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The SEC’s New Mine Safety Disclosure Rules

January 3, 2012

Photo by Peter Craine. Some rights reserved.

On December 21st, the SEC published rule amendments implementing Section 1503 of the Dodd-Frank Act. Section 1503(a) of the Act requires issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine to disclose in their periodic reports filed with the Commission information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities. Section 1503(b) of the Act mandates the filing of a Form 8-K disclosing the receipt of certain orders and notices from the Mine Safety and Health Administration.

The disclosure requirements set forth in Section 1503 of the Act are currently in effect. In order to facilitate consistent compliance with the Act’s requirements, the amendments codify those requirements into the SEC’s disclosure rules and specify their scope and application. The amendments also require a limited amount of additional disclosure to provide context for certain items required by the Act.

In general, the final amendments do not expand the required disclosure beyond that required by Section 1503. The Commission found that the added burden of those additional requirements likely would have outweighed the potential incremental benefits of the additional disclosure. The amendments, therefore, apply only to mines located in the U.S. and require disclosure for each distinct mine covered by the Mine Act. Issuers are not permitted to group mines by project or geographic region. 

Although the final amendments do not extend to foreign mines, to the extent mine safety issues are material, disclosure could be required pursuant to Regulation S-K: Item 303 (Management’s Discussion and Analysis of Financial Condition and Results of Operations), Item 503(c) (Risk Factors), Item 101 (Description of Business), or Item 103 (Legal Proceedings).

Orders and citations issued to independent contractors (who are not subsidiaries of an issuer) who are working at the issuer’s mine site would not need to be reported by the issuer. As a result, some orders or citations could go unreported if the independent contractor has no other reporting obligation. However, if individual orders or citations, or a pattern of violations, at mines owned by a reporting issuer but operated by an independent contractor are material to the issuer, disclosure could be required under Regulation S-K.

The new amendments require issuers that have matters to report to include a brief disclosure in Part II of Form 10-Q, Part I of Form 10-K and Forms 20-F and 40-F, noting that they have mine safety violations or other regulatory matters to report in accordance with Section 1503(a), and that the required information is included in an exhibit to the filing. The exhibit would include the detailed disclosure about specific violations and regulatory matters required by Section 1503(a). The final amendments do not require disclosure in the body of the periodic report of certain information, such as all fatal accidents or receipt of notice that a mine has a pattern of violations.

The new amendments do not allow issuers to exclude information about orders or citations that were received during the time period covered by the report but subsequently dismissed, reduced or vacated.

The new amendments affect Form 10-K, Form 10-Q, Form 20-F and Form 40-F, to require the disclosure required by Section 1503(a) of the Act; new Item 104 of Regulation S-K, which sets forth the disclosure requirements for Forms 10-Q and 10-K; and amendments to Item 601 of Regulation S-K, to add a new exhibit to Form 10-K and Form 10-Q for provision of this information. Amendments to Forms 20-F and 40-F, to include the same disclosure requirements as those adopted for issuers that are not foreign private issuers, are also included. In addition, the SEC is adding a new item to Form 8-K to implement the requirement imposed by Section 1503(b) of the Act, and amending Form S-3 to add the new Form 8-K item to the list of Form 8-K items the untimely filing of which will not result in loss of Form S-3 eligibility.

The new amendments are effective January 27, 2012.

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