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Volume XI, Number 269

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Does The SEC Grant Only Industry Requests?

Yesterday, the Securities and Exchange Commission adopted final rules for the disclosure of payments by "resource extraction issuers".  These rules implement Section 13(q) of the Securities Exchange Act of 1934.  Section 13(q) was added by the Dodd-Frank Wall Street Reform and Consumer Protection Act.  In a comment letter to the SEC, I recommended that the SEC define "mineral". See Resource Extraction Payments Disclosure: “I’ve Information Vegetable, Animal, and Mineral”.   The SEC, however, has resolutely refused to define the term:

'We decline to follow the recommendation of the commenter [yours truly] who suggested that we define the term 'mineral.'"

The SEC's explanation, however, is revealing:

"In this regard, we note that, in response to the 2019 proposed  rulemaking, as well as to the 2016 rulemaking, no industry commenter has requested that we  provide a definition of 'minerals.'"

The takeaway appears to be that the SEC responds favorably only to industry requests.  The SEC also doubled down on its assertion that the term is "commonly understood":

"This reinforces our belief that the term “minerals” is commonly understood."

As I pointed out in my comment letter, however, the U.S. Supreme Court has reached the opposite conclusion:

"The word ‘mineral’ is used in so many senses, dependent upon the context, that the ordinary definitions of the dictionary throw but little light upon its signification in a given case."

Northern Pacific R. Co. v. Soderberg, 188 U. S. 526, 530 (1903).   Further, as I pointed out in my comment letter, the SEC's claim to a “common understanding” is belied by the multiplicity of definitions that can found in federal regulations, including the following:

“Minerals include oil, gas, sulphur, geopressured-geothermal and associated resources, and all other minerals which are authorized by an Act of Congress to be produced from 'public lands' as defined in section 103 of the Federal Land Policy and Management Act of 1976.” 30 C.F.R. § 282.3.

“Mineral means clay, stone, sand, gravel, metalliferous ore, non-metalliferous ore, or any other solid material or other matter of commercial value.” 15 C.F.R. § 922.3.

“Mineral means oil, gas, and sulfur; it also includes sand, gravel, and salt used to facilitate the development and production of oil, gas, and sulfur.” 30 C.F.R. § 556.105(b).

The SEC did accept one of my suggestions ("In response to a suggestion by one commenter, the final rules use the disjunctive 'or' in the definition of extraction.").  Oddly, the SEC ignored my comment that defining "extraction" as "extraction" is circular.  

© 2010-2021 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume X, Number 352
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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
Partner

Keith Bishop works with privately held and publicly traded companies on federal and state corporate and securities transactions, compliance, and governance matters. He is highly-regarded for his in-depth knowledge of the distinctive corporate and regulatory requirements faced by corporations in the state of California.

While many law firms have a great deal of expertise in federal or Delaware corporate law, Keith’s specific focus on California corporate and securities law is uncommon. A former California state regulator of securities and financial institutions, Keith has decades of...

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