Thousands of public companies to assess use of minerals from Democratic Republic of Congo and report payments to governments exceeding $100,000
The SEC has passed controversial new rules obliging thousands of public companies to disclose any use of so-called ‘conflict minerals’ and forcing oil and mining companies to disclose payments to foreign governments in a series of disclosure changes under the Dodd-Frank Act.
The new disclosure rule surrounding conflict minerals, adopted in a 3-to-2 vote by the SEC, will force companies to document the origin of any tantalum, gold, tungsten or tin they use and extensively report any use of the minerals from countries in conflict such as the Democratic Republic of Congo.
It will also force companies to assess whether they or their suppliers use these minerals in their production processes.
The rule, which was widely contested as too expensive and cumbersome by several companies, was proposed at the end of 2010 and was scheduled to take effect in April of 2011 but was delayed amid heated debate. Companies must start disclosing their use of conflict minerals by May 2014.
‘We have received significant public input on this rulemaking, and in response we incorporated many changes from the proposal that are designed to address concerns about the costs,’ says Mary Schapiro, chairman of the SEC, in a statement.
‘I believe the final rule faithfully implements the statutory requirement as mandated by Congress in a fair and balanced manner.’
Also at Wednesday’s meeting, the SEC passed in a 2-to-1 vote, with two abstentions, a rule forcing oil, natural gas and minerals companies to disclose payments of more than $100,000 to foreign governments, starting with fiscal years after September 30, 2013.
Besides extraction, the rule covers import, export, processing, exploration and acquisitions of oil, natural gas and minerals.
Companies must start reporting taxes, fees, royalties, bonuses, dividends, infrastructure improvement costs and other payments to governments, detailing the amounts per project and per government as well as outlining the purpose of the payments.
Mining and oil companies and associations criticized the new rules, saying they would place US companies at a disadvantage internationally.
‘The SEC appears to want to require publicly traded energy firms to release commercially sensitive, detailed payment information about every foreign and US project,’ John Felmy, chief economist for the American Petroleum Institute, says in a release.
‘With a few clicks of a mouse, state-owned foreign firms – companies like the China National Petroleum Company and Russia’s Gazprom – could plunder that information, which could help them determine their rivals’ strategies and resource levels.’
The Republican commissioners voted against both rules, while Schapiro and commissioner Troy Paredes were recused from the vote on the disclosure of payments to governments by the oil, natural gas and minerals companies.
