Resource Extraction - PRA Supporting Statement.Final.03-23-2021

SUPPORTING STATEMENT FOR THE PAPERWORK REDUCTION ACT
INFORMATION COLLECTION SUBMISSION FOR FINAL 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 Exchange Act Release No. 34-90679 (the “Adopting Release”), the
Commission adopted 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 Commission previously adopted rules under Section 13(q) in 2016,2 but those rules
were disapproved by a joint resolution of Congress in 2017. 3 Although the joint resolution
vacated the 2016 Rules, the statutory mandate under Section 13(q) of the Exchange Act
remained in effect. Therefore, the Commission proposed new Section 13(q) rules in December,
2019,4 and adopted those rules largely as proposed in December, 2020.
The 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).

1

Disclosure of Payments by Resource Extraction Issuers, Release No. 34-90679 (Dec. 16, 2020).

2

See Release No. 34-78167 (June 27, 2016) [81 FR 49359 (July 27, 2016)] (“2016 Rules Adopting Release”).

3

See H.R.J. Res. 41, 115th Cong. (2017) (enacted).

4

See Release No. 34-87783 (Dec. 18, 2019) [85 FR 2522 (Jan. 15, 2020)].

2. PURPOSE AND USE OF THE INFORMATION COLLECTION
Form SD is currently used by certain companies to disclose their use of conflict minerals if
those minerals are “necessary to the functionality or production of a product” manufactured by
those companies. This conflict minerals disclosure is required by Rule 13p-1 of the Exchange
Act which implemented Section 1502 of the Dodd-Frank Act. The amendments do not affect the
Form SD disclosure requirements that relate to conflict minerals.
The Adopting Release amends Form SD to also accommodate disclosures required by new
Rule 13q-1. The purpose of this rule is to implement Section 1504 of the Dodd-Frank 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 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 U.S. forms
or rules that conflict with or substantially duplicate the requirements of Form SD. Although
some foreign jurisdictions have adopted rules that require similar disclosure by resource
extraction issuers, the final rules permit an issuer to submit such disclosure in satisfaction of the
Commission’s rules as long as the Commission has determined that the requirements of the
foreign jurisdiction (referred to as an “alternative reporting regime”) satisfy the transparency
objectives of Section 13(q). Consequently, we believe that the final rules will result in little
duplication of information.
5. REDUCING THE BURDEN ON SMALL ENTITIES
Form SD applies to 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. However, the final rules exempt
smaller reporting companies and emerging growth companies from the Section 13(q)
requirements as long as they are not subject to an alternative reporting regime that the
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Commission has determined satisfies the transparency objectives of Section 13(q). Most small
entities will fall within the scope of this exemption and, therefore, will not be subject to the final
rules. Moreover, if a small entity is subject to an alternative reporting regime and, therefore, is
not eligible for the exemption, that entity may satisfy its Section 13(q) reporting obligations by
submitting to the Commission its home country report, subject to certain conditions. Those
small entities will incur only minor costs of translating the home country report into English, if
necessary, and formatting the report into XBRL. Accordingly, the Commission believes that the
final rules will not have a significant economic impact on a substantial number of small entities.
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) to 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 will 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
There are no special circumstances.
8. CONSULTATIONS WITH PERSONS OUTSIDE THE AGENCY
The Commission issued Securities Exchange Act Release No. 34-87783 (“Proposing
Release”) to solicit comment on the new “collection of information” requirements and associated
paperwork burdens. 5 Issuers, investors, industry groups, civil society organizations, and other
market participants provided comments in response to the solicitation for comment in the
Proposing Release. In addition, the Commission and staff participated in ongoing dialogue with
representatives of various interested parties through meetings and telephone conferences.
Comments received on the proposal are available at: https://www.sec.gov/comments/s7-2419/s72419.htm. The Commission did not receive any comments that specifically addressed the
estimated paperwork burdens of the proposed rules, although some parties commented generally
on whether the proposed rules would impose a lesser compliance burden than the Section 13(q)
rules that the Commission adopted in 2016 and that were subsequently disapproved by Congress
in 2017.

5

See, e.g., Section IV of Release No. 34-87783 (Dec. 18, 2019).

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9. PAYMENT OR GIFT TO RESPONDENTS
No payment or gift to respondents.
10. CONFIDENTIALITY
The collection of information is a public document.
11. SENSITIVE QUESTIONS
Form SD has no information of a sensitive nature, including social security numbers that
will be required under this collection of information. The information collection collects basic
Personally Identifiable Information (PII) that may include name, telephone number, and job title.
However, the agency has determined that the information collection does not constitute a system
of record for purposes of the Privacy Act. Information is not retrieved by a personal identifier.
In accordance with Section 208 of the E-Government Act of 2002, the agency has conducted a
Privacy Impact Assessment (PIA) of the EDGAR system, in connection with this collection of
information. The EDGAR PIA, published on February 5, 2020, is provided as a supplemental
document and is also available at https://www.sec.gov/privacy.
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.
The current paperwork burden estimates for Form SD include burden estimates
associated with complying with the conflict mineral disclosure requirements that are not affected
by the final amendments as well as burden estimates for the disapproved 2016 Rules, as
discussed below. We currently estimate for Form SD that there are 1,481 responses per year,
and that 75% of the burden per response is prepared internally by the issuer and 25% of the
burden per response is prepared by outside professionals retained by the issuer at a cost of $400
per hour. We currently estimate that the preparation and filing of Form SD requires a total of
528,846 internal hours and outside professional costs of $113,012,752 on average per year.
This current OMB inventory for Form SD includes the paperwork burden for the 2016
Rules under Section 13(q) that were later disapproved by Congress. That paperwork burden
included an increase of 617 responses, an increase of 289,878 internal burden hours, and an
increase of $71,487,820 in professional costs.
We estimate that the burden to prepare and file Form SD for purposes of the new rules
will be 500 burden hours per respondent for the 237 issuers that we estimate will bear the full
costs of compliance with the rules, for an aggregate of 88,875 hours,6 and approximately 25
6

237 x 500 hrs. = 118,500 hrs. 118,500 hrs. x 0.75 = 88,875 hrs.

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burden hours per respondent for the 177 issuers that we estimate will bear some, but not the full,
costs of compliance due to their compliance with similar rules in alternative reporting regimes,
for an aggregate of 3,319 hours.7 Thus, for purposes of the Paperwork Reduction Act, we
estimate that the final rules will result in a total of 414 responses8 and an incremental internal
burden of 92,194 hours.9
We estimate that an issuer bearing the full costs of the final rules will incur outside
professional costs of $11,850,000.10 We also estimate that those issuers will incur additional
initial compliance costs for IT consulting, training and travel of $100,000 per respondent, for an
aggregate of $23,700,000.11 Thus, issuers bearing the full costs of compliance will incur
incremental outside costs of $35,550,000.12 We estimate that issuers subject to alternative
reporting regimes in foreign jurisdictions that the Commission has determined meet the
transparency objectives of Section 13(q) will incur outside professional costs of $442,400.13 We
do not believe that those issuers will incur additional initial compliance costs because those
issuers should already have IT systems in place to comply with the foreign regimes.
Accordingly, we estimate that affected issuers will incur an aggregate of $35,992,400 in outside
professional costs as a result of the final rules.14
Because the current OMB inventory for Form SD includes the paperwork burden for the
2016 Rules, which was higher in all respects than the paperwork burden for the new rules, we are
submitting a program adjustment that will decrease the number of responses by 203. 15 188 of
those responses incurred the full costs of the 2016 Rules 16 and 15 incurred some, but not the full,
burden as a result of being subject to similar requirements in alternative reporting regimes.17 The
decrease in the number of responses under the new rules is the result of a conditional exemption
for smaller reporting companies and emerging growth companies, which the 2016 Rules did not
7

177 x 25 hrs. = 4,425 hrs. 4,425 hrs. x 0.75 = 3,319 hrs.

8

237 + 177 = 414.

9

88,875 hrs. + 3,319 hrs. = 92,194 hrs.

10

118,500 hrs. x 0.25 = 29,625 hrs. 29,625 hrs. x $400/hr. = $11,850,000.

11

237 x $100,000 = $23,700,000.

12

$11,850,000 + $23,700,000 = $35,550,000.

13

4,425 hrs. x 0.25 = 1,106 hrs. 1,106 hrs. x $400/hr. = $442,400.

14

$35,550,500 + $442,400 = $35,992,400.

15

617- 414 = 203.

16

See 2016 Rules Adopting Release at Section IV.B (stating that 425 issuers will bear the full costs of
compliance). 425 – 237 =188.

17

See id. (Stating that 192 issuers will bear significantly lower costs because they are already subject to similar
requirements in foreign reporting regimes). 192 – 177 = 15.

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include. Having fewer responses under the new rules will result in a decrease in the number of
responses from 1,481 to 1,278. 18
There will also be a corresponding decrease in internal burden hours. Because there will
be 188 fewer issuers that will incur full compliance costs compared to the paperwork burden
estimates for the 2016 Rules, there will be a decrease of 70,500 hours for those issuers. 19 In
addition, because there will be 15 fewer issuers that are subject to alternative reporting regimes,
there will be a decrease of 281 hours for those issuers. 20 Consequently, the total number of
internal burden hours will decrease from 528,846 hours to 458,065 hours (a decrease of 70,781
hours).21
Finally, there will be a corresponding decrease in professional costs. Because there will
be 188 fewer respondents incurring the full compliance burden, professional costs for those
respondents will decrease by $9,400,000.22 Because there will be 15 fewer issuers that are
subject to alternative reporting regimes, there will be a decrease of $37,600 for those issuers. 23
Consequently, the total amount of professional costs will decrease from $113,012,752 to
$103,575,152 (a decrease of $9,437,600).
The table below illustrates the incremental change to the annual compliance burden of the
affected form, in hours and in costs, together with the total requested reporting burden and costs,
under the final amendments.
Table 1.
Form

SD

Requested Paperwork Burden under the Proposed Amendments

Current Burden

Program Adjustment

Current
Annual
Responses

Current
Burden
Hours

Current Cost
Burden

Number
of
Affected
Responses

(A)

(B)

(C)

1,481

528,846

$113,012,752

Requested Adjustment in Burden

Professional
(External)
Costs

Annual
Responses

Burden
Hours

Cost
Burden

(D)

Number
of
Company
Hours
(Internal)
(E)

(F)

(G) =
(A) - (D)

(H) =
(B) - (E)

(I) =
(C) - (F)

203

70,781

$9,437,600

1,278

14. COSTS TO FEDERAL GOVERNMENT

18

1,481 – 203 = 1,278.

19

188 x 500 hrs. = 94,000 hrs. 94,000 hrs. x .75 = 70,500 hrs.

20

15 x 25 hrs. = 375 hrs. 375 hrs. x .75 = 281 hrs.

21

70,500 hrs. + 281 hrs. = 70,781 hrs. 528,846 hrs. – 70,781 hrs. = 458,065 hrs.

22

188 x 500 hrs. = 94,000 hrs. 94,000 hrs. x .25 = 23,500 hrs. x $400/hr. = $9,400,000.

23

15 x 25 hrs. = 375 hrs. 375 hrs. x .25 = 94 hrs. 94 hrs. x $400/hr. = $37,600.

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458,065

$103,575,152

The annual cost of reviewing and processing disclosure documents, including registration
statements, post-effective amendments, proxy statements, annual reports and other filings of
operating companies amounted to approximately $103,479,690 in fiscal year 2019, based on the
Commission’s computation of the value of staff time devoted to this activity and related
overhead.
15. REASON FOR CHANGE IN BURDEN
As explained in further detail in Items 12 and 13 above, the final rules implement anew
Section 13(q) by requiring resource extraction issuers to include on Form SD certain payments
made to foreign governments and the U.S. Federal Government. Thus, Form SD will again be
used to satisfy the disclosure requirements under both Sections 13(p) and 13(q) of the Exchange
Act and the OMB inventory for this collection of information will include burden estimates to
comply with both statutes. However, because the new Section 13(q) rules include a conditional
exemption for smaller reporting companies and emerging growth companies that was not
included in the 2016 Rules, the burden estimates for the new rules are less than the burden
estimates for the 2016 Rules. We are therefore submitting a program adjustment to decrease the
current OMB inventory by: 203 responses, internal burden hours by 70,781 hours, and
professional costs by $9,437,600.
The new internal burden and professional cost estimates for Form SD represent the
maximum annual internal burden and professional costs for this collection of information. The
actual annual internal burden and professional costs for Form SD may vary because not all
issuers will submit Form SD to satisfy disclosure obligations under both Sections 13(p) and
13(q) of the Exchange Act. We expect that some issuers will file Form SD only to meet their
disclosure obligations under Rule 13p-1 and others will submit Form SD only to satisfy their
disclosure obligations pursuant to Rule 13q-1, although we cannot quantify these issuers with
any degree of certainty.
16. INFORMATION COLLECTION PLANNED FOR STATISTICAL PURPOSES
The information collection does not employ statistical methods.
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
There are no exceptions to certification for Paperwork Reduction Act submissions.

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B. STATISTICAL METHODS
The information collection does not employ statistical methods.

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Form SD Short Statement
Form SD is the specialized disclosure form that is currently used to file Conflict Minerals
Reports pursuant to Rule 13p-1 of the Exchange Act. The current OMB inventory also includes
burden estimates for the 2016 Rules that implemented Section 13(q) of the Exchange Act but
were later disapproved by Congress. The Adopting Release amends Form SD to re-implement
Section 13(q) by including on that collection of information the disclosures required by resource
extraction issuers under Section 13(q) pursuant to Rule 13q-1. For purposes of the Paperwork
Reduction Act, and after taking into account a program adjustment to the burden estimates of the
2016 Rules, we estimate that, for this collection of information, the final amendments will result
in a decrease in annual responses from 1,481 to 1,278 responses; a decrease in internal burden
hours 70,781 hours; and a decrease in professional costs of $9,437,600.

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