Final Resource Extraction - PRA Supporting Statement

SUPPORTING STATEMENT FOR THE PAPERWORK REDUCTION ACT
INFORMATION COLLECTION SUBMISSION FOR PROPOSED RULES UNDER THE
SECURITIES EXCHANGE ACT OF 1934 AND DODD-FRANK WALL STREET
REFORM AND CONSUMER PROTECTION ACT
This supporting statement is part of a submission under the Paperwork Reduction Act of
1995, 44 U.S.C. §3501, et seq.
A. JUSTIFICATION
1. CIRCUMSTANCES MAKING THE COLLECTION OF INFORMATION
NECESSARY
In Securities Act Release No. 34-76620 (the “Proposing Release”), the Commission
proposed amendments to Form SD to implement Section 13(q) of the Securities Exchange Act of
1934 (the “Exchange Act”).1 Section 13(q) was added by Section 1504 of the Dodd-Frank Wall
Street Reform and Consumer Protection Act (“Dodd-Frank Act”). Section 13(q) requires the
Commission to issue rules requiring resource extraction issuers to include in an annual report
information relating to certain payments made by the issuer, a subsidiary of the issuer, or an
entity under the control of the issuer, to a foreign government or the federal government for the
purpose of the commercial development of oil, natural gas, or minerals. Section 13(q) requires a
resource extraction issuer to provide information about the type and total amount of certain
payments made for each project related to the commercial development of oil, natural gas, or
minerals, and the type and total amount of payments made to each government. In addition,
Section 13(q) requires a resource extraction issuer to provide information regarding those
payments in an interactive data format.
The proposed amendments contain “collection of information” requirements within the
meaning of the Paperwork Reduction Act of 1995. The title of the collection of information is:


“Form SD” (OMB Control No. 3235-0697).

2. PURPOSE AND USE OF THE INFORMATION COLLECTION
The purpose of the proposed new regulation is to implement Section 1504 of the DoddFrank Act, which added new Section 13(q) to the Exchange Act. As discussed above,
Section 13(q) requires the Commission to issue rules requiring resource extraction issuers to
include in an annual report information relating to any payment made by the issuer, a subsidiary
of the issuer, or an entity under the control of the issuer, to a foreign government or the federal
government for the purpose of the commercial development of oil, natural gas, or minerals. A
primary goal of such transparency is to help empower citizens of those resource-rich countries to
hold their governments accountable for the wealth generated by those resources. To accomplish
this goal, Congress created a disclosure regime in Exchange Act Section 13(q) that would

1

Disclosure of Payments by Resource Extraction Issuers, Release No. 34-76620 (Dec. 11, 2015) [80 FR 80057].

support the commitment of the U.S. federal government to international transparency promotion
efforts relating to the commercial development of oil, natural gas, or minerals.
3. CONSIDERATION GIVEN TO INFORMATION TECHNOLOGY
Form SD is filed electronically with the Commission using the Commission’s Electronic
Data Gathering and Retrieval (EDGAR) system.
4. DUPLICATION OF INFORMATION
The Commission makes every effort to coordinate with other regulatory entities when
necessary or appropriate in the public’s interest and for the protection of investors and to
streamline regulations to enhance the production of capital. We are not aware of any forms or
rules that conflict with or substantially duplicate the requirements of Form SD.
5. REDUCING THE BURDEN ON SMALL ENTITIES
Form SD applies to all issuers that are required to file annual reports with the
Commission under Section 13(a) or Section 15(d) of the Exchange Act, and that are engaged in
the commercial development of oil, natural gas, or minerals. The requirements of the proposed
regulation do not vary based on the size of the issuer. The Commission believes that the
proposed rules would impact some small entities that meet the definition of resource extraction
issuer under Section 13(q).
6. CONSEQUENCES OF NOT CONDUCTING COLLECTION
Congress elected to use the disclosure requirements in the securities laws to increase the
transparency of payments made by oil, natural gas, and mining companies to governments for the
purpose of the commercial development of their oil, natural gas, and minerals. A primary goal
of such transparency is to help empower citizens of those resource-rich countries to hold their
governments accountable for the wealth generated by those resources. To accomplish this goal,
Congress created a disclosure regime in Exchange Act Section 13(q) that would support the
commitment of the U.S. federal government to international transparency promotion efforts
relating to the commercial development of oil, natural gas, or minerals. The new rule and
amendment to Form SD implement Exchange Act Section 13(q) by setting forth the disclosure
requirements for resource extraction issuers. Failure to require the collection of information
would frustrate the statutory intent of Section 1504 of the Dodd-Frank Act and Exchange Act
Section 13(q).
7. SPECIAL CIRCUMSTANCES
None.

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8. CONSULTATIONS WITH PERSONS OUTSIDE THE AGENCY
The Commission has issued the Proposing Release soliciting comment on the new
“collection of information” requirements and associated paperwork burdens.2 A copy of the
Proposing Release is attached. In response to the solicitation for comment in the Proposing
Release, registrants, investors and other interested parties provide comments. In addition, the
Commission and staff participate in ongoing dialogue with representatives of various market
participants through public conferences, roundtables and meetings. The Commission will
consider all comments received prior to publishing the final rule as required by
5 C.F.R. 1320.11(f). Comments received on the proposal are available at
http://www.sec.gov/comments/s7-25-15/s72515.shtml.
9. PAYMENT OR GIFT TO RESPONDENTS
Not applicable.
10. CONFIDENTIALITY
The proposed rules do not prevent requests for confidential treatment from being made
under the Commission’s existing rules. Otherwise, the collection of information is a public
document.
11. SENSITIVE QUESTIONS
No information of a sensitive nature would be required under this collection of
information. The information collection collects basic Personally Identifiable Information
(“PII”) that may include: name; business address; residential address (for sole proprietor only);
telephone/cellular/facsimile number; email address; and Tax ID Number (“TIN”). The
information collection is covered under the Systems of Records Notice (SORN), which may be
found at the following link: https://www.sec.gov/about/privacy/sorn/secsorn6.pdf. The Privacy
Impact Assessment (“PIA”) is provided as a supplementary document.
12/13. BURDEN OF INFORMATION COLLECTION AND COSTS TO
RESPONDENTS
The estimated burden hours and cost burden are made solely for the purposes of the
Paperwork Reduction Act and represent the average burden for all issuers. The cost burden is
not derived from a comprehensive or even a representative survey of the costs of Commission
rules and forms.

2

See Release No. 34-76620.

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Form SD is currently estimated to have a total burden of 311,437 hours with 864
responses per year. The current estimate includes burden estimates for Form SD associated with
complying with Section 13(p). Table 1 illustrates the current estimated total annual compliance
burden, in hours and in costs, of the collection of information pursuant to Form SD.
Table 1.

Form SD

Estimated paperwork burden under Form SD, prior to proposed
amendments relating to Form SD
Number of
responses

Burden
hours/form

Total burden
hours

Internal
issuer time

External
professional time

Professional
costs

864

480.61

311,437

233,577.75

77,859.25

$41,523,840

We believe that the proposed amendments relating to Form SD, if adopted, would
increase the current estimated paperwork burden of the form shown in Table 1 above by adding
the estimated burden associated with complying with Section 13(q). For purposes of the
Paperwork Reduction Act, we estimate that the burden to prepare and file proposed Form SD for
purposes of the proposed rules is 667 hours for the 425 issuers that we estimate would bear the
full costs of compliance with the proposed rules and approximately 33 hours for the 192 issuers
that we estimate would not bear the full costs of compliance due to their compliance with similar
rules in foreign jurisdictions. We also estimate that the overall number of Form SD filings
would increase from the current estimate of 864 per year to 1,481 per year.
We estimate that 75% of the hours per response is prepared internally by the issuer for an
annual total reporting burden for the proposed rules of approximately 217,408.65 hours ({[667
hours per response x 425 responses] + [33.35 hours per response x 192 responses]} x 0.75). We
estimate that 25% of the hours per response is prepared by outside professionals retained by the
issuer at a cost of $400 per hour. In addition, we estimate that initial compliance costs would
include $100,000 for IT consulting, training, and travel costs. These additional IT costs would
not apply to the 192 issuers that we estimate would not bear the full costs of compliance, because
those issuers would already have IT systems in place to comply with foreign laws. Thus, we
estimate a total cost burden for the proposed rules of $71,487,820 (((667 hours per response x
425 responses) + (33.35 hours per response x 192 responses)) x 0.25 x $400) + ($100,000 x
425)). Table 2 illustrates the estimated total annual compliance burden, in hours and in costs, of
the collection of information pursuant to Form SD following these amendments.
Table 2.

Form SD

Estimated paperwork burden under Form SD, post-amendments relating to
Form SD
Number of
responses

Burden
hours/form

Total burden
hours

Internal
issuer time

External
professional time

Professional
costs

1,481

406

601,315.2

450,986.4

150,328.8

$113,011,660

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14. COSTS TO FEDERAL GOVERNMENT
We estimate that the cost of preparing the amendments would be approximately
$150,000.
15. REASON FOR CHANGE IN BURDEN
As explained in further detail in Items 12 and 13 above, the increase in burden for
Form SD corresponds to new disclosure requirements for resource extraction issuers. These
disclosure requirements implement Section 13(q) by requiring resource extraction issuers to
include in an annual report information about certain payments made to foreign governments and
the U.S. federal government. As discussed above, the approximately 1,481 issuers required to
file on Form SD annually would increase the current paperwork burden under Form SD from
311,437 hours to 601,315.2 hours, an increase of 289,878 hours. There would be a
corresponding increase of $71,487,820 in cost burden.
16. INFORMATION COLLECTION PLANNED FOR STATISTICAL PURPOSES
Not applicable.
17. APPROVAL TO OMIT EXPIRATION DATE
We request authorization to omit the expiration date on the electronic version of Form SD
for design and scheduling reasons. Including the expiration date on the electronic version of the
form will result in increased costs, because the need to make changes to the form may not follow
the EDGAR application’s scheduled version release dates. The OMB control number will be
displayed.
18. EXCEPTIONS TO CERTIFICATION FOR PAPERWORK REDUCTION ACT
SUBMISSIONS
Not applicable.
B. STATISTICAL METHODS
Not applicable.

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