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New rules for oil and minerals

By Sheyna Steiner ·
Monday, August 27, 2012
Posted: 4 pm ET

Last week the Securities and Exchange Commission, or SEC, voted on two controversial amendments in the Dodd-Frank Act. The first requires oil and mining companies to disclose payments made to the U.S. government or foreign governments.

After the rule goes into effect, if companies are engaged in the business of extracting oil, natural gas or minerals from the planet, they must disclose payments made to governments in exchange for access. The types of payments to be disclosed include taxes, royalties, fees, production entitlements, bonuses, dividends and infrastructure improvements.

Publicly traded companies will be required to file the paperwork with the SEC within 150 days of the end of the fiscal year.

The move is designed to mitigate corruption in resource-rich countries, though critics of the rule contend that it will unduly constrain publicly traded companies.

According to The New York Times article, "U.S. oil and mining companies must disclose payments to foreign governments," the rule will apply to 1,100 companies and payments more than $100,000 made after September 2013.

The SEC did leave a little to the imagination in their definitions of how companies will report payments and the projects to which they correspond. According to the statement released about the rule, the term "project" was intentionally left vague "to provide resource extraction issuers flexibility in applying the term to different business contexts."

A supporter of the SEC rule, the group Publish What You Pay, an advocacy group working for more transparency in the extractive industry, notes that it will be important to establish a meaningful definition of "project" that isn't open to interpretation.

Conflict minerals

The SEC also voted on another Dodd-Frank amendment last Wednesday: the conflict minerals provision. The provision requires companies to disclose the use of minerals from the Democratic Republic of the Congo, or DRC, or an adjoining country. Prompting the amendment is the ongoing humanitarian crisis in the DRC area in which armed groups profit from the mineral trade and fund their activities.

The rule governs public companies that use minerals including gold, tantalum, tin and tungsten, if "those minerals are 'necessary to the functionality or production of a product' manufactured by those companies" or contracted to be manufactured by the company.

Under the SEC's final rule, companies have between two and four years, depending on size, to determine the origination of minerals in their products.

Since the passage of Dodd-Frank in 2010, some companies have moved to flush conflict minerals from their supply chains. According to a study released by the Enough Project earlier this month, "A majority of leading consumer electronics companies have moved ahead in addressing conflict minerals in their supply chains."

The report ranks companies on their use of conflict minerals and plans to trace supply chains. At the top of the list are Intel, Motorola Solutions, HP and Apple, reports the study, "Taking conflict out of consumer gadgets: Company rankings on conflict minerals 2012."

Nintendo, Sharp, HTC, Nikon and Canon are lagging the leaders, the study says. However, consumer electronics firms are far ahead of other industries that use conflict minerals including automotive, jewelry, mining and industrial machinery.

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1 Comment
Time Leverage Capital News
September 22, 2012 at 8:52 am

"Oil Little Changed as Jobless Claims Curb Gasoline Rally"

- Oil was little changed as gasoline and heating oil futures climbed while more Americans than

forecast applied for unemployment benefits.

- Oil for October delivery settled at $91.87 a barrel on the New York Mercantile Exchange, the fourth

consecutive decline.

- Total gasoline inventories fell 1.41 million barrels to 196.3 million, the eighth consecutive

decline and also the lowest level since October 2008.


Time Leverage Capital