, 1081,
1090, 1094, 1099, 1220, 1221, 1222, 1231, 1311, 1321, 1381, 1382,
1389, 1400, 2911, 3330, 3331, 3334, and 3339.
    \524\ These are issuers whose primary business is not
necessarily resource extraction but which have some resource
extraction operations, such as ownership of mines.
    \525\ In the Proposing Release, using calendar year 2014 data,
we estimated that the number of affected issuers would be 877.
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    In the following economic analysis, we discuss the potential
benefits and costs and likely effects on efficiency, competition, and
capital formation that might result from both the new reporting
requirement mandated by Congress and from the specific implementation
choices that we have made in formulating the final rules.\526\ We
analyze these potential economic effects in Sections III.B and III.C
and provide qualitative and, wherever possible, quantitative
discussions of the potential costs and benefits that might result from
the payment reporting requirement and specific implementation choices,
respectively.
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    \526\ Our consideration of potential benefits and costs and
likely effects on efficiency, competition, and capital formation
also is reflected throughout the discussion in Section II above.
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B. Potential Effects Resulting From the Payment Reporting Requirement

1. Benefits
    As noted above, we understand that Section 13(q) and the rules
required thereunder are intended to advance the important U.S. foreign
policy objective of combatting global corruption and helping to promote
accountability, thereby potentially improving governance in resource-
rich countries around the world.\527\ The statute seeks to realize
these goals by improving transparency about the payments that companies
in the extractive industries make to national and subnational
governments, including local governmental entities.\528\ While these
statutory goals and intended benefits are of global significance, the
potential positive economic effects that may result cannot be readily
quantified with any precision.\529\ The current empirical evidence on
the direct causal effect of increased transparency in the resource
extraction sector on societal outcomes is inconclusive,\530\ and
several academic papers have noted the inherent difficulty in
empirically validating a causal link between transparency interventions
and governance improvements.\531\
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    \527\ See Proposing Release, Section I.E.
    \528\ See id.
    \529\ Further, we note that the Commission is not statutorily
required to quantify the benefits here. See Lindeen et al. v. SEC,
2016 WL 3254610, *9 (Nos. 15-1149, 15-1150) (D.C. Cir. June 14,
2016) (explaining that the Commission is not required to ``conduct a
rigorous, quantitative economic analysis'' nor ``to measure the
immeasurable'') (internal quotation marks omitted); see also id.
(``find[ing] that the SEC's discussion of unquantifiable benefits
fulfills its statutory obligation to consider and evaluate'' the
potential economic effects of a Commission rule).
    \530\ For positive findings, see Caitlin C. Corrigan, ``Breaking
the resource curse: Transparency in the natural resource sector and
the extractive industries transparency initiative'', Resources
Policy, 40 (2014), 17-30 (finding that the negative effect of
resource abundance on GDP per capita, the capacity of the government
to formulate and implement sound policies and the level of rule of
law is mitigated in EITI countries but noting that the EITI has
little effect on the level of democracy, political stability and
corruption (the author also submitted a comment letter attaching an
updated version of the study; see letter from Caitlin C. Corrigan
(Feb. 16, 2016) (``Corrigan''))); Liz David-Barrett and Ken Okamura,
``The Transparency Paradox: Why Do Corrupt Countries Join EITI?'',
Working Paper No. 38, European Research Centre for Anti-Corruption
and State-Building (Nov. 2013) (finding that EITI compliant
countries gain access to increased aid the further they progress
through the EITI implementation process and that EITI achieves
results in terms of reducing corruption), available at https://eiti.org/document/transparency-paradox-why-do-corrupt-countries-join-eiti, and Maya Schmaljohann, ``Enhancing Foreign Direct
Investment via Transparency? Evaluating the Effects of the EITI on
FDI'', University of Heidelberg Discussion Paper Series No. 538
(Jan. 2013) (finding that joining the EITI increases the ratio of
the net foreign direct investment (``FDI'') inflow to GDP by 2
percentage points). For negative empirical evidence, see [Ouml]lcer,
Dilan (2009): Extracting the Maximum from the EITI (Development
Centre Working Papers No. 276): Organisation for Economic
Cooperation and Development (finding that the EITI has not been able
to significantly lower corruption levels). However, all these papers
discuss the earlier version of the EITI, which did not require