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Client Alert

Understanding the SEC’s New Mining Disclosure Rules: Questions and Answers

February 5, 2019

by Christopher L. Doerksen and Kimberley R. Anderson

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On October 31, 2018, the SEC adopted final rules effecting a complete overhaul of the technical disclosure requirements applicable to companies engaged in material mining operations, including royalty companies.  Upon effectiveness, the new rules will replace the SEC’s decades-old guidelines, set forth in Industry Guide 7 (Guide 7), with new subpart 1300 of Regulation S-K, based on the Committee for Mineral Reserves International Reporting Standards (CRIRSCO).  All SEC reporting companies, other than those who file under the Canada-U.S. Multijurisdictional Disclosure System (MJDS), will be required to comply with the new rules for their first fiscal year beginning on or after January 1, 2021.  Foreign private issuers who file on Forms 20-F, F-1, F-3 or F-4 will no longer be permitted to include non-compliant disclosures in such filings.  The final rules can be found here.

In this corporate update, we provide a discussion of the final rules in question and answer format.  To move forward to a particular question, you may click on one of the links below:

The SEC’s guidelines for mining disclosure, currently set forth in Industry Guide 7 (Guide 7), have not been updated for more than 30 years.  During this period, mining has become an increasingly globalized industry and several foreign countries have adopted mining disclosure standards based on the Committee for Mineral Reserves International Reporting Standards (CRIRSCO), which significantly differ from Guide 7.  For example, unlike Guide 7, CRIRSCO standards:

  • Require companies to disclose material mineral resources;
  • Require that any public report about a company’s exploration results, mineral resources and mineral reserves be prepared by a “competent or qualified person”; and
  • Permit disclosure of mineral reserves to be based on a preliminary feasibility (pre-feasibility) study or a final feasibility study.

Because of the widespread adoption of the CRIRSCO standards1, industry participants requested revisions to Guide 7, urging the SEC to align its mining disclosure rules with the CRIRSCO-based codes.  The SEC’s replacement of Guide 7 with a CRIRSCO-based code takes into account these global developments and industry participants’ concerns.

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When will the new rules become ?

The new rules will become effective for an SEC registrant’s first fiscal year beginning on or after January 1, 2021.  As an example of what this means, the SEC has stated that a registrant with a December 31 fiscal year end will be required to comply with the final rules when filing an applicable registration statement2 on or after January 1, 2021, and when filing its SEC annual report for the fiscal year ended December 31, 2021.  For registrants filing registration statements in 2021, this has the effect of accelerating public reporting under the new rules.

Once the SEC has completed EDGAR reprogramming made necessary by the final rules, the SEC will permit registrants to voluntarily comply with the new mining property disclosure rules as of an earlier date, as long as in doing so, they comply with all of the new requirements.  Until then, registrants should continue to comply with Guide 7 for their mining property disclosures.

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The final rules will apply to an SEC registrant that has mining operations that are material to its business or financial condition.  

Mining operations is defined under the final rules as including operations on all mining properties that a registrant:

  • Owns or in which it has, or it is probable that it will have, a direct or indirect economic interest;
  • Operates, or it is probable that it will operate, under a lease or other legal agreement that grants the registrant ownership or similar rights that authorize it, as principal, to sell or otherwise dispose of the mineral; or
  • Has, or it is probable that it will have, an associated royalty or similar right.

The SEC has not modified its definition of materiality in the new rules. Information is material if there is a substantial likelihood that a reasonable investor would attach importance to such information in determining whether to buy or sell the securities registered.

Because the new rules define mining operations to include both direct and indirect economic interests, and because the standard for disclosure is materiality, companies that hold royalties, streaming agreements or other economic interests with respect to mining properties, as well as companies that invest in mining companies, will be subject to the new rules if such interests are material to the registrant’s business or financial condition.

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Yes.  Foreign private issuers that file annual reports or registration statements with the SEC on Forms 20-F, F-1, F-3 or F-4, that voluntarily file on U.S. domestic reporting forms or that prepare offering circulars on Form 1-A under Regulation A+ will be required to comply with the new rules.

Canadian issuers that file annual reports or registration statements with the SEC under the Multijurisdictional Disclosure System (MJDS), including Forms 40-F, F-10, F-7, F-8 and F-80, will not be required to comply with the new rules.

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What are the main differences between the SEC’s Industry and the new rules?

The chart in Appendix A provides an overview of the main differences between existing Guide 7 and related SEC guidance, and the new rules.

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What are the main differences between the SEC’s initial proposal in and the new rules?

The SEC first proposed an overhaul of the disclosure requirements for mining companies, and solicited comments on its proposed rules, in 2016.  Many industry organizations, companies, and law firms that commented on the proposals were supportive of the idea of modernization, but felt that the SEC’s proposals were too prescriptive and varied in too many ways from CRIRSCO standards, thereby imposing an administrative burden on companies, especially those reporting in more than one jurisdiction.

In response to these comments, the SEC’s final rules incorporated a number of changes, many of which were intended to more closely align the SEC’s mineral property disclosure requirements with CRIRSCO standards, and thereby help decrease the compliance burden and costs on registrants that are subject to additional CRIRSCO-based codes.  For example, as compared to the 2016 proposals, the final rules:

  • eliminate the prohibition on estimating mineral resources and mineral reserves using a commodity price that is greater than the 24-month historical average;
  • allow mineral reserves to be declared based on a pre-feasibility study, even in high-risk situations;
  • allow mineral reserves to include diluting materials and allowances for losses;
  • permit inferred mineral resources to be included in the economic analysis that is included in an initial assessment (the equivalent to a preliminary economic assessment under Canada’s NI 43-101);
  • eliminate the requirement for a technical report summary in order to disclose material exploration results;
  • permit mineral resources and reserves to be disclosed at any specific point of reference selected by the qualified person, rather than three (in situ, plant or mill feed, and saleable product);
  • permit the use of non-compliant, historic estimates of mineral resources or mineral reserves in SEC filings pertaining to mergers, acquisitions and business combinations, subject to certain conditions;
  • permit registrants holding royalty or similar interests to omit information to which they lack access and which they cannot obtain without incurring an unreasonable burden or expense;
  • will not apply to geothermal fields;
  • permit the disclosure of exploration targets;
  • eliminate many of the quantitative thresholds in the proposed rules, in favor of more qualitative standards;
  • reduce the number of required tables, and the amount of information required to be included in tables;
  • clarify that technical report summaries may be authored by more than one qualified person; and
  • allow a qualified person to rely on certain information provided by the registrant.

In addition, the final rules clarify that when a qualified person is not an employee of the registrant and is not otherwise affiliated with the registrant, the technical report summary and any required expert consent may be signed by the third-party firm that employs the individual qualified person, without naming the individual.

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Are the SEC’s new rules the same as the standards under Canada’s National 43-101 (NI 43-101) or other -based codes?

No.  While the SEC’s new rules are intended to be substantially similar to those of other CRIRSCO-based codes, they are not identical to any single CRIRSCO-based code.  Some differences relate to terminology.  For example, the SEC’s new rules use the term “technical report summary” instead of NI 43-101’s “technical report”, and the term “initial assessment” instead of NI 43-101’s “preliminary economic assessment”.  Other differences relate to substantive requirements, and are in some cases subtle.  SEC registrants that are subject to other CRIRSCO-based codes should compare such codes to the SEC’s new rules and determine whether the differences have any material implications for the registrant.

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The new rules introduce a materiality threshold for being considered a development or production stage issuer.  Under the new rules, a registrant is defined as:

  • An exploration stage issuer if it has no material property with mineral reserves;
  • A development stage issuer if it is engaged in the preparation of mineral reserves for extraction on at least one material property; or
  • A production stage issuer if it is engaged in material extraction of mineral reserves on at least one material property.

The new rules also clarify how individual properties of a mining company should be described.  Under the new rules, an individual property is defined as being:

  • An exploration stage property if it has no mineral reserves disclosed;
  • A development stage property if it has mineral reserves disclosed, but with no material extraction; and
  • A production stage property if it has material extraction of mineral reserves.

It should be noted that both Guide 7 and the new rules require a registrant to have disclosed mineral reserves in order to describe itself as being either a development or production stage company, regardless of whether the registrant is actively constructing a mine or operating a producing mine. Guide 7 does not discuss the characterization of individual properties, or distinguish between properties of a registrant that are at different stages of development.

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Consistent with CRIRSCO-based mining codes, the new rules would introduce the concept of a qualified person, a mineral industry professional meeting certain criteria, whose expertise must be utilized in preparing certain mining disclosures.

In the final rules, a qualified person is defined as an individual who is:

  • A mineral industry professional with at least five years of relevant experience in the type of mineralization and type of deposit under consideration and in the specific type of activity that person is undertaking on behalf of the registrant; and
  • An eligible member or licensee in good standing of a recognized professional organization at the time the technical report is prepared.

To be a recognized professional organization, an organization must:

  • Be either:
    • An organization recognized within the mining industry as a reputable professional association, or
    • A board authorized by U.S. federal, state or foreign statute to regulate professionals in the mining, geoscience or related field;
  • Admit eligible members primarily on the basis of their academic qualifications and experience;
  • Establish and require compliance with professional standards of competence and ethics;
  • Require or encourage continuing professional development;
  • Have and apply disciplinary powers, including the power to suspend or expel a member regardless of where the member practices or resides; and
  • Provide a public list of members in good standing.

The SEC has stated that it does not intend to publish and maintain a list of recognized professional organizations.

A person is not required to be independent of the registrant in order to be a qualified person.  Therefore, an employee of the registrant that satisfies the requisite criteria of experience and membership in a recognized professional organization could serve as the registrant’s qualified person.

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A registrant’s disclosure of exploration results, mineral resources and mineral reserves, as required by the new rules, must be based on and accurately reflect information and supporting documentation prepared by a qualified person. The registrant is responsible for determining that the person meets the requirements of a qualified person, and that the disclosure in the registrant’s filing accurately reflects the information provided by the qualified person.

With respect to any property containing mineral resources or mineral reserves that is material to the registrant’s business or financial condition, the registrant must obtain a dated and signed technical report summary from the qualified person, which identifies and summarizes the information reviewed and conclusions reached by the qualified person about the registrant’s mineral resources and mineral reserves results determined to be on such property.  A registrant may, but is not required to, obtain a dated and signed technical report summary from a qualified person relating to exploration results on a property prior to the declaration of mineral resources or mineral reserves.

When a qualified person is not an employee of the registrant and is not otherwise affiliated with the registrant, the technical report summary and any required expert consent may, but is not required to be, be signed by the third-party firm that employs the individual qualified person, without naming the individual.

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Who has to sign and when must they be filed?

Written consents of a qualified person are required to the use of the qualified person’s name, or any quotation from, or summarization of, the technical report summary in the relevant registration statement or report, and to the filing of the technical report summary as an exhibit to the registration statement or report.  

The rules provide that a third-party firm comprising mining experts, such as professional geologists or mining engineers, may sign the technical report summary instead of, and without naming, its employee, or other affiliated person who prepared the summary.  If a third-party firm has signed the technical report summary, the firm must provide the written consent.  So, if an individual qualified person is employed by a third-party firm, that firm may sign the technical report summary and provide the written consent required for an expert under the Securities Act.  However, if a qualified person is an employee of, or affiliated with, the issuer, the qualified person must provide the written consent on an individual basis.

The written consent must be filed as an exhibit to a Securities Act registration statement.  However, for periodic reports, the registrant is not required to file the written consent obtained from the qualified person, but should retain the written consent for as long as it is relying on the qualified person’s information and supporting documentation for its current estimates regarding mineral resources, mineral reserves, or exploration results.

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In what circumstances may a qualified person rely on, or , information provided by third parties?

The new rules permit a qualified person, in preparing its findings and conclusions, to rely on information provided by the registrant regarding the following aspects of modifying factors:

    • macroeconomic trends, data, and assumptions, and interest rates;
    • marketing information and plans within the control of the registrant;
    • legal matters outside the expertise of the qualified person, such as statutory and regulatory interpretations affecting the mine plan;
    • environmental matters outside the expertise of the qualified person;
    • accommodations the registrant commits or plans to provide to local individuals or groups in connection with its mine plans; and
    • governmental factors outside the expertise of the qualified person.

Any such reliance must be disclosed in the applicable technical report summary, and accompanied by additional information as described in Appendix B.

A technical report summary may be prepared by more than one qualified person, with the summary clearly delineating the section or sections of the summary prepared by each qualified person.

A qualified person may also include in the technical report summary information provided by a third-party specialist who is not a qualified person, such as an attorney, appraiser, and economic or environmental consultant, upon which the qualified person has relied in preparing the technical report summary.  However, the qualified person may not disclaim responsibility for any information or documentation prepared by such a third-party specialist.

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Unlike Guide 7, the new rules both recognize and require the disclosure of mineral resources.  The rules define a mineral resource as a concentration or occurrence of material of economic interest in or on the Earth’s crust in such form, grade or quality, and quantity, that there are reasonable prospects for economic extraction.  Material of economic interest includes mineralization, including dumps and tailings, mineral brines, and other resources extracted on or within the Earth’s crust, but does not include oil and gas resources as defined in Regulation S-X, gases (e.g., helium and carbon dioxide), geothermal fields or water.

An instruction to the rules clarifies that a mineral resource is a reasonable estimate of mineralization, taking into account relevant factors such as cut-off grade, likely mining dimensions, location or continuity, that, with the assumed and justifiable technical and economic conditions, is likely to, in whole or in part, become economically extractable.  The rules set forth a definition of cut-off grade and provide for requirements that a qualified person must satisfy in determining the existence of a mineral resource.  These include the evaluation of modifying factors, which is the term used in the new rules to describe factors that affect the economic prospects of a deposit.  Modifying factors include, but are not restricted to: mining; processing; metallurgical; infrastructure; economic; marketing; legal; environmental compliance; plans, negotiations or agreements with local individuals or groups; and governmental factors.  The number, type and specific characteristics of the modifying factors applied will necessarily be a function of and depend upon the mineral, mine, property, or project.

When mineral resources are determined, a qualified person must subdivide mineral resources, in order of increasing geological confidence, into inferred, indicated and measured mineral resources.

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The new rules create three different categories of mineral resources based on the level of geological confidence that the mineral resource exists.

An inferred mineral resource is that part of a mineral resource for which quantity and grade or quality are estimated on the basis of limited geological evidence and sampling, which means evidence that is only sufficient to establish that geological and grade or quality continuity is more likely than not.  An inferred mineral resource has the lowest level of geological confidence of all mineral resources, which in the SEC’s view prevents the application of the modifying factors in a manner useful for evaluation of economic viability.  

An indicated mineral resource is that part of a mineral resource for which quantity and grade or quality are estimated on the basis of adequate geological evidence and sampling, which means evidence that is sufficient to establish geological and grade or quality continuity with reasonable certainty.  The level of geological certainty associated with an indicated mineral resource is sufficient to allow a qualified person to apply modifying factors in sufficient detail to support mine planning and evaluation of the economic viability of the deposit.  An indicated mineral resource has a lower level of confidence than that applying to a measured mineral resource and may only be converted to a probable mineral reserve.

A measured mineral resource is that part of a mineral resource for which quantity and grade or quality are estimated on the basis of conclusive geological evidence and sampling, which means evidence that is sufficient to test and confirm geological and grade or quality continuity.  A measured mineral resource has a higher level of confidence than that applying to either an indicated mineral resource or an inferred mineral resource.  It may be converted to a proven mineral reserve or to a probable mineral reserve.

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Under existing Guide 7, a reserve is that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination.  Reserves are to be identified as probable or proven based on the mineralization’s level of certainty.  The SEC’s staff has provided guidance that a final feasibility study is required to support the establishment of reserves and that the commodity prices used in establishing a Guide 7 reserve should not exceed the 3-year trailing average price of such commodity.

The new rules retain the categories of probable and proven reserves, but replace the existing Guide 7 definitions with new definitions, permit mineral reserves to be established on the basis of either a preliminary feasibility (pre-feasibility) study or a final feasibility study and replace the 3-year trailing average price limitation with a requirement that the commodity prices used in calculating mineral reserves provide a reasonable basis for establishing that the project is economically viable.

Under the new rules, a mineral reserve is an estimate of tonnage and grade or quality of indicated and measured mineral resources that, in the opinion of the qualified person, can be the basis of an economically viable project. More specifically, it is the economically mineable part of a measured or indicated mineral resource, which includes diluting materials and allowances for losses that may occur when the material is mined or extracted.

The determination that part of a measured or indicated mineral resource is economically mineable must be based on a pre-feasibility or feasibility study conducted by a qualified person applying the modifying factors to indicated or measured mineral resources.  Such study must demonstrate that, at the time of reporting, extraction of the mineral reserve is economically viable under reasonable investment and market assumptions.  The study must establish a life of mine plan that is technically achievable and economically viable, which will be the basis of determining the mineral reserve.

A probable mineral reserve is the economically mineable part of an indicated and, in some cases, a measured mineral resource.  For a probable mineral reserve, the qualified person’s confidence in the results obtained from the application of the modifying factors and in the estimates of tonnage and grade or quality is lower than what is sufficient for a classification as a proven mineral reserve, but is still sufficient to demonstrate that, at the time of reporting, extraction of the mineral reserve is economically viable under reasonable investment and market assumptions. 

A proven mineral reserve is the economically mineable part of a measured mineral resource.  For a proven mineral reserve, the qualified person has a high degree of confidence in the results obtained from the application of the modifying factors and in the estimates of tonnage and grade or quality.

For purposes of estimating mineral reserves, the modifying factors are the same factors as are used in estimating mineral resources, as applied to determine the economic viability of mineral reserves.  A qualified person must apply and evaluate modifying factors to convert measured and indicated mineral resources to proven and probable mineral reserves.

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The new rules describe four types of technical report summary:

  • A technical report summary that discloses exploration results;
  • An initial assessment, which is required to establish mineral resources;
  • A preliminary feasibility study (pre-feasibility study), which is required to establish mineral reserves; and
  • A feasibility study or final feasibility study.

Under the new rules, exploration results are defined as data and information generated by mineral exploration programs (i.e., programs consisting of sampling, drilling, trenching, analytical testing, assaying, and other similar activities undertaken to locate, investigate, define or delineate a mineral prospect or mineral deposit) that are not part of a disclosure of mineral resources or reserves.  

An initial assessment is a preliminary technical and economic study of the economic potential of all or parts of mineralization to support the disclosure of mineral resources.  The initial assessment must be prepared by a qualified person and must include appropriate assessments of reasonably assumed modifying factors, together with any other relevant operational factors that are necessary to demonstrate, at the time of reporting, that there are reasonable prospects for economic extraction.  An initial assessment is required for disclosure of mineral resources but cannot be used as the basis for disclosure of mineral reserves.

A preliminary feasibility study (pre-feasibility study) is a comprehensive study of a range of options for the technical and economic viability of a mineral project that has advanced to a stage where a qualified person has determined (in the case of underground mining) a preferred mining method, or (in the case of surface mining) a pit configuration, and in all cases has determined an effective method of mineral processing and an effective plan to sell the product.  A pre-feasibility study includes a financial analysis based on reasonable assumptions, based on appropriate testing, about the modifying factors and the evaluation of any other relevant factors that are sufficient for a qualified person to determine if all or part of the indicated and measured mineral resources may be converted to mineral reserves at the time of reporting. The financial analysis must have the level of detail necessary to demonstrate, at the time of reporting, that extraction is economically viable.  A pre-feasibility study is less comprehensive and results in a lower confidence level than a feasibility study. A pre-feasibility study is more comprehensive and results in a higher confidence level than an initial assessment.

A feasibility study is a comprehensive technical and economic study of the selected development option for a mineral project, which includes detailed assessments of all applicable modifying factors, as defined by this section, together with any other relevant operational factors, and detailed financial analysis that are necessary to demonstrate, at the time of reporting, that extraction is economically viable.  The results of the study may serve as the basis for a final decision by a proponent or financial institution to proceed with, or finance, the development of the project.  A feasibility study is more comprehensive, and with a higher degree of accuracy, than a pre-feasibility study.  It must contain mining, infrastructure, and process designs completed with sufficient rigor to serve as the basis for an investment decision or to support project financing.  The confidence level in the results of a feasibility study is higher than that with a pre-feasibility study.  Terms such as full, final, comprehensive, bankable, or definitive feasibility study are equivalent to a feasibility study.

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The new rules require that a registrant file a technical report summary authored by a qualified person as an exhibit to its SEC annual report or applicable registration statement when the registrant is disclosing in such report or registration statement, for the first time, mineral resources or mineral reserves for a property that is material to the registrant’s business or financial condition.  A registrant also may, but is not required to, file a technical report summary with respect to exploration results.

Certain exceptions apply to a registrant that only holds a royalty, streaming or other similar right with respect to a property.  Such a registrant is not required to file a technical report summary for a property that is covered by a current technical report summary filed by the producing mine registrant.  In that situation, the registrant holding the royalty, streaming or other similar right should refer to the producing registrant’s previously filed technical report summary. Such a reference will not be deemed to incorporate the report by reference, absent an express statement to such effect.

If such a report has not been filed, the registrant holding the royalty, streaming or other similar right will be required to file a technical report summary for the underlying property unless the registrant lacks access to the technical report summary because:

  • obtaining the information would result in an unreasonable burden or expense, or
  • it requested the technical report summary from the owner, operator or other person possessing the technical report summary, who is not affiliated with the registrant, and who denied the request,

and it provides in the applicable registration statement or annual report all the information required by the SEC rules that it does possess or which it can acquire without unreasonable effort and expense.

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The new rules will require the registrant to file an updated technical report summary in connection with the filing of the registrant’s SEC annual report or in connection with an applicable registration statement if, at such time, there has been a material change in the mineral resources or mineral reserves for a material property from that reported in the previously-filed technical report summary, or a material change in the exploration results contained in a technical report summary that the registrant filed voluntarily.

Without limiting the foregoing, a registrant may not rely on a previously filed technical report summary if, at the time of filing the registrant’s SEC annual report or in connection with an applicable registration statement, the registrant is unable to conclude that all material assumptions and information pertaining to the disclosure of a registrant’s mineral resources and mineral reserves, including material assumptions relating to all modifying factors, price estimates, and scientific and technical information (e.g., sampling data, estimation assumptions and methods), are current as of the end of the registrant’s most recently completed fiscal year.

Due to the number of requirements with which a technical report summary must comply, an updated technical report summary may, in practice, be required on an annual or other regular basis.

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Every technical report summary filed with the SEC must:

  • be prepared, signed and dated by each qualified person responsible for the technical report summary; provided, that in the case of a qualified person that is not an employee of and not otherwise affiliated with the registrant, a third-party firm comprising mining experts, such as professional geologists or mining engineers, may date and sign the technical report summary instead of, and without naming, the individual qualified person employed or affiliated with the firm that prepared the technical report summary;
  • avoid the inclusion of large amounts of technical or other project data, either in the report or as appendices to the report,
  • conform, to the extent practicable, with “plain English” principles,
  • otherwise comply with subpart 1300 of Regulation S-K,

and comply with detailed disclosure requirements in the following general categories: (i) executive summary, (ii) introduction, (iii) property description, (iv) accessibility, climate, local resources, infrastructure and physiography, (v) history, (vi) geological setting, mineralization and deposit, (vii) exploration, including hydrogeology, and geotechnical data, testing and analysis, (viii) sample preparation, analyses, and security, (ix) data verification, (x) adjacent properties, (xi) other relevant data and information, (xii) interpretation and conclusions, (xiii) recommendations, (xiv) references, and (xv) reliance on information provided by the registrant.  The details on disclosure for each of these categories are set forth in the rules.  See Appendix B.

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None.

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A registrant’s disclosure of mineral resources must be based upon a qualified person’s initial assessment, which supports the determination of mineral resources.  As explained above in the discussion of mineral resources, the initial assessment must include the qualified person’s qualitative evaluation of applicable modifying factors to establish the economic potential of the mining property or project.  The technical report summary submitted by the qualified person to support a determination of mineral resources must describe the procedures, findings and conclusions reached for the initial assessment.  In addition to the information required to be included in every technical report summary, a technical report summary that reports the results of an initial assessment must include detailed disclosure in the following general categories: (i) mineral processing and metallurgical testing and (ii) mineral resource estimates.  The details on disclosure for each of these categories are set forth in the new rules.  See Appendix B.

A qualified person may, but is not required to, apply modifying factors to the mineral resources to include an economic analysis in the initial assessment.

To assist qualified persons in understanding the disclosure requirements in an initial assessment relating to modifying factors, the new rules include Table 1, extracted below, which describes certain information the qualified person is required or permitted to disclose, or permitted to assume, in an initial assessment relating to modifying factors.

Extract from Table 1 – Summary Description of Modifying Factors Evaluated in Technical Studies

Factors2 Initial Assessment 
Site infrastructureEstablish whether or not access to power and site is possible.  Assume infrastructure location, plant area required, type of power supply, site access roads and camp/town site, if required.
Mine design & planningMining method defined broadly as surface or underground.  Production rates assumed.
Processing plantEstablish that all products used in assessing prospects of economic extraction can be processed with methods consistent with each other.  Processing method and plant throughput assumed.
Environmental compliance & permittingList of required permits & agencies drawn.  Determine if significant obstacles exist to obtaining permits.  Identify pre-mining land uses.  Assess requirements for baseline studies.  Assume post-mining land uses.  Assume tailings disposal, reclamation, and mitigation plans.
Other relevant

factors

2
Appropriate assessments of other reasonably assumed modifying factors necessary to demonstrate reasonable prospects for economic extraction.
Capital costsOptional.3  If included: 


Accuracy:  ±50% 


Contingency:  ≤25%

Operating costsOptional.3  If included: 


Accuracy:  ±50% 


Contingency:  ≤25%

Economic analysis4Optional.  If included: Taxes and revenues are assumed.  Discounted cash flow analysis based on assumed production rates and revenues from available measured and indicated mineral resources.

1.   When applied in an initial assessment, these factors pertain to the relevant technical and economic factors likely to influence the prospect of economic extraction.

2.   The relevant technical and economic factors to be applied in an initial assessment include, but are not limited to, the factors listed in this table.  The number, type, and specific characteristics of the applicable factors will be a function of and depend upon the particular mineral, mine, property, or project.

3.   Initial assessment, as defined in this subpart, does not require cash flow analyses or operating and capital cost estimates.  The qualified person may include such cash flow analyses at his or her discretion.

4.   An initial assessment does not require capital and operating cost estimates or economic analysis, although it requires unit cost assumptions based on an assumption that the resource will be exploited with surface or underground mining methods.  Economic analyses, if included, may be based only on measured and indicated mineral resources, or also may include inferred resources if additional conditions are met.

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A registrant’s disclosure of mineral reserves must be based upon a qualified person’s pre-feasibility study or feasibility study which supports a determination of mineral reserves.  The pre-feasibility or feasibility study must include the qualified person’s detailed evaluation of all applicable modifying factors to demonstrate the economic viability of the mining property or project.  The technical report summary submitted by the qualified person to support a determination of mineral reserves must describe the procedures, findings and conclusions reached for the pre-feasibility or feasibility study.  In addition to the information required to be included in a technical report summary that reports the results of an initial assessment, a technical report summary that reports the results of a pre-feasibility or feasibility study must include detailed disclosure in the following general categories: (i) mineral reserve estimates, (ii) mining methods, (iii) processing and recovery methods, (iv) infrastructure, (v) market studies, (vi) environmental studies, permitting, and plans, negotiations or agreements with local individuals or groups, (vii) capital and operating costs, and (viii) economic analysis.  The details on disclosure for each of these categories are set forth in the new rules.  See Appendix B.

To assist qualified persons in understanding the disclosure requirements relating to modifying factors, the new rules include the table below, which describes certain information regarding modifying factors that is required to be included in a pre-feasibility or feasibility study.

Extract from Table 1 – Summary Description of Modifying Factors Evaluated in Technical Studies

Factors1

Preliminary Feasibility Study

Feasibility Study
Site infrastructureRequired access roads, infrastructure location and plant area defined.  Source of all utilities (power, water, etc.) required for development and production defined with initial designs suitable for cost estimates.  Camp/Town site finalized.  Required access roads, infrastructure location and plant area finalized.  Source of all required utilities (power, water, etc.) for development and production finalized.  Camp/Town site finalized.
Mine design & planningPreferred underground mining method or the pit configuration for surface mine defined.  Detailed mine layouts drawn for each alternative.  Development and production plan defined for each alternative with required equipment fleet specified. Mining method finalized. Detailed mine layouts finalized for preferred alternative.  Development and production plan finalized for preferred alternative with required equipment fleet specified.
Processing plantDetailed bench lab tests conducted.  Detailed process flow sheet, equipment sizes, and general arrangement completed.  Detailed plant throughput specified. Detailed bench lab tests conducted.  Pilot plant test completed, if required, based on risk.  Process flow sheet, equipment sizes, and general arrangement finalized.  Final plant throughput specified.
Environmental compliance & permittingIdentification and detailed analysis of requirements or interests of agencies, NGOs, communities and other stakeholders.  Detailed baseline studies with preliminary impact assessment (internal).  Detailed tailings disposal, reclamation and mitigation plans.Identification and detailed analysis of requirements or interests of agencies, NGOs, communities and other stakeholders finalized.  Completed baseline studies with final impact assessment (internal).  Tailings disposal, reclamation and mitigation plans finalized.
Other relevant factors2Reasonable assumptions, based on appropriate testing, on the modifying factors sufficient to demonstrate that extraction is economically viable. Detailed assessments of modifying factors necessary to demonstrate that extraction is economically viable.
Capital costsAccuracy: ±25% 

Contingency: ≤15%

Accuracy: ±15% 

Contingency: ≤10%

Operating costsAccuracy: ±25% 

Contingency: ≤15%

Accuracy:  ±15%

Contingency:  ≤10%

Economic AnalysisTaxes described in detail; revenues are estimated based on at least a preliminary market study; economic viability assessed by detailed discounted cash flow analysis.Taxes described in detail; revenues are estimated based on at least a final market study or possible letters of intent to purchase; economic viability assessed by detailed discounted cash flow analysis.

1.   When applied in a preliminary or final feasibility study, these factors pertain to the modifying factors, as defined in this subpart.

2.   The modifying factors to be applied in a pre-feasibility or final feasibility study include, but are not limited to, the factors listed in this table.  The number, type, and specific characteristics of the applicable factors will be a function of and depend upon the particular mineral, mine, property, or project.

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Registrants are currently required to disclose under Guide 7 information regarding mines, plants and significant properties owned or operated, or presently intended to be owned or operated, by the registrant.

The new rules would require differing levels of disclosure regarding a mining property depending on whether the property is material to the registrant.  If a registrant with material mining operations has more than one mining property that it:

  • Owns or in which it has, or it is probable that it will have, a direct or indirect economic interest;
  • Operates, or it is probable that it will operate, under a lease or other legal agreement that grants the registrant ownership or similar rights that authorize it, as principal, to sell or otherwise dispose of the mineral; or
  • Has, or it is probable that it will have, an associated royalty or similar right,

then it must provide in its SEC annual report and applicable registration statements the following information regarding all such properties, including both material and non-material properties:

  • A map or maps, of appropriate scale, showing the locations of all properties. Such maps should be legible on the page when printed.
  • An overview of the registrant’s mining properties and operations.  The overview must include aggregate annual production for the properties during each of the three most recently completed fiscal years preceding the filing.  It should also include, as relevant:
    • The location of the properties;
    • The type and amount of ownership interests;
    • The identity of the operator or operators;
    • Title, mineral rights, leases or options and acreage involved;
    • The stages of the properties (exploration, development or production);
    • Key permit conditions;
    • Mine types and mineralization styles; and
    • Processing plants and other available facilities.

    When presenting the overview, the registrant should include the amount and type of disclosure that is material to an investor’s understanding of the registrant’s properties and mining operations in the aggregate.  A registrant should refer to, rather than duplicate, any disclosure concerning individually material properties provided elsewhere in the document.

  • A summary of all mineral resources and mineral reserves, as determined by the qualified person, at the end of the most recently completed fiscal year by commodity and geographic area and for each property containing 10% or more of the registrant’s combined measured and indicated mineral resources or containing 10% or more of the registrant’s mineral reserves.  This summary must be provided for each class of mineral resources (inferred, indicated and measured), together with total measured and indicated mineral resources, and each class of mineral reserves (probable and proven), together with total mineral reserves, using a tabular format set forth in the new rules.  

Registrants that hold only royalties, streaming or other similar rights with respect to a material property are subject to the foregoing disclosure requirements; however, if such a registrant lacks access to any of the required information, such registrant may omit such information, provided that the registrant:

  • Specifies the information to which it lacks access;
  • Explains that it does not have access to the required information because:
    • Obtaining the information would result in an unreasonable burden or expense, or
    • It requested the information from a person possessing knowledge of the information, who is not affiliated with the royalty company or similar registrant, and who denied the request; and
  • Provides all required information that it does possess or which it can acquire without incurring an unreasonable burden or expense.

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In its SEC annual report and in applicable registration statements, a registrant engaged in mining operations would be required to disclose certain property-specific information for each property that is material to the registrant’s business or financial condition.  While the new rules do not specify how a registrant should determine what is an individual “property”, versus multiple properties, the SEC  noted in the proposing release that properties sharing the same processing plant or other facilities prior to the first point of material external sale could be treated as one mining property.  This suggests that such determinations should not be made on a strictly legal basis but should instead be based on how such properties are situated or operated.

The new rules acknowledge that some registrants have material mining operations but do not have any single property that is material to the registrant’s business or financial condition; for example, a registrant may have 50 distinct properties, none of which is individually material.  A registrant with no individually material properties need not comply with the disclosure requirements described in this section.

In addition to information similar to current Guide 7 requirements, the new rules require, with respect to each material property:

  • Tabular disclosure of mineral resources and mineral reserves;
  • Additional narrative disclosures; and
  • As previously described, filing as an exhibit a technical report summary prepared by one or more qualified persons in support of any estimate of material resources, any estimate of material reserves, any material change in the foregoing or any material change in a voluntarily-filed technical report summary relating to exploration results.

The new rules require that a registrant engaged in mining operations include in its annual reports and applicable registration statements the following information with respect to each property that is material to the registrant’s business or financial condition:

  • A brief description of the property including:
    • The location, accurate to within one mile, using an easily recognizable coordinate system. The registrant must provide appropriate maps, with proper engineering detail (such as scale, orientation, and titles). Such maps must be legible on the page when printed;
    • Existing infrastructure including roads, railroads, airports, towns, ports, sources of water, electricity, and personnel; and
    • A brief description, including the name or number and size (acreage), of the titles, claims, concessions, mineral rights, leases or options under which the registrant and its subsidiaries have or will have the right to hold or operate the property, and how such rights are obtained at this location, indicating any conditions that the registrant must meet in order to obtain or retain the property. If held by leases or options or if the mineral rights otherwise have termination provisions, the registrant must provide the expiration dates of such leases, options or mineral rights and associated payments.
  • If the registrant’s interest in the property is through a royalty, streaming or other similar right, a brief description of the agreement under which the registrant and its subsidiaries have or will have the right to a royalty or similar interest in the property, indicating any conditions that the registrant must meet in order to obtain or retain the royalty or similar interest, and indicating the expiration date.
  • The following information, as relevant to the particular property:
    • A brief description of the present condition of the property, the work completed by the registrant on the property, the registrant’s proposed program of exploration or development, the current stage of the property as exploration, development or production, the current state of exploration or development of the property, and the current production activities. Mines should be identified as either surface or underground, with a brief description of the mining method and processing operations. If the property is without known reserves and the proposed program is exploratory in nature or the registrant has started extraction without determining mineral reserves, the registrant must provide a statement to that effect;
    • The age, details as to modernization and physical condition of the equipment, facilities, infrastructure, and underground development; and
    • The total cost for or book value of the property and its associated plant and equipment;
  • A brief history of previous operations, including the names of previous operators, insofar as known;
  • A brief description of any significant encumbrances to the property, including current and future permitting requirements and associated timelines, permit conditions, and violations and fines;
  • If mineral resources or reserves have been determined, a tabular summary of all mineral resources or reserves as of the end of the most recently completed fiscal year, presented for each class of mineral resources (measured, indicated and inferred), together with total measured and indicated mineral resources, the estimated tonnages and grades (or quality, where appropriate), and in a separate table, for each class of mineral reserves (proven and probable), together with total mineral reserves, the estimated tonnages, grades (or quality, where appropriate), cut-off grades and metallurgical recovery, based on a specific point of reference selected by the qualified person.
  • A comparison of the property’s mineral resources and reserves as of the end of the last fiscal year with the mineral resources and reserves as of the end of the preceding fiscal year, with an explanation of any material change between the two.  The comparison must disclose information concerning:
    • The mineral resources or reserves at the end of the last two fiscal years;
    • The net difference between the mineral resources or reserves at the end of the last completed fiscal year and the preceding fiscal year, as a percentage of the resources or reserves at the end of the fiscal year preceding the last completed one;
    • An explanation of the causes of any discrepancy in mineral resources including depletion or production, changes in commodity prices, additional resources discovered through exploration, and changes due to the methods employed; and
    • An explanation of the causes of any discrepancy in mineral reserves including depletion or production, changes in the resource model, changes in commodity prices and operating costs, changes due to the methods employed, and changes due to acquisition or disposal of properties;
  • If the registrant has not previously disclosed mineral reserve or resource estimates in a filing with the SEC or is disclosing material changes to its previously disclosed mineral reserve or resource estimates, a brief discussion of the material assumptions and criteria in the disclosure and cite to corresponding sections of the technical report summary, which must be filed as an exhibit.
  • To the extent material to investors, a discussion of exploration activity and exploration results, including:
    • If disclosing exploration activity for any material property for the most recently completed fiscal year, a summary that describes the sampling methods used, and, for each sampling method used, the number of samples, the total size or length of the samples, and the total number of assays; and
    • If disclosing exploration results for any material property for the most recently completed fiscal year, a summary that, for each property, identifies the hole, trench or other sample that generated the exploration results, describes the length, lithology, and key geologic properties of the exploration results, and includes a brief discussion of the exploration results’ context and relevance.  If the summary only includes results from selected samples and intersections, it should be accompanied with a discussion of the context and justification for excluding other results. 
  • If the registrant is disclosing exploration results not previously disclosed in a filing with the SEC, or material changes to previously disclosed exploration results, provide sufficient information to allow for an accurate understanding of the significance of the exploration results. This must include information such as exploration context, type and method of sampling, sampling intervals and methods, relevant sample locations, distribution, dimensions, and relative location of all relevant assay and physical data, data aggregation methods, land tenure status, and any additional material information that may be necessary to make the required disclosure concerning the registrant’s exploration results not misleading. If filing a technical report summary, the registrant must cite to corresponding sections of the summary technical report, which must be filed as an exhibit.  A change in exploration results that significantly alters the potential of the subject deposit is considered material.
  • If the registrant includes disclosure of an exploration target, such disclosure must appear in a separate section of the filing that is clearly captioned as a discussion of an exploration target.  This section must include:
    • A clear and prominent statement that:
      • The ranges of potential tonnage and grade (or quality) of the exploration target are conceptual in nature;
      • There has been insufficient exploration of the relevant property or properties to estimate a mineral resource;
      • It is uncertain if further exploration will result in the estimation of a mineral resource; and
      • The exploration target therefore does not represent, and should not be construed to be, an estimate of a mineral resource or mineral reserve.
    • A detailed explanation of the basis for the exploration target, such as the conceptual geological model used to develop the target;
    • An explanation of the process used to determine the ranges of tonnage and grade, which must be expressed as approximations;
    • A statement clarifying whether the exploration target is based on actual exploration results or on one or more proposed exploration programs, which should include a description of the level of exploration activity already completed, the proposed exploration activities designed to test the validity of the exploration target, and the time frame in which those activities are expected to be completed; and
    • A statement that the ranges of tonnage and grade (or quality) of the exploration target could change as the proposed exploration activities are completed.

Registrants that hold only royalties, streaming or other similar rights are subject to the foregoing disclosure requirements; however, if such a registrant lacks access to any of the required information, such registrant may omit such information, provided that the registrant:

  • Specifies the information to which it lacks access;
  • Explains that it does not have access to the required information because:
    • Obtaining the information would result in an unreasonable burden or expense, or
    • It requested the information from a person possessing knowledge of the information, who is not affiliated with the royalty company or similar registrant, and who denied the request; and
  • Provides all required information that it does possess or which it can acquire without incurring an unreasonable burden or expense.

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Under the new rules, every registrant with mining operations that are material to its business or financial condition must describe in its SEC annual report and applicable registration statements the internal controls that the registrant uses in its exploration and mineral resource and reserve estimation efforts.  This disclosure should include quality control and quality assurance (QC/QA) programs, verification of analytical procedures and a discussion of comprehensive risk inherent in the estimation.

In addition, if a registrant has filed a technical report summary with respect to any property, the registrant must identify the qualified person who prepared the technical report summary and state whether the qualified person is an employee of the registrant.  If the qualified person is not an employee of the registrant, the registrant must name the qualified person’s employer, disclose whether the qualified person or the qualified person’s employer is affiliated with the registrant or another entity that has an ownership, royalty or other interest in the property that is the subject of the technical report summary, and if affiliated, describe the nature of the affiliation.

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May a registrant disclose mineral resources, mineral reserves or material exploration results that the registrant has been unable to ?

Only in limited circumstances.  If a report containing a mineral resource, mineral reserve or other estimate relating to a property was prepared before the registrant acquired, or entered into an agreement to acquire, an interest in the property, and the registrant has not verified the information as a current estimate of mineral resources, mineral reserves, or exploration results, then such information is not considered current and cannot be filed in support of disclosure.  Notwithstanding this prohibition, a registrant may include such an estimate in an SEC filing that pertains to a merger, acquisition or business combination if the registrant is unable to update the estimate prior to the completion of the relevant transaction.  In that event, when referring to the estimate, the registrant must disclose the source and date of the estimate, and state that a qualified person has not done sufficient work to classify the estimate as a current estimate of mineral resources, mineral reserves, or exploration results, and that the registrant is not treating the estimate as a current estimate of mineral resources, mineral reserves, or exploration results.

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May a registrant include in its SEC filings disclosures that do not comply with the SEC’s new rules, but comply with a foreign mining code such as Canada’s NI 43-101?

Not in its core “filed” SEC reports, such as Form 10-Ks, 10-Qs and 20-Fs, and certain Form 8-Ks.  Nor can such information be incorporated by reference into a non-MJDS SEC registration statement.  

However, the SEC’s new rules will not prohibit a registrant from including supplemental disclosures that are inconsistent with the SEC’s rules in disclosures that are not subject to the rules, such as disclosures on an issuer’s website, in press releases or in certain SEC submitted documents such as a Form 8-K furnished under Regulation FD, or for foreign private issuers a Form 6-K that is not incorporated by reference into an applicable registration statement.  This is consistent with the existing reporting regime for U.S. issuers, under which many U.S. issuers voluntarily prepare technical reports and other disclosures that comply with NI 43-101 or other foreign standards and make such reports available to the public outside their core “filed” SEC reports.  As under existing Guide 7, a registrant seeking to make such supplemental disclosures should assure itself that neither such disclosures nor its SEC filings are misleading.

The new rules will change the existing practice of Canadian issuers that file on non-MJDS forms including Forms 20-F, F-1, F-3 and F-4.  Existing Guide 7 includes an exception that permits the disclosure of information that would otherwise be prohibited by Guide 7, if such information is required by foreign or state law.  The SEC has taken the view that only Canada requires by law compliance with a particular mining disclosure code (NI 43-101).  In addition, the SEC has not permitted U.S. issuers that are subject to Canadian disclosure requirements to take advantage of the exemption.  Accordingly, the prevailing SEC guidance is that Canadian issuers filing with the SEC on non-MJDS forms are permitted to disclose NI 43-101 compliant information (which would otherwise violate Guide 7) in their SEC filings, as long as the filings are not misleading and the registrant also includes the information that would be required by Guide 7.  U.S. issuers and registrants from other countries are not permitted to vary from Guide 7.  As initially proposed by the SEC, the final new rules eliminate this exception on the basis that, because the new rules permit the disclosure of mineral resources and are generally consistent with other CRIRSCO-based reporting regimes, such an exception is no longer be necessary.

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Could a qualified person be if information contained in the technical report summary is incorrect or ?

Yes.  U.S. securities laws allow the purchaser in a public offering of securities to sue the registrant, its directors, and any officer that signed the SEC registration statement for the offering, if the registration statement pursuant to which the securities were sold “contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading . . . ”, and the purchaser suffered damages.  A purchaser may also sue any accountant, engineer, or other expert who has, with his or her consent, been named in the registration statement, with respect to the statements attributed to him.  This would include any qualified person named as the author of a technical report summary.

Notwithstanding the foregoing, a person (other than the registrant) generally will not be liable if after reasonable investigation, the person had reasonable grounds to believe and did believe that the statements were true and that there was no material omission.  This is known as the due diligence defense.  A qualified person may therefore avoid liability, even in the case of a materially misleading statement or omission, if the qualified person conducted appropriate due diligence and had reasonable grounds to believe and did believe in the accuracy of the disclosure. 

Liability for misleading disclosures is not limited to public offerings. Rule 10b-5 under the Securities Exchange Act of 1934 makes it unlawful to “make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading . . . in connection with the purchase or sale of any security.”  Under this rule, claims for damages may be made in respect of securities purchased in private placements.  In addition, lawsuits may be brought against a registrant or other persons alleged to have “made” untrue or misleading statements to the market generally, seeking damages on behalf of persons that purchased or sold securities in the market in reliance upon such information. The applicable standards for such claims are complex and beyond the scope of this discussion. 

The filing of such lawsuits as class actions is common in the United States. Defendants may agree to settle such actions as an otherwise costly nuisance.  Because plaintiffs’ attorneys may be entitled to receive fees in such settlements, even ones with little benefit to the purported class of affected shareholders, it is common for plaintiffs’ attorneys to bring class action lawsuits against companies that have experienced a significant drop in stock price as a result of an unfavorable disclosure, or that are engaged in a sale of the company.

Many qualified persons are already subject to these potential liabilities, because they act for registrants that are Canadian companies, and that pursuant to Canada’s NI 43-101 have been identified in such registrants’ SEC registration statements and reports.

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1.   Including in Canada, Australia, South Africa, the European Union, Chile, Hong Kong, and Russia.

2.   Unless otherwise indicated, “applicable registration statement” and similar references shall mean a registration statement on Form S-1, S-3, S-4, F-1, F-3, F-4, 10 or 20-F, or an offering statement on Form 1-A.


 

Primary Differences Between SEC Industry Guide 7 and the New Rules

 Industry Guide 7 and SEC Informal Guidance

Proposed Rules
Who must report?Registrants with significant mining operations – the Staff has historically used 10% of assets as a benchmark

Staff has treated royalty companies and vertically integrated companies as subject to Guide 7 

Registrants with mining operations material to its business or financial condition

Specifically includes vertically integrated companies and royalty companies

What is a mineral?Neither minerals nor mineral deposits are definedMore expansive.  Includes mineralization, including dumps and tailings, mineral brines, and other resources extracted on or within the earth’s crust, but excluding oil and gas resources, gases, geothermal fields and water
What is a mineral resource? Not defined Defined as a concentration or occurrence of material of economic interest in or on the earth’s crust in such form, grade or quality, and quantity that there are reasonable prospects for its economic extraction.
What is a mineral reserve? That part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination An estimate of tonnage and grade or quality of indicated or measured mineral resources that, in the opinion of the qualified person, can be the basis of an economically viable project
What study can form the basis of reserves?Final “bankable” feasibility studyPreliminary or Final Feasibility Studies
What commodity price must be used to calculate reserves? Based on trailing three-year average pricesMust be reasonable
What factors must be considered when converting resources to reserves?Does not outline the factors that must be considered when making a reserve determinationEstablishes the framework of applying modifying factors to indicated or measured mineral resources in order to convert them to mineral reserves

What reserves and resources may be disclosed? 

Only proven and probable reserves (if foreign law requires additional disclosure, that additional disclosure may be included – only Canada’s NI 43-101 falls within this exemption)

Resources may not be disclosed

Informal Staff guidance allows disclosure of “mineralized material”, which must be presented as in-place tonnage and grade and may not include contained ounces

Reserves and resources must be disclosed, if determined in accordance with the rule requirements.  Otherwise, they may not be disclosed
Are exploration results required to be disclosed?Not addressedOptional
Is a technical report summary required to be filed with the SEC?NoYes 
Must the resource determination be made by an expert or qualified person?NoYes
Characterization of the issuer as being in exploration, development or production stageGuide 7 doesn’t discuss the characterization of individual properties, or distinguish between properties of a registrant that are at different stages of developmentIntroduces a materiality concept.  Adds classification standards for individual properties
Property DisclosureRequires disclosure of certain items for each “mine, plant or other significant property” in which the registrant has an economic interest.  No rule provision regarding summary disclosure for multiple properties but the Staff has not objected to such summary disclosureAdditional disclosure for material properties.  Required summary disclosure for registrants with multiple mining properties
Disclosure of internal controls used in exploration and mineral resource and reserve estimation effortsNoYes 
Use of US Geological Survey published Circular 831 and 891?The Staff has not objected to use of the circulars to classify resources of coal or industrial mineralsNo longer permitted

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Summary of Requirements for Technical Report Summaries

Required Content for All Technical Report Summaries:

  • Executive Summary.  Briefly summarize the most significant information in the technical report summary, including property description (including mineral rights) and ownership, geology and mineralization, the status of exploration, development and operations, mineral resource and mineral reserve estimates, summary capital and operating cost estimates, permitting requirements, and the qualified person’s conclusions and recommendations.  The executive summary must be brief and should not contain all of the detailed information in the technical support summary;
  • Introduction.  Disclose:
    • The registrant for whom the technical report summary was prepared;
    • The terms of reference and purpose for which the technical report summary was prepared;
    • The sources of information and data contained in the technical report summary or used in its preparation, with citations if applicable;
    • The details of the personal inspection on the property by each qualified person or, if applicable, the reason why a personal inspection has not been completed;
    • Whether the technical report summary’s purpose was to report mineral resources, mineral reserves or material exploration results;
    • If applicable, that the technical report summary updates a previously filed technical report summary; and
    • When filing an update, the name and date of the previous technical report summary.
  • Property Description.  Describe:
    • The location of the property, accurate to within one mile, using an easily recognizable coordinate system.  The qualified person must provide appropriate maps, with proper engineering detail (such as scale, orientation, and titles) to portray the location of the property.  Such maps must be legible on the page when printed;
    • The area of the property;
    • The name or number of each title, claim, mineral right, lease or option under which the registrant and its subsidiaries have or will have the right to hold or operate the property.  If held by leases or options, the registrant must provide the expiration dates of such leases or options and associated payments;
    • The mineral rights, and how such rights have been obtained at this location, indicating any conditions that the registrant must meet in order to obtain or retain the property;
    • Any significant encumbrances to the property, including current and future permitting requirements and associated timelines, permit conditions, and violations and fines; and
    • Any other significant factors and risks that may affect access, title, or the right or ability to perform work on the property.

    If the registrant holds a royalty or similar interest in the property, the above information must be provided for the property that is owned or operated by a party other than the registrant.  In this event, for example, the report must address the documents under which the owner or operator holds or operates the property, the mineral rights held by the owner or operator, conditions required to be met by the owner or operator, significant encumbrances and significant factors and risks relating to the property or work on the property.

  • Accessibility, Climate, Local Resources, Infrastructure and Physiography.  Describe:
    • The topography, elevation, and vegetation;
    • The means of access to the property, including highways, towns, rivers, railroads, and airports;
    • The climate and the length of the operating season, as applicable; and
    • The availability of and required infrastructure, including sources of water, electricity, personnel, and supplies.
  • History.  Describe:
    • Previous operations, including the names of previous operators, insofar as known; and
    • The type, amount, quantity, and general results of exploration and development work undertaken by any previous owners or operators.
  • Geological Setting, Mineralization and Deposit.  Describe briefly:
    • The regional, local, and property geology;
    • The significant mineralized zones encountered on the property, including a summary of the surrounding rock types, relevant geological controls, and the length, width, depth, and continuity of the mineralization, together with a description of the type, character, and distribution of the mineralization; and
    • Each mineral deposit type that is the subject of investigation or exploration together with the geological model or concepts being applied in the investigation or forming the basis of exploration program.

    The qualified person must include at least one stratigraphic column and one cross-section of the local geology to meet the requirements of this paragraph.

  • Exploration.  Describe the nature and extent of all relevant exploration work, conducted by or on behalf of, the registrant.
    • For all exploration work other than drilling, describe:
      • The procedures and parameters relating to the surveys and investigations;
      • The sampling methods and sample quality, including whether the samples are representative, and any factors that may have resulted in sample biases;
      • The location, number, type, nature, and spacing or density of samples collected, and the size of the area covered; and
      • The significant results of and the qualified person’s interpretation of the exploration information.
    • For drilling, to the extent such information is relevant and available, describe:
      • The type and extent of drilling including the procedures followed;
      • Any drilling, sampling, or recovery factors that could materially impact the accuracy and reliability of the results; and
      • The material results and interpretation of the drilling results.
    • For characterization of hydrogeology, to the extent such information is relevant and available, describe:
      • The nature and quality of the sampling methods used to acquire data on surface and groundwater parameters;
      • The type and appropriateness of laboratory techniques used to test for groundwater flow parameters such as permeability, and include discussions of the quality control and quality assurance procedures;
      • Results of laboratory testing and the qualified person’s interpretation, including any material assumptions, which must include descriptions of permeable zones or aquifers, flow rates, in-situ saturation, recharge rates and water balance; and
      • The groundwater models used to characterize aquifers, including material assumptions used in the modeling.
    • For geotechnical data, testing and analysis, to the extent such information is relevant and available, describe:
      • The nature and quality of the sampling methods used to acquire geotechnical data;
      • The type and appropriateness of laboratory techniques used to test for soil and rock strength parameters, including discussions of the quality control and quality assurance procedures; and
      • Results of laboratory testing and the qualified person’s interpretation, including any material assumptions.
    • For a technical report summary to support disclosure of exploration results, the qualified person must provide information on all samples or drill holes.  If some information is excluded, the qualified person must identify the omitted information and explain why that information is not material.
    • For a technical report summary to support disclosure of mineral resources or mineral reserves, the qualified person can meet the requirements of this section by providing sampling (including drilling) plans, representative plans and cross-sections of results.
    • Include a plan view of the property showing locations of all drill holes and other samples.
    • If disclosing an exploration target for which a mineral resource has yet to be disclosed, the above information must be provided in a subsection of the “Exploration” section that is clearly captioned as a discussion of an exploration target, together with:
      • A clear and prominent statement that:
        • The ranges of potential tonnage and grade (or quality) of the exploration target are conceptual in nature;
        • There has been insufficient exploration of the relevant property or properties to estimate a mineral resource;
        • It is uncertain if further exploration will result in the estimation of a mineral resource; and
        • The exploration target therefore does not represent, and should not be construed to be, an estimate of a mineral resource or mineral reserve.
      • A detailed explanation of the basis for the exploration target, such as the conceptual geological model used to develop the target;
      • An explanation of the process used to determine the ranges of tonnage and grade, which must be expressed as approximations;
      • A statement clarifying whether the exploration target is based on actual exploration results or on one or more proposed exploration programs, which should include a description of the level of exploration activity already completed, the proposed exploration activities designed to test the validity of the exploration target, and the time frame in which those activities are expected to be completed; and
      • A statement that the ranges of tonnage and grade (or quality) of the exploration target could change as the proposed exploration activities are completed.
  • Sample Preparation, Analyses, and Security.  Describe:
    • Sample preparation methods and quality control measures employed prior to sending samples to an analytical or testing laboratory, sample splitting and reduction methods, and the security measures taken to ensure the validity and integrity of samples;
    • Sample preparation, assaying and analytical procedures used, the name and location of the analytical or testing laboratories, the relationship of the laboratory to the registrant, and whether the laboratories are certified by any standards association and the particulars of such certification;
    • The nature, extent, and results of quality control procedures and quality assurance actions taken or recommended to provide adequate confidence in the data collection and estimation process; and
    • The author's opinion on the adequacy of sample preparation, security, and analytical procedures.  If the analytical procedures used in the analysis are not part of conventional industry practice, the qualified person must state so and provide a justification for why he or she believes the procedure is appropriate in this instance.
  • Data Verification.  Describe the steps taken by the qualified person to verify the data being reported on or which is the basis of this technical report summary, including:
    • Data verification procedures applied by the qualified person;
    • Any limitations on or failure to conduct such verification, and the reasons for any such limitations or failure; and
    • The qualified person’s opinion on the adequacy of the data for the purposes used in the technical report summary.
  • Adjacent Properties.  Where applicable, a qualified person may include relevant information concerning an adjacent property if:
    • Such information was publicly disclosed by the owner or operator of the adjacent property;
    • The source of the information is identified;
    • The qualified person states that he or she has been unable to verify the information and that the information is not necessarily indicative of the mineralization on the property that is the subject of the technical report summary; and
    • The technical report summary clearly distinguishes between the information from the adjacent property and the information from the property that is the subject of the technical report summary.
  • Other Relevant Data and Information.  Include any additional information or explanation necessary to provide a complete and balanced presentation of the value of the property to the registrant.
  • Interpretation and Conclusions.  The qualified person must summarize the interpretations of and conclusions based on the data and analysis in the technical report summary.  He or she must also discuss any significant risks and uncertainties that could reasonably be expected to affect the reliability or confidence in the exploration results, mineral resource or mineral reserve estimates, or projected economic outcomes.
  • Recommendations.  If applicable, the qualified person must describe the recommendations for additional work with associated costs.  If the additional work program is divided into phases, the costs for each phase must be provided along with decision points at the end of each phase.
  • References.  Include a list of all references cited in the technical report summary in sufficient detail so that a reader can locate each reference.
  • Reliance on Information Provided by the Registrant.  If the qualified person is relying on information provided by the registrant, as permitted by the SEC’s rules, for any matters discussed in the technical report summary:
    • Identify the categories of information provided by the registrant;
    • Identify the particular portions of the technical report summary that were prepared in reliance on information provided by the registrant and the extent of that reliance; and
    • Disclose why the qualified person considers it reasonable to rely upon the registrant for any of such information.

Required Additions for an Initial Assessment:

  • Mineral Processing and Metallurgical Testing.  Describe:
    • The nature and extent of the mineral processing or metallurgical testing and analytical procedures;
    • The degree to which the test samples are representative of the various types and styles of mineralization and the mineral deposit as a whole;
    • The name and location of the analytical or testing laboratories, the relationship of the laboratory to the registrant, whether the laboratories are certified by any standards association and the particulars of such certification;
    • The relevant results including the basis for any assumptions or predictions about recovery estimates.  Discuss any processing factors or deleterious elements that could have a significant effect on potential economic extraction; and
    • The qualified person’s opinion on the adequacy of the data for the purposes used in the technical report summary.  If the analytical procedures used in the analysis are not part of conventional industry practice, the qualified person must state so and provide a justification for why he or she believes the procedure is appropriate, in this instance.
  • Mineral Resource Estimates.  If this item is included, the technical report summary must:
    • Describe the key assumptions, parameters, and methods used to estimate the mineral resources, in sufficient detail for a reasonably informed person to understand the basis for and how the qualified person estimated the mineral resources;
    • Provide the qualified person’s estimates of mineral resources for all commodities, including estimates of quantities, grade or quality, cut-off grades, and metallurgical or processing recoveries.  The qualified person must classify mineral resources into inferred, indicated, and measured mineral resources, disclose the criteria used to classify a resource as inferred, indicated or measured, and justify the classification.  The technical report summary must include mineral resource estimates at a specific point of reference selected by the qualified person and disclosed in the technical report summary.  The qualified person must round off, to appropriate significant figures chosen to reflect order of accuracy, any estimates of quantity and grade or quality.  The qualified person must estimate cut-off grades based on assumed costs for surface or underground operations and commodity prices that provide a reasonable basis for establishing prospects of economic extraction for resources.  The qualified person must disclose the price used for each commodity, and explain, with particularity, his or her reasons for using the selected price, including the material assumptions underlying the selection.  This explanation must include disclosure of the time frame used to estimate the commodity price and unit costs for cut-off grade estimation and the reasons justifying the selection of that time frame.  The qualified person may use a price set by contractual arrangement, provided that such price is reasonable, and the qualified person discloses that he or she is using a contractual price.
    • When the qualified person reports the grade or quality for a multiple commodity mineral resource as metal or mineral equivalent, he or she also must report the individual grade of each metal or mineral and the commodity prices, recoveries, and any other relevant conversion factors used to estimate the metal or mineral equivalent grade;
    • Discuss the uncertainty in the estimates of inferred, indicated, and measured mineral resources and explain the sources of uncertainty and how they were considered in the uncertainty estimates.  The qualified person must support the disclosure of uncertainty associated with each class of mineral resources with a list of all factors considered and explain how those factors contributed to the final conclusion about the level of uncertainty underlying the resource; and
    • The qualified person must provide a qualitative assessment of all relevant technical and economic factors likely to influence the prospect of economic extraction to establish economic potential and justify why he or she believes that all issues can be resolved with further exploration and analysis.  These factors include, but are not limited to, to the extent material:
      • Site infrastructure (e.g. whether access to power and site is possible);
      • Mine design and planning (e.g. what is the broadly defined mining method);
      • Processing plant (e.g. whether all products used in assessing prospects of economic extraction can be processed with methods consistent with each other);
      • Environmental compliance and permitting (e.g. what are the required permits and corresponding agencies and whether significant obstacles exist to obtaining those permits); and
      • Any other reasonably assumed technical and economic factors, including plans, negotiations, or agreements with local individuals or groups, which are necessary to demonstrate reasonable prospects for economic extraction.
  • In complying with the above requirements, the qualified person must take into account the following instructions:
    • The qualified person must consider all sources of uncertainty when reporting the uncertainty associated with each class of mineral resources.  Sources of uncertainty that affect such reporting of uncertainty include sampling or drilling methods, data processing and handling, geologic modeling and estimation.  The qualified person is not required to use estimates of confidence limits derived from geostatistics or other numerical methods to support the disclosure of uncertainty surrounding mineral resource classification.  If the qualified person chooses to use confidence limit estimates from geostatistics or other numerical methods, he or she should consider the limitations of these methods and adjust the estimates appropriately to reflect sources of uncertainty that are not accounted for by these methods.
    • Mineral resources must generally be reported exclusive of mineral reserves; however, in the technical report summary mineral resource estimates may be inclusive of mineral reserves so long as this is clearly stated with equal prominence to the rest of the item.  If the qualified person chooses to disclose resources inclusive of mineral reserves, he or she must also clearly state the mineral resources exclusive of mineral reserves in the technical report summary.
    • Unless otherwise stated, cut-off grades also refer to net smelter returns, pay limits and other similar terms.

A qualified person may, but is not required to, also include the following information in the initial assessment:

  • Economic Analysis.  Describe:
    • The key assumptions, parameters, and methods used to demonstrate economic viability.  The qualified person must provide all material assumptions including discount rates, exchange rates, commodity prices, and taxes, royalties, and other government levies or interests applicable to the mineral project or to production, and to revenues or income from the mineral project;
    • Results of the economic analysis, including annual cash flow forecasts based on an annual production schedule for the life of project, and measures of economic viability such as net present value (NPV), internal rate of return (IRR), and payback period of capital; and
    • Sensitivity analysis results using variants in commodity price, grade, capital and operating costs, or other significant input parameters, as appropriate, and discuss the impact on the results of the economic analysis.

    When this information is included in an initial assessment:

    • The qualified person must include a statement, of equal prominence to the rest of this section, that, unlike mineral reserves, mineral resources do not have demonstrated economic viability; and
    • If the qualified person includes inferred mineral resources in any economic analysis, the report must:
      • State with equal prominence to the disclosure of mineral resource estimates that the assessment is preliminary in nature, it includes inferred mineral resources that are considered too speculative geologically to have modifying factors applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that this economic assessment will be realized;
      • Disclose the percentage of the mineral resources used in the cash flow analysis that was classified as inferred mineral resources; and
      • Disclose, with equal prominence, the results of the economic analysis excluding inferred mineral resources in addition to the results that include inferred mineral resources.
    • Operating and capital cost estimates must have an accuracy level of at least approximately ±50% and a contingency level of no greater than 25%.  The qualified person must state the accuracy and contingency levels in the initial assessment.

Further Required Additions for a Preliminary Feasibility Study or a Final Feasibility Study:

  • Mineral Reserves Estimates.  If this item is included, the technical report summary must:
    • Describe the key assumptions, parameters, and methods used to estimate the mineral reserves, in sufficient detail for a reasonably informed person to understand the basis for converting, and how the qualified person converted, indicated and measured mineral resources into the mineral reserves;
    • Provide the qualified person’s estimates of mineral reserves for all commodities, including estimates of quantities, grade or quality, cut-off grades, and metallurgical or processing recoveries.  The qualified person must classify mineral reserves into probable and proven mineral reserves.  The qualified person must round off, to appropriate significant figures chosen to reflect order of accuracy, any estimates of quantity and grade or quality.  The technical report summary must include mineral reserve estimates at a specific point of reference selected by the qualified person and disclosed in the technical report summary.  The qualified person must estimate cut-off grades based on detailed cut-off grade analysis that includes a long term price that provides a reasonable basis for establishing that the project is economically viable. The qualified person must disclose the price used for each commodity, which must provide a reasonable basis for establishing that the project is economically viable, and explain, with particularity, his or her reasons for using the selected price, including the material assumptions underlying the selection. This explanation must include disclosure of the time frame used to estimate the price and costs and the reasons justifying the selection of that time frame. The qualified person may use a price set by contractual arrangement, provided that such price is reasonable, and the qualified person discloses that he or she is using a contractual price when disclosing the price used; 
    • When the qualified person reports the grade or quality for a multiple commodity mineral reserve as metal or mineral equivalent, he or she must also report the individual grade of each metal or mineral and the commodity prices, recoveries, and any other relevant conversion factors used to estimate the metal or mineral equivalent grade.
    • Provide the qualified person’s opinion on how the mineral reserve estimates could be materially affected by risk factors associated with or changes to any aspect of the modifying factors.
  • Mining Methods.  Describe the current or proposed mining methods and the reasons for selecting these methods as the most suitable for the mineral reserves under consideration. Include:
    • Geotechnical and hydrological models, and other parameters relevant to mine designs and plans;
    • Production rates, expected mine life, mining unit dimensions, and mining dilution and recovery factors;
    • Requirements for stripping, underground development, and backfilling;
    • Required mining equipment fleet and machinery, and personnel; and
    • At least one map of the final mine outline.
  • Processing and Recovery Methods.  Describe the current or proposed mineral processing methods and the reasons for selecting these methods as the most suitable for extracting the valuable products from the mineralization under consideration.  Include:
    • A description or flow sheet of any current or proposed process plant;
    • Plant throughput and design, equipment characteristics and specifications;
    • Current or projected requirements for energy, water, process materials, and personnel; and
    • If the processing method, plant design or other parameters have never been used to successfully extract the valuable product from such mineralization, the qualified person must so state and provide a justification for why he or she believes the approach will be successful in this instance.

    If the processing method, plant design or other parameter has never been used to commercially extract the valuable product from such mineralization and is still under development, then no mineral resources or reserves can be disclosed on the basis of that method, design, or other parameter.

  • Infrastructure.  Describe the required infrastructure for the project, including roads, rail, port facilities, dams, dumps and leach pads, tailings disposal, power, water and pipelines, as applicable.  The qualified person must include at least one map showing the layout of the infrastructure.
  • Market Studies.  Describe the market for the products of the mine, including justification for demand or sales over the life of the mine (or length of cash flow projections).  Include:
    • Information concerning markets for the property’s production, including the nature and material terms of any agency relationships and the results of any relevant market studies, commodity price projections, product valuation, market entry strategies, and product specification requirements;
    • Descriptions of all material contracts required for the issuer to develop the property, including mining, concentrating, smelting, refining, transportation, handling, hedging arrangements, and forward sales contracts.  State which contracts have been executed and which are still under negotiation.  For all contracts with affiliated parties, discuss whether the registrant obtained the same terms, rates or charges as could be obtained had the contract been negotiated at arm’s length with an unaffiliated third party; and
    • If the mine’s product cannot be traded on an exchange, there is no other established market for the product, and no sales contract exists:
      • In the case of a pre-feasibility study, a preliminary market study, meaning a study that is sufficiently rigorous and comprehensive to determine and support the existence of a readily accessible market for the mineral.  It must, at a minimum, include product specifications based on preliminary geologic and metallurgical testing, supply and demand forecasts, historical prices for the preceding five or more years, estimated long term prices, evaluation of competitors (including products and estimates of production volumes, sales, and prices), customer evaluation of product specifications, and market entry strategies.  The study must provide justification for all assumptions.  It can, however, be less rigorous and comprehensive than a final market study, which is required for a full feasibility study; and
      • In the case of a feasibility study, a final market study, meaning a comprehensive study to determine and support the existence of a readily accessible market for the mineral.  It must, at a minimum, include product specifications based on final geologic and metallurgical testing, supply and demand forecasts, historical prices for the preceding five or more years, estimated long term prices, evaluation of competitors (including products and estimates of production volumes, sales, and prices), customer evaluation of product specifications, and market entry strategies or sales contracts.  The study must provide justification for all assumptions, which must include all assumptions concerning the material contracts required to develop and sell the mineral reserves.
  • Environmental Studies, Permitting, and Plans, Negotiations, or Agreements with Local Individuals or Groups.  Describe the factors pertaining to environmental compliance, permitting, and local individuals or groups, which are related to the project.  Include:
    • The results of environmental studies (e.g. environmental baseline studies or impact assessments);
    • Requirements and plans for waste and tailings disposal, site monitoring, and water management during operations and after mine closure;
    • Project permitting requirements, the status of any permit applications, and any known requirements to post performance or reclamation bonds;
    • Plans, negotiations or agreements with local individuals or groups;
    • Descriptions of any commitments to ensure local procurement and hiring;
    • Mine closure plans, including remediation and reclamation plans, and the associated costs; and
    • The qualified person’s opinion on the adequacy of current plans to address any issues related to environmental compliance, permitting and local individuals or groups.
  • Capital and Operating Costs.  Provide estimates of capital and operating costs, with the major components set out in tabular form.  Explain and justify the basis for the cost estimates including any contingency budget estimates.  State the accuracy level of the capital and operating cost estimates.  To assess the accuracy of the capital and operating cost estimates, the qualified person must take into account the risks associated with the specific engineering estimation methods used to arrive at the estimates.  As part of this analysis, the qualified person must take into consideration the accuracy of the estimation methods in prior similar environments.  Operating and capital cost estimates in a pre-feasibility study must, at a minimum, have an accuracy level of approximately ±25% and a contingency range not exceeding 15%.  Operating and capital cost estimates in a feasibility study must, at a minimum, have an accuracy level of approximately ±15% and a contingency range not exceeding 10%.  The qualified person must state the accuracy level and contingency range in the study.
  • Economic Analysis.  Describe:
    • The key assumptions, parameters, and methods used to demonstrate economic viability.  The qualified person must provide all material assumptions including discount rates, exchange rates, commodity prices, and taxes, royalties, and other government levies or interests applicable to the mineral project or to production, and to revenues or income from the mineral project;
    • Results of the economic analysis, including annual cash flow forecasts based on an annual production schedule for the life of project, and measures of economic viability such as net present value (NPV), internal rate of return (IRR), and payback period of capital; and
    • Sensitivity analysis results using variants in commodity price, grade, capital and operating costs, or other significant input parameters, as appropriate, and discuss the impact on the results of the economic analysis.

    When this information is included in a pre-feasibility study:

    • The qualified person must exclude inferred mineral resources from the pre-feasibility study’s demonstration of economic viability in support of a disclosure of a mineral reserve;
    • Factors to be considered are typically the same as those required for an initial assessment, but considered at a greater level of detail or at a later stage of development.  For example, a pre-feasibility study must define, analyze or otherwise address in detail:
      • The required access roads, infrastructure location and plant area, and the source of all utilities (e.g. power and water) required for development and production;
      • The preferred underground mining method or surface mine pit configuration, with detailed mine layouts drawn for each alternative;
      • The bench lab tests that have been conducted, the process flow sheet, equipment sizes, and general arrangement that have been completed, and the plant throughput;
      • The environmental compliance and permitting requirements or interests of agencies, non-governmental organizations, communities and other stakeholders, the baseline studies, and the plans for tailings disposal, reclamation and mitigation, together with an analysis establishing that permitting is possible; and
      • Any other reasonable assumptions, based on appropriate testing, on the modifying factors sufficient to demonstrate that extraction is economically viable.
    • The pre-feasibility study must also identify sources of uncertainty that require further refinement in a final feasibility study.

    When this information is included in a final feasibility study:

    • The qualified person must exclude inferred mineral resources from the pre-feasibility study’s demonstration of economic viability in support of a disclosure of a mineral reserve;
    • A feasibility study must contain the application and description of all relevant modifying factors in a more detailed form and with more certainty than a pre-feasibility study.  The list of factors is not exclusive.  For example, a feasibility study must define, analyze or otherwise address in detail, to the extent material:
      • Final requirements for site infrastructure, including well-defined access roads, finalized plans for infrastructure location, plant area, and camp or town site, and the established source of all required utilities (e.g. power and water) for development and production;
      • Finalized mining method, including detailed mine layouts and final development and production plan for the preferred alternative with the required equipment fleet specified.  The feasibility study must address detailed mining schedules, construction and production ramp up, and project execution plans;
      • Completed detailed bench lab tests and a pilot plant test, if required, based on risk.  The feasibility study must further address final requirements for process flow sheet, equipment sizes, and general arrangement and specify the final plant throughput;
      • The final identification and detailed analysis of environmental compliance and permitting requirements, and the completion of baseline studies and finalized plans for tailings disposal, reclamation and mitigation; and
      • The final assessments of other modifying factors necessary to demonstrate that extraction is economically viable.

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Firm Highlights

Insights

Construing Congressional Silence: With the Natural Gas Act’s Not Addressing Compensation in Pipeline Condemnations, Can Courts Use State Law to Award Attorney Fees?

On November 9, 2026, the Supreme Court will hear oral arguments in Leonard W. Hoffmann v. WBI Energy Transmission, Inc. to determine: “In private condemnations under the Natural Gas Act, should just compensation be determined by reference to state law?” North Dakota ranchers litigated the price of a natural gas pipeline easement during three years of condemnation proceedings, settled on the easement price, and were awarded attorney fees based on state law, but the fees were denied by Eighth Circuit, which held that because the Natural Gas Act (“NGA”) provision authorizing pipelines to use of eminent domain does not address compensation, the Fifth Amendment standard must necessarily apply, that is, “just compensation” for property, but not attorney fees.1 Four other circuits disagree. The Court will resolve the circuit split, likely making some pipeline condemnations less expensive and quicker or, alternatively, more expensive and take longer. Whatever the result, Congressional action could follow. Background Section 7(c) of the NGA requires the Federal Energy Regulatory Commission (“FERC”) to issue a certificate of public convenience and necessity, before new interstate natural gas pipeline facilities can be constructed and operated.2 Significantly, only a private party – not the federal government, not a state, nor a municipality – can obtain certificate authorization.3 The NGA did not initially address property acquisition, leaving certificate holders to rely on state condemnation law to secure necessary property rights to develop their projects, rendering some with “only an illusory right to build.”4 Congress resolved that by enacting NGA Section 7(h), which vests certificate holders with the ability to exercise eminent domain in a federal or state court where the property is located.5 Yet Section 7(h) does not address compensation: it does not indicate whether attorney fees can be recovered; “it does not even expressly require that just compensation be provided.”6 Litigation over the meaning of the Congressional compensation silence ensued. After Years of Litigation, Parties Agreed on Easement Price, but Not Attorney Fees In February 2018, WBI Energy Transmission, Inc. (“WBI”) received certificate authorization to construct and operate approximately 12 miles of 24-inch diameter pipeline through ranch land in western North Dakota, in the heart of the oil and gas producing Bakken formation of the Williston Basin.7 WBI and the ranchers could not agree on an easement price: the ranchers had recently negotiated easement prices with oil pipelines (which do not have eminent domain rights and must pay “market” prices to obtain easements) and sought a similar deal,8 but WBI was unwilling, instead offering only what it paid for a parallel natural gas line easement years earlier.9 So WBI filed in federal district court a complaint to take by eminent domain a permanent easement and temporary rights-of-way to construct the pipeline. Shortly thereafter, with the agreement of the ranchers, the court ordered that WBI could have immediate use and possession of the easements necessary for construction, leaving for trial the amount of compensation.10 The Fifth Amendment guarantees that private property shall not be taken for public use without just compensation.11 WBI and the ranchers disagreed on what constitutes “just compensation.” WBI maintained that compensation should be determined solely by the “before and after rule” – i.e., the difference between the market value of the land free of the easement and the market value burdened with the easement.12 The ranchers argued that other factors should also be considered, such as market rate paid by oil pipelines for easements on the properties.13 WBI filed a motion in limine to exclude evidence and testimony of such payment information, which the trial judge denied,14 leading to a confidential settlement on the value of the easement, with the ranchers’ reserving their right to seek attorney fees and expenses and WBI’s reserving its right to contest. After three years of litigation, the ranchers sought to recover $383,375.76 – that is, $332,274.96 in legal fees and $50,650.86 in costs and expenses.15 WBI claimed that the amount was unreasonable and should be limited to $220,625.52.16 The trial court, recognizing that the NGA was silent on compensation issues, relied on United States v. Kimbell Foods, Inc.17 to analyze whether to “fill in the gap” with North Dakota condemnation law and ultimately concluded it could award attorney fees and costs.18 WBI appealed. Four Circuits Rely on Kimbell Foods and State Law to Award Attorney Fees Courts have recognized the difference between condemnations by the federal government and a private party: “the sovereign need only pay for what it actually takes rather than for all that the owner has lost.”19 “[W]here the federal government is the condemnor there exists a significant concern about the spending of federal dollars, one that does not exist when a private entity is the condemnor . . . pursuing the condemnation ‘for purposes of profit.’”20 As such, four circuit courts have applied federal common law to allow recovery of attorney fees and costs in condemnations under the NGA.21 “In crafting such federal common law, courts need not inevitably … resort to federal rules,”22 but rather, after weighing various considerations set forth in the Supreme Court’s 1979 opinion in Kimbell Foods, can apply state law.23 In particular, the four circuits answered “no” to each of the following three questions posed in Kimbell Foods: “(1) whether the federal program, by its very nature, required uniformity; (2) whether application of state law would frustrate specific objectives of the federal program; and (3) whether application of uniform federal law would disrupt existing commercial relationships predicated on state law.”24 The Eighth Circuit took a different tack. Eighth Circuit Reversed and Barred Attorney Fees, Breaking with Sister Circuits The Eighth Circuit framed the issue this way: “Under North Dakota law, as the district court points out, attorney fees are available in condemnation proceedings. WBI’s view is that federal law applies because it was exercising the eminent-domain power of the United States, which would owe no attorney fees if it did the condemning.”25 The court then held: “Just compensation” under the Fifth Amendment has a well-established legal meaning that usually equates to “market value,” the “full monetary equivalent of the property taken.” * * * But the focus is always on the value of the property itself, not what the owner spends trying to keep it. * * * Under the Fifth Amendment, property owners cannot recover for “indirect costs” like attorney fees and expenses. Only a statute can require more. * * * [T]he Natural Gas Act says nothing about the measure of compensation due to a property owner.  It does not even use the words “just compensation,” let alone say that attorney fees are available or that an agency or state law can provide them. Without such an exercise of “legislative grace,” the default rules applies: “just compensation” under the Fifth Amendment.26 The Eighth Circuit recognized “that different concerns are at stake when the United States is exercising its own power under the Fifth Amendment…. But these are policy arguments better addressed to Congress.”27 Petition For Writ of Certiorari Granted to Resolve Circuit Split The ranchers filed with the Supreme Court a petition for a writ of certiorari to resolve the split between the Eighth Circuit and four other circuits.28 WBI initially opposed the petition,29 but relented after the Solicitor General urged the court to grant petition and uphold the Eighth Circuit opinion.30 The attorneys general of ten states31 and a national network of eminent domain and property lawyers filed amici curiae (friends of the court) briefs in support of the ranchers’ petition.32 Shortly after WBI and ranchers filed supplemental briefs,33 the Supreme Court granted the petition for certiorari on June 26, 2026.34 Ranchers Focused on Statutory Interpretation, Six Amici on Economic Fairness Rather than rely primarily on Kimbell Foods, the ranchers’ merits brief used statutory interpretation to argue that private condemnation lawsuits under the NGA should use state law compensation rules.35 They contend that, in contrast to various ways that the federal government can take land,36 NGA Section 7(h) grants a limited “delegation of power to take property through a condemnation lawsuit – to file what is sometimes called “a straight condemnation,”37 where authorization to take property is not sought, but instead for the court to adjudicate the value of the property: “If the condemnor wants to buy the property at the court’s price, it tenders payment; if not, it can abandon the condemnation.”38 Thus, the ranchers submit that their rights to compensation under the NGA flow not from the Fifth Amendment, but rather from the NGA’s authorizing “the filing of a lawsuit whose purpose is to adjudicate how much they must be paid for their land.”39 If the condemnor were the federal government, compensation would not be greater than the Fifth Amendment minimum, absent statutory authorization;40 but that does not require the same to result in a private condemnation. The ranchers suggest that several additional reasons support using state law to resolve property compensation issues. First, given that real property law “lies at the core of traditional state authority”,41 compensation should consider “North Dakota’s rule that property owners cannot be made to bear the cost of their condemnation….”42 Second, based on the “Court’s longstanding practice of borrowing state substantive law,” the issue is not whether NGA Section 7(h) incorporates state land valuation rules, but “whether the statute preempts them.”43 Third, unless an easement’s value is above a statutory minimum,44 the condemnor can only file in state court: “If Congress expected those state courts to look to a source of law other than the one they would ordinarily look to in a property case, one could expect it to have left some hint to that effect in the text. But there isn’t one.”45 Fourth, awarding attorney fees under state law is consistent with the purpose of NGA Section 7(h): Respondent suggests that Congress, out of a desire to fix a problem in Missouri (where interstate natural-gas companies lacked an eminent-domain cause of action), also decided to take some money away from farmers and ranchers in places like Iowa (where the companies already had a cause of action). Surely not.46 Six groups filed amicus briefs supporting the ranchers.47 Among them, Florida property owners, who were involved in a different condemnation proceeding,48 contend that (1) compensation rules for federal government acting in its own name should not apply to private, for-profit companies acting under a limited delegation of eminent domain,49 and (2) “property owners who are without economic wherewithal proceed in an unrepresented fashion and are typically forced to accept a compromise close to the amount of the private licensee company’s low offers because they are not otherwise with the means to prepare their own valuation estimates and defend their respective constitutional entitlement to compensation.”50 This was reinforced by a group of property lawyers: In 2016, under the auspices of the Natural Gas Act (“NGA”), the Sabal Trail natural gas pipeline project in Florida took land from Ryan B. Thomas and offered him $6,800 in exchange. A Florida jury later determined that the measure of compensation for Sabal Trail’s taking was $463,439. Sabal Trail had thus initially offered Mr. Thomas 1.4% of his land’s value. Between the initial offer and the jury’s determination of compensation lay months of litigation work by Mr. Thomas and his attorney.51 The property lawyers also argued that affirming the Eighth Circuit’s decision would strip property owners of state law protections in 21 states.52 WBI Argued NGA Silence on Attorney Fees Intentional, Supported by Three Amici WBI’s merits brief contends that condemnation by a private party is nothing new and does not require a different set of rules from the Federal government’s condemning land: “For as long as the eminent domain power has been exercised by the United States, it has also been delegated to private parties.”53 These private delegatees “knitted together the expanding nation by building railroads, bridges, roads, and telegraph and telephone lines”54 and, absent a Congressional directive, paid the fair market value of the property taken, as required by the Fifth Amendment.55 WBI points to a 1943 case, United States ex rel. Tennessee Valley Auth. v. Powelson,56 which summarized then existing law: “[i]n the absence of a statutory mandate, the sovereign must pay only for what it takes, not for the opportunities which the owner may lose”.57 Indeed, Congress knew how to depart from the Fifth Amendment’s fair-market-value measure of condemnation compensation: “One year before enacting Section 717f(h), in the General Bridge Act of 1946, Congress authorized private parties to condemn land for bridges and expressly required that compensation ‘be ascertained and paid according to the laws of [the] State’ where the property sits.”58 Additionally, WBI argues that the ranchers essentially urge the court to adopt a patchwork of individual state compensation laws, which would undermine what Congress did in enacting NGA Section 7(h) --“eliminate state-by-state variation in NGA condemnations so that certificate-holders could efficiently construct interstate pipelines.”59 Three amicus briefs were filed in support of WBI, including one from the Attorney General, who reiterated: “Just compensation under the Fifth Amendment ‘is for the property, and not the owner. Accordingly, ‘indirect costs to the property owner caused by the taking of his land,’ such as ‘attorneys fees’ are ‘generally not part of the just compensation to which his is constitutionally entitled.’”60 Another amicus brief filed by trade associations claimed that interstate natural gas pipelines are responsible stewards of eminent domain, exercising it only as a last resort, as evinced by a survey indicating that, over a recent nine-year period FERC-certificated pipeline projects more than ten miles in length (25,268 tracts) resulted in only 10% of the tracts requiring condemnation and less than one percent (1%) required litigation.61 Finally, the US Chamber of Commerce emphasized the importance of natural gas to businesses,62 and urged the Court not to create obstacles that would “chill investment in essential infrastructure….”63 Crystal Ball Judicial Tension between “Strict Construction” and Support for Property Rights? Hoffmann could set up a clash between a favored method of the Supreme Court for resolving conflicts and a centuries’ long commitment to protecting a fundamental right. Questions during oral arguments could foreshadow which way the Court will lean. On one hand, the Court could rely on NGA Section 7(h)’s “’plain meaning’ derived from an ordinary understanding of the words and structure of the statutory text.”64 Consider the Supreme Court’s rationale in Dobbs v. Jackson Women’s Health Organization,65 which overruled the landmark Roe v. Wade:66 “The Constitution makes no reference to abortion, and no such right is implicitly protected by any constitutional provisions including . . . the Due Process Clause of the Fourteenth Amendment.”67 This type of “strict construction”68 aligns most closely with WBI’s argument that Section 7(h) does not specifically provide for attorney fees, and the silence was intentional, given that Congress expressly permitted recovery of attorney fees in eminent domain actions under the General Bridge Act of 1946, the year before enactment of NGA Section 7(h).69 On the other hand, the ranchers’ arguments resonate with a long line of cases protecting property rights. More than 130 years ago, the Court in Monongahela Nav. Co. v. U.S.70 explained that in condemnation cases the courts should adhere to “the rule that constitutional provisions for the security of person and property should be liberally construed.  A close and literal construction deprives them of half their efficacy, and leads to gradual depreciation of the right….”71 Half a century ago, the Supreme Court, in Lynch v. Household Fin. Corp,72 emphasized: “Property does not have rights. People have rights.”73 Three years ago, all nine justices, in Tyler v. Hennepin County, Minnesota,74 ruled for a property owner, holding that a local government cannot keep the surplus profit after selling a seized home for unpaid taxes.75 The policies in these (and other cases cited by the ranchers) would appear to support landowners’ recovering the costs incurred to defend their property in condemnation proceedings. Whether a strict construction of NGA Section 7(h) permits those policies to be realized in Hoffmann remains to be seen. Implications and Possible Congressional Action The amount of compensation offered by pipelines and the length of condemnation proceedings may change, depending on how the Supreme Court rules. If the Court upholds the Eighth Circuit opinion – and concludes that attorney fees and costs cannot be recovered –a landowner may be presented with an unsavory decision: accept the pipeline’s offer or, alternatively, refuse the offer, go to court, and watch legal fees erode any compensation ultimately received. Worse yet, with litigation unlikely, pipelines may submit “low ball” offers, believing that the landowner will not likely want to risk costly litigation. Conversely, if the Supreme Court reverses the Eighth Circuit and holds that attorney fees and costs can be recovered, the number of condemnation cases could increase, as landowners’ eyeing large payouts reject pipeline offers and take their chances in court. This in turn could increase pipeline costs (that are passed on to ratepayers). In short, depending on the Supreme Court rules, pipeline condemnations could become less expensive and quicker or, alternatively, more expensive and take longer. No matter how the Supreme Court rules, Congressional action could (and arguably should) follow. If the Eighth Circuit opinion is affirmed, Congress may be pressured to protect landowner property rights by amending NGA Section 7(h) to provide for the recovery of attorney and fees and costs. Under similar circumstances in 1954, Congress responded to an unpopular Supreme Court opinion on federal regulatory jurisdiction by amending the NGA.76 But even if the Eighth Circuit opinion is reversed, the result would be a geographical crazy quilt of federal common law stitched together from applicable state condemnation statutes, tying recovery of attorney fees in NGA condemnations to the state law in which the property is located, possibly leading to disparate cost recovery by landowners for the same pipeline project, prompting calls for a clear, uniform rule. 1 Click on the hyperlink in the body to access all motions and briefs submitted in the Supreme Court proceeding. 2 NGA § 7(c), 15 U.S.C. § 717(c)(1)(A) (“No natural-gas company … shall … undertake construction of extension of facilities … unless there is in force with respect to such natural gas-company a certificate of public convenience and necessity….). 3 Id. § 2, 15 U.S.C. § 717a (“’Natural-gas company’ means a person engaged in the transportation of natural gas in interstate commerce….; ‘Person’ includes an individual or a corporation.”). 4 PennEast Pipeline Co. v. New Jersey, 594 U.S. 482, 489 (2021). 5 NGA § 7(h), 15 U.S.C. § 717f(h), Pub. Law No. 80-245, 61 Stat. 459 (1947). Section 7(h), in pertinent part, provides: When any holder of a certificate of public convenience and necessity cannot acquire by contract, or is unable to agree with the owner of property to the compensation to be paid for, the necessary right-of-way to construct, operate, and maintain a pipe line or pipe lines for the transportation of natural gas, and the necessary land or other property . . . , it may acquire the same by the exercise of the right of eminent domain in the district court of the United States for the district in which such property may be located, or in the State courts. Id. 6 Tennessee Gas Pipeline Company, LLC v. Permanent Easement for 7.053 Acres, 931 F.3d 237, 243 (3d Cir. 2019). 7 Under FERC’s regulations, once issued a “blanket certificate,” an interstate natural gas pipeline may file a “prior notice” for certificate authorization to construct and operate facilities of limited cost, which, if not protested within 60 days after publication in the Federal Register, is authorized by operation of law. 18 C.F.R. § 157.205. On November 30, 2017, WBI filed a prior notice request to construct and operate certain facilities in McKenzie County, North Dakota; because no protests were filed, certificate authorization for the pipeline project was granted by operation of law. WBI estimated the project cost to be $27.2 million (WBI’s Prior Notice Request, Docket No. CP18-21-000 (Nov. 30, 2017) at 8), including $1,115,153 in pipeline right-of-way costs. WBI’s Supplemental Prior Notice Filing, Docket No. CP18-21-000, Exhibit K (Dec. 7, 2017) (Estimated Cost of Facilities). 8 “Leonard Hoffman was offered roughly half the market rate for gas pipeline access across his pastureland….” Chris Bennett, “Lowballed by Eminent Domain, ND Farmers Appeal Landmark Case to Supreme Court,” AG Web (Sept. 16, 2025) https://www.agweb.com/news/business/farmland/lowballed-eminent-domain-nd-farmers-appeal-landmark-case-supreme-court. 9 The pipeline at issue would run parallel to an existing pipeline on the ranchers’ land, which WBI uses to transport gas from the Wild Basin and Garden Creek processing plants to an interconnection with the pipeline system of Northern Border Pipeline Company. Brief of Respondent, Leonard W. Hoffman v. WBI Energy Transmission, Inc., No. 25-159 (filed Sept. 14, 2026) (“Respondent’s Brief”) at 7; id. (“Despite having earlier reached voluntary agreements for WBI’s immediately parallel pipeline at substantially lower rates, petitioners rejected WBI’s compensation offers.”) (citation omitted). 10 WBI Energy Transmission Inc. v. Easement and Right-of-Way Across, 189.9 rods, more or less, Case No. 1:18-cv-078, slip op. (D.N.D. May 7, 2018) (order adopting stipulation). 11 U.S. Const. amend. V (takings clause). 12 See United States v. 1129.75 Acres of Land, 473 F.2d 996, 998 (8th Cir. 1973) (“When land is taken by eminent domain, and the title acquired is not a fee, but merely an easement, the proper measure of damages is the difference between the market value of the land free of the easement and the market value burdened with the easement.”). 13 WBI Energy Transmission, Inc., v. Easement and Rights-of-Way Across 189.9 rods, more less, Case No. 1:18-cv-078, slip op. at 3 (D. ND, April 1, 2021) (Order Denying Plaintiff’s Motion in Limine to Exclude Evidence of Other Transactions). 14 Id. at 17 (“In this case, it may be appropriate for the fact finder to consider comparable pipeline easement transactions, particularly based on the unique natura of pipeline development in the Bakken oil field development occurring in McKenzie County, North Dakota.”). 15 The legal fees were “based upon a total of 1,295.4 hours, billed at hourly rates ranging from $115 to $350.” WBI Energy Transmission, Inc. v. Easement and Right-of-Way Across 189.9 rods, more or less . . . ., 2024 WL 1477719 (D. ND March 5, 2024). “The expenses include payments for court fees, travel expenses, legal research, and expert witness fees.” Id. 16 Each party and various amici curiae have expended considerable time and money to resolve the slightly more than $150,000 difference between the attorney fees and costs actually incurred ranchers and what WBI considered reasonable, underscoring that from the start this appeal has been about whether attorney fees should be awarded, not whether the ranchers’ attorney fees were reasonable. 17 440 U.S. 715 (1979). 18 WBI Energy Transmission, Inc., 2024 WL 1477719. 19 Tennessee Gas Pipeline, 931 F.3d at 244 (citations omitted); cf. Georgia Power, 617 F.2d at 1118 (“Thus by definition a licensed project does not implicate the interests of the United States to the degree that is thought desirable that the project be undertaken by the United States itself.”). 20 Tennessee Gas Pipeline, 931 F. 3d at 249 (citation omitted). 21 See Tennessee Gas Pipeline Company, LLC v. Permanent Easement for 7,053 Acres, 931 F.3d 237, 245 (3d Cir. 2019). The court explained: “Federal common law refers to the development of legally binding federal rules articulated by a federal court which cannot be easily found on the face of a constitutional or statutory provision.” The need for common lawmaking “stems from the inability of legislators to anticipate every possible contingency and the impracticality of judges[‘] returning all unanswered questions to the legislature.” Id. (citations omitted). The Third Circuit explained that “when Congress has not spoken in an area comprising issues substantially related to an established program of government operation, … the Supreme Court has direct[ed] federal courts to fill the interstices of federal legislation according to their own standards.” Id. (internal quotations and citations omitted). 22 Id. (citation omitted). 23 Id. The Supreme Court in Kimbell Foods was tasked with either crafting a uniform, national rule or, alternatively, utilizing state law, to determine whether contractual liens under federal loan programs take precedence over private liens. After establishing and applying a three-part test, the Court ultimately decided that nondiscriminatory state laws should be utilized. 440 U.S. at 740. The 3rd Circuit in Tennessee Gas Pipeline ruled that Kimbell Foods “and its progeny reflect a presumption in favor of state law, one not rebutted here.” 931 F.3d at 255. 24 The 5th Circuit applied Kimbell Foods first in a condemnation involving the Federal Power Act (Georgia Power Co. v. 138.30 Acres of Land, 617 F.2d 1112 (5th Cir. 1980)) and later in an NGA condemnation. Mississippi River Transmission Corp. v. Goerge S. Tabor, 757 F.2d 662 (5th Cir. 1985). The 6th Circuit (Columbia Gas Transmission Corp. v. Exclusive Natural Gas Storage Easement, 962 F. 2d 1192 (6th Cri. 1992), 3rd Circuit (Tennessee Gas Pipeline Co., 931 F. 3d at 245-46), and 11th Circuit also followed suit. Sabal Trail Transmission, LLC v. 18.27 Acres of Land in Levy County, 59 F.4th 1158 (11th Cir. 2023). The geographic footprint of each of these four circuits include significant oil and gas formations and, therefore, associated pipeline transportation systems: Third Circuit (Marcellus Formation), Fifth Circuit (Eagle Ford, Haynesville, and Permian Formations), Sixth (Devonian, Marcellus, and Utica Formations), and Eleventh Circuit (transmission from Marcellus and Utica Formations). These formations account for approximately 75% of the natural gas produced in the U.S. Ryan Bellafontaine, “Mapped: Where is U.S. Natural Gas Produced?” (Aug. 17, 2026) (Sources: EIA 2026) https://www.visualcapitalist.com/sp/sc02-mapped-where-is-u-s-natural-gas-produced/. 25 WBI Energy Transmission, Inc. v. 189.9 Rods, More or Less, 1332 F.4th 1058, 1060 (8th Cir. 2025). 26 Id. at 1060-61. 27 Id. at 1062. 28 Leonard W. Hoffmann v. WBI Energy Transmission, Inc., petition for cert. filed, No. 25-159 (U.S. Aug. 7, 2025) at 8-11. The petition was a long shot. Each year, the Court reportedly receives more than 7,000 petitions for a writ of certiorari, but only hears oral argument for 100 or less. Nora Collins, “The serious decline in petitions before the Supreme Court,” SCOTUS Blog (May 11, 2026) https://www.scotusblog.com/2026/05/the-serious-decline-in-petitions-before-the-supreme-court/. 29 WBI argued that “this case is a poor vehicle for review of the question presented” because North Dakota does not require, but merely allows the award of attorney fees (Brief in Opposition of WBI Energy Transmission, Inc. No. 25-159 (Oct. 2025) at 2) and urged the Court to wait and see if other courts agree with the 8th Circuit. Id. 30 Brief for the United States as Amici Curiae, No. 25-159 (May 22. 2026) at 2. 31 The ten states on brief included North Dakota, Alabama, Arkansas, Florida, Idaho, Indiana, Louisiana, Nebraska, South Carolina, South Dakota, Tennessee, and Texas. Brief of North Dakota, as Amici Curiae in Support of Petitioners, No. 25-159 (Sept. 8, 2025) at 4 (“just compensation” should be determined under state law because, among other things, the NGA “was not intended to displace traditional state authority for assessing real property value.”). 32 Owners’ Counsel of America as Amici Curiae in Support of Petitioners, No. 25-159 (Sept. 10, 2025) at 8 (presenting a survey showing that property owners in nearly half the states “would be stripped of their guaranteed rights if the Eighth Circuit’s choice-of-law analysis were adopted nationwide.”). 33 Respondent’s Supplemental Brief, No. 25-159 (June 8, 2026) at 1 (agreeing that cert should be granted, but “reserv[ing] the right to argue on remand, should it become relevant, that North Dakota law does not in fact include attorneys’ fees in the state’s measure of just compensation.”); Petitioners’ Supplemental Brief, No. 25-159 (June 5, 2026) at 2 (contrary to the Attorney General’s argument, requiring condemnors to pay for attorney fees would not incentivize landowners to draw out disputes to increase a potential fee award, any more than the status quo encourages condemnors to make unreasonable compensation offers). 34 https://www.supremecourt.gov/qp/25-00159qp.pdf; Sup. Ct. R. 16. (if a petition for certiorari is granted, “[t]he case then will be scheduled for briefing and oral argument.”). 35 The ranchers’ merits brief argues that the Kimbell Foods analysis leads to the same result as the statutory interpretation analysis. Brief of Petitioner, Leonard W. Hoffman v. WBI Energy Transmission, Inc., No. 25-159 (filed August 13, 2026) (“Petitioners’ Brief”) at 37-42. 36 Id. at 13-14 (unlike private parties, the federal government can take property by (1) seizing private property directly, leaving the owners to sue for compensation or (2) invoking the Declaration of Taking Act, where a condemnor takes immediate title to property, leaving compensation litigation for another day). 37 Id. at 14, citing Kirby Forest Indus., Inc. v. U.S., 467 U.S. 1, 3 (1984). 38 Petitioners’ Brief at 14. 39 Id. at 15. 40 Petitioners’ Brief at 15-16, citing Library of Congress v. Shaw, 478 U.S. 310, 317 & n.5 (1986). 41 Petitioner’s Brief at 17, quoting Sackett v. EPA, 598 U.S. 651, 679 (2023). 42 Petitioners’ Brief at 18; see also id. at 24 (arguing that, for nearly two centuries, Congress has known that the Supreme Court routinely interpreted federal claims by applying substantive state law), citing McCluny v. Silliman, 3 Pet. 270, 276, 278 (1830 (applying state limitations period to plaintiff’s rights under federal law). 43 Petitioners’ Brief at 26; see Agency Holding Corp. V. Malley-Duff & Associates, Inc., 483 U.S. 143, 158 (1987) (Scalia concurring). Thus, for example, “congressional silence on the [statute of] limitations issue is ordinarily insufficient to pre-empt state statutes….” Agency Holding Corp., 483 U.S. at 162. 44 See NGA § 7(h), 15 U.S.C. § 717f(h) (“the United States district courts shall only have jurisdiction of cases when the amount claimed by the owner of the property to be condemned exceeds $3,000.”). 45 Petitioners’ Brief at 29. 46 Id. at 32. 47 Six amicus briefs supporting the ranchers were filed on August 13, 2026 in Leonard W. Hoffman v. WBI Energy Transmission, Inc., No. 25-159: Brief of Florida Property Owners Ryan Thomas, Lee Thomas Trust, and Sunderman Groves, Inc. (“Florida Property Owners Brief”); Brief of Gary R. Erb and Lynda Like (“Pennsylvania Property Owners’ Brief”); Brief of Owners Counsel of America (“Owners Counsel Brief”); Brief of Landowner Groups, (“Landowner Groups’ Brief”); Brief of Pacific Legal Foundation (“PLF Brief”); Brief of National Association of Realtors, American Farm Bureau Federation, and Realtors Land Institute (“Realtors Brief”). 48 The Florida property owners report that ten years ago Sabal Trail Transmission, LLC (“Sabal Trail”) filed 263 condemnation cases in federal courts for a 247-mile corridor to construct a 36-inch pipeline to transport 1 Bcf/day. Florida Property Owners Brief at 13-14. In August 2026, the Florida property owners received notice that Sabal Trail is evaluating expansion pipeline project running near or along the current route for 482 miles, (id. at 14) increasing the stakes at issue in Hoffmann. 49 Id. at 8-9 (“Federal actors are ultimately accountable to federal officials, sworn to uphold the Constitution, charged with promoting the public good, and held accountable by the voters on Election Day. * * * And, in direct federal condemnations, the federal government retains a continued ownership interest in the property taken . . . .”); see Pennsylvania Property Owners’ Brief” at 2 (while NGA § 7(h) delegates the power to condemn, “it does not transfer every rule or governmental protection that accompanies condemnation by the United States.”); id. at 7, citing U.S. v. Carmack, 329 U.S. 230, 243, n.13 (1946) (distinguishing federal officers acting for the sovereign from private entities authorized to condemn “on behalf of themselves”, whose grants “are, in their very natural grants and of limited powers” that “do not include sovereign powers greater than those expressed or necessarily implied.”). 50 Florida Property Owners’ Brief at 4; id. at 5 (for private licensee companies exercising eminent domain rights under the NGA, “the Fifth Amendment’s measure of compensation should serve as a floor and not a ceiling” -- to do otherwise, “state created rights to attorneys’ fees will be stricken in six of the seven states of the Eighth Circuit, and will be at serious risk in at least 15 other states if the Eighth Circuit’s new-fashioned split widens.”). 51 Owners Counsel Brief at 2 (internal citations omitted). “In the Sabal Trail pipeline litigation, condemnors spent a combined $8.3 million on appraisal work alone across the project.” Id. at 6 (citation omitted); see also Landowner Groups’ Brief at 5 (“The Eighth Circuit’s decision threatens to alter that bargaining framework well before any condemnation proceedings begin. If a company exercising eminent domain … may disregard state compensation protections and pay only the federal constitutional minimum, its fallback position becomes less costly, changing the baseline against which voluntary easement negotiations occur.”). 52 Owners Counsel Brief at 10-17 (list of 21 state statutes providing condemnation protection); see PLF Brief at 4 (distinguishing cases relied on by the 8th Circuit); see also Realtors Brief at 5 (cautioning that the 8th Circuit’s reasoning could incentivize “advocates for more public control of private interests….”) (citation omitted). 53 Respondent’s Brief” at 2, quoting PennEast, 594 U.S. at 495; see Respondent’s Brief at 2, quoting Luxton v. North River Bridge Co., 153 U.S. 525, 530 (1894) (Congress “may at its discretion, use its sovereign powers, directly or through a corporation * * * for the accommodation of interstate commerce.”). 54 Respondent’s Brief at 4. 55 Id. at 2, United States v. Miller, 317 U.S. 369, 374 (1943) (“[T]he courts early adopted, and have retained the concept of fair market value” as the appropriate compensation); United States v. New River Collieries Co., 262 U.S. 341 344 (1923) (“More would be unjust to the United States, and less would deny the owner what he is entitled to.”). 56 United States ex rel. Tennessee Valley Auth. v. Powelson, 391 U.S. 266 (1943). 57 319 U.S. at 281-82. 58 Respondent’s Brief at 2, quoting 33 U.S.C. § 532. 59 Respondent’s Brief at 28 (citation omitted). 60 Brief for the United States, Leonard W. Hoffman v. WBI Energy Transmission, Inc., No. 25-159 (filed Sept. 21, 2026) at 12 (citations omitted). The Attorney General also noted that the Supreme Court had recently ruled that eminent domain power delegated to a certificate holder is “categorical,” that is, absolute and unconditional. Id. at 10, citing PennEast Pipeline Co., 594 U.S. at 498. 61 Brief of the Interstate Natural Gas Association of America and American Petroleum Institute, Leonard W. Hoffman v. WBI Energy Transmission, Inc., No. 25-159 (filed Sept. 21, 2026) at 11. “INGAA” is the natural gas pipeline trade association, while “API” represents all aspects of the oil and gas industry. Id. at 1. 62 Brief of the Chamber of Commerce of the US, Leonard W. Hoffman v. WBI Energy Transmission, Inc., No. 25-159 (filed Sept. 21, 2026) at 4-6. 63 Id. at 9. 64 Bradley C. Karkkainen, “Plain Meaning”: Justice Scalia’s Jurisprudence of Strict Statutory Construction,” 17 Harv. J.L. & Pub. Pol’y 401 (1994). 65 597 U.S. 215 (2022). 66 410 U.S. 113 (1973). 67 Id. at 231. 68 See id. at n.9 (strict construction “refers to a construction that narrows the scope of coverage or application of a statute….”). 69 See West Virginia v. EPA, 597 U.S. 697, 723 (2022) (“We presume that ‘Congress intends to make major policy decisions itself, ….”) (citation omitted). In applying the “major question doctrine,” the Court explained: “The question there [American Elec. Power. Co. v. Connecticut, 564 U.S. 131 (2011)] however, was whether Congress wanted district court judges to decide, under unwritten federal nuisance law, ‘whether and how to regulate carbon dioxide emissions from powerplants. We answered no….”’ 597 U.S. at 731. Another reason supports the efficacy of WBI’s argument: the Roberts Court has been labeled “business friendly,” with business winning on average 71% of the cases before the Supreme Court from 2010-20. Lee Epstein and Mitu Gulati, “A Century of Business in the Supreme Court, 1920-2020,” 107 Minn. L. Rev. 49, 59 & n.36-37 (2022). 70 148 U.S. 312 (1893). 71 Id. at 325. The Court concluded that if the government condemns a series of locks and dams built by a company to make a river navigable, whose passage is compensated with tolls, it must compensate a company not just for the value of the tangible property, but also for the franchise to take tolls. Id. at 344-45. 72 405 U.S. 538 (1972). 73 Id. at 552. After lower courts allowed a credit union to seize a woman’s savings account (without notice) for failure to repay a loan, the Court remanded and explained: “The right to enjoy property without unlawful deprivation, no less than the right to speak or the right to travel, is in truth a ‘personal’ right ….” Id. (emphasis added). 74 598 U.S. 631 (2023) (J. Gorsuch and J. Jackson concurring). 75 After Hennepin County sold her condominium $40,000 to satisfy a $15,000 tax bill and kept the surplus, a 94-year-old woman filed claims (under the takings clause of the Fifth Amendment and Excessive Fines Clause of the 8th Amendment) against the county, which the trial court dismissed for failure to state a claim, and the 8th Circuit affirmed. 598 U.S. at 635-36. In a companion case, Sackett v. EPA, 598 U.S. 651 (2023), landowners wanting to build a house used sand and gravel to fill in a lot next to a ditch, but the Environmental Protection Agency (“EPA”) considered their land protected wetlands under the Clean Water Act, told the landowners that they could not build, directed them to remove the sand and gravel or face $40,000/day fines. Id. at 662. The Supreme Court reversed the underlying opinion siding with the EPA and limited the scope of the “waters of the United States,” allowing the landowners to build their house. Id. at 684. 76 NGA § 1(c), P.L. 83-323, 68 Stat. 36 (1954) (exempting from federal regulation natural gas companies operating entirely within a single state, effectively overturning FPC v. East Ohio Gas Co., 338 U.S. 464 (1950) that had ruled an otherwise local, in-state gas company was subject to federal regulation because it crossed state lines to receive gas).

Event/Resource

Corporate Counsel Symposium 2026 Materials Hub

Materials Symposium Agenda Sessions 8:30 am - 9:30 am CT Session A: The Corporate Compass: Finding True North When Ethical Duties Conflict Philip Kaplan, Senior Legal Counsel, Howden Re Lucia Suljic, Vice President, Corporate Legal, Canon USA Nicole Stanton, Partner & Deputy General Counsel, Dorsey & Whitney LLP This panel addresses ethical obligations of in-house counsel, including balancing obligations and duties that may conflict with each other. How should a responsible in-house lawyer deal with those challenging situations? Rather than stick to an academic discussion, this panel will revolve around a series of practical scenarios that are designed to be realistic and timely, including situations where counsel is asked to represent both the company and an individual, how and when to disclose uncomfortable facts and inconvenient documents, issues involving changing firms and companies, and multijurisdictional practice. The panel will feature discussion from two experienced in-house lawyers and Dorsey’s Deputy General Counsel. Session B: Managing Rapid Regulatory Change in International Trade and Cross-Border Investment Nathan Brower, Executive Vice President, General Counsel, Nature’s Sunshine Greg Ogunsanya, Senior Vice President, General Counsel and Corporate Secretary, H.B. Fuller Kathryn Wood, Senior Vice President & General Counsel, DecoPac, Inc. Dave Townsend and Lawrence Ward, Dorsey & Whitney LLP This program is designed for attorneys advising on cross-border transactions, international trade, regulatory compliance, and corporate governance matters. Panelists will examine recent developments in U.S. trade and investment law and policy, as well as their impact on international collaborations, corporate compliance, and mergers and acquisitions. The discussion will explore how general counsel and in-house legal teams assess and manage evolving trade-related risks within their organizations. Particular focus will be given to developments during the first two years of the second Trump Administration, including changes in tariff policy, tariff refunds, export controls, economic sanctions, and national security reviews of foreign investment. Through a discussion of regulatory trends and practical case studies, attendees will gain a deeper understanding of the legal risks and compliance obligations associated with cross-border business activities, and hear about practical strategies for advising clients and managing compliance obligations in a rapidly changing trade and investment environment. 9:45 am - 10:45 am CT Session A: The Elon Musk Cases: What Tesla and Twitter Can Teach Your Board of Directors Loren Unterseher, Managing Partner, Oxbow Industries, LLC Shulamite White, Chief Legal Officer and Head of People, Motive Technologies Kirsten Schubert, Tom Swigert, and Jonathan Van Horn, Dorsey & Whitney LLP Recent cases involving Elon Musk and his businesses have had significant impact on principles governing board of directors’ fiduciary duties and corporate processes. This panel will examine recent litigation involving Elon Musk, Tesla, and Twitter, and its effects on the law governing the duties of directors and executives, including the executive compensation and director compensation processes, conflicts that may arise when a single executive has control over multiple businesses, and the ramifications of tweets or other public statements by an executive. Session B: All Eyes on DEI: Managing Diversity Efforts Amid Regulatory Scrutiny and Potential Litigation Maggie Dalton, Senior Commercial Attorney, Cargill; Board Co-Chair, Twin Cities Diversity in Practice Laura A. Vannelli, Legal Counsel, Mayo Clinic Susan Lorenc and Jack Sullivan, Dorsey & Whitney LLP The legal and regulatory landscape surrounding diversity, equity, and inclusion (DEI) initiatives has changed dramatically over the past two years. Law firms and legal departments are continuing to grapple with how to recruit, retain, and develop talent from a wide range of personal backgrounds, in a world where previously accepted recruiting and employment practices are facing increased scrutiny and litigation. This program will provide a practical overview of the current legal regime, including recent federal enforcement actions and litigation trends associated with DEI initiatives. Panelists will discuss practical ways in which organizations can pursue and retain legal talent and increase inclusion while minimizing legal, business, and reputational risk. 11:00 am - 12:00 pm CT Session A: Governance in an Age of Increasing Unpredictability James Chosy, Senior Executive Vice President and General Counsel, U.S. Bancorp Todd Hartman, Executive Vice President and Chief Legal and Risk Officer, Best Buy Co., Inc. Alan Rosselot, Associate General Counsel & Assistant Secretary, Delta Air Lines, Inc. Cam Hoang and Robert Rosenbaum, Dorsey & Whitney LLP More than ever, ensuring that boards are well-informed and forward-thinking is critical to a company’s success. Join our panel of corporate governance experts as they share their experiences advising boards through crisis and unpredictable events; capitalizing on, but also checking, disruptive technologies; and positioning the company to succeed in an environment of shifting government priorities. Session B: A Day in the Life of a Trademark, Copyright & Advertising Attorney: A Hypothetical Case Study Alexander Kim, Vice President and General Counsel, Binks Nate Whitaker, Chief Legal Officer and General Counsel, Crumbl Cathy Dahl and Tiffany Shimada, Dorsey & Whitney LLP What issues are companies facing daily while developing rights in intellectual property, protecting those rights, and staying in compliance with myriad potential issues related to advertising, social media, relationships with influencers, and environmental or governmental claims? This panel will feature two in-house counsel who are navigating these issues, utilizing a hypothetical case study, with the support of two Dorsey attorneys helping to develop a roadmap for meeting business objectives and minimizing the risk of claims. 12:00 pm - 1:15 pm CT Keynote Address Dr. Rebecca Heiss, Stress Physiologist Dr. Rebecca Heiss is a stress physiologist, author, and sought-after speaker who helps audiences transform fear and stress into fuel for greater performance and resilience. Her research has been recognized as “transformative” by the National Science Foundation, and she is the author of two books, Springboard and Instinct. Through her Fear(less) message, Rebecca inspires audiences with practical, science-based strategies to train our brains to work for us – not against us – and navigate change and uncertainty with greater confidence.

Insights

Observations on the SEC’s 2027 Examination Priorities

The SEC’s Division of Examinations (the “Division”) recently announced its examination priorities (“Exam Priorities”) for fiscal year 2027.1 Although many of the Division’s core areas of focus remain consistent with fiscal year 2026, the 2027 Exam Priorities include notable changes and refinements, which we discuss below, along with other key 2027 examination priorities. Dorsey Observations Renewed focus on economic conflicts of interest. After certain economic-incentive topics received less emphasis in the 2026 Exam Priorities2, the Division has again expressly identified economic conflicts as an examination focus. The 2027 Exam Priorities indicate that the Division will prioritize reviewing advisers’ fiduciary obligations relating to economic conflicts of interest raised by fee rebates, fee and expense calculations, cash management, quid pro quo arrangements, and deposits and withdrawals. Greater emphasis on private-fund practices. Building on the private-fund items in the 2026 Exam Priorities, the 2027 Exam Priorities indicate that the Division will assess private-fund disclosures and controls relating to investment allocations, leverage, affiliated service providers, and fees and expenses. The Division also identified investments in private companies through special purpose vehicles (“SPVs”) and loans provided by private funds and business development companies (“BDCs”) as products the Division will scrutinize. Advisers, particularly private-fund advisers, should evaluate whether their disclosures and compliance programs address these areas. Expanded focus on AI-related cybersecurity risks. While the 2026 Exam Priorities focused on advisers’ use of and representations regarding artificial intelligence (“AI”), the 2027 Exam Priorities specifically highlight AI-enabled cybersecurity threats, including AI-generated phishing and synthetic or “deepfake” voice and video used for social engineering. The shift signals that registrants should consider whether their cybersecurity policies and controls adequately address these evolving threats. New focus on proxy advisory firms. The 2027 Exam Priorities state that the Division will examine advisers that rely on proxy advisory firms, including how those advisers evaluate the firms’ recommendations, assess the bases for those recommendations, identify potential conflicts of interest, and determine whether that reliance satisfies applicable legal obligations. Advisers that rely on proxy advisory firms may wish to consider whether their compliance programs address these areas. Updated focus on Regulation S-P and Regulation S-ID. The 2026 Exam Priorities stated that the Division would engage firms during examinations regarding their progress in preparing incident response programs ahead of the compliance dates for the amendments to Regulation S-P and would examine compliance with the amended rule after those dates. The 2027 Exam Priorities indicate that examinations will focus on whether firms have developed, implemented, and maintained reasonably designed policies and procedures addressing administrative, technical, and physical safeguards to protect customer information and that, in accordance with the amended rule, staff will evaluate response program policies and procedures for unauthorized access to or use of customer information, including customer notification procedures and oversight of service providers. With respect to Regulation S-ID, the 2027 Exam Priorities indicate that examiners will assess whether firms are updating their Identity Theft Prevention Program to address emerging risks, such as those related to AI and stolen credentials. Advisers may wish to consider whether their compliance programs address these areas, as applicable. Summary of Other 2027 Examination Priorities Beyond the developments discussed above, many of the Division’s core examination priorities remain consistent with fiscal year 2026. These include investment adviser fiduciary obligations and compliance programs, examinations of never-examined and recently registered advisers, and cybersecurity and operational resiliency. The Exam Priorities are not exhaustive, and examinations will vary based on each registrant’s business, activities and risks. Advisers should consider the 2027 Exam Priorities in reviewing their compliance programs and preparing for potential examinations, including by: Reviewing risk disclosures and controls. The Division states that, when examining advisers to private funds, it will assess whether investment-related risk disclosures are consistent with fiduciary standards and whether compliance policies, procedures, and controls are designed to address both fund-level and investment-level risks. Reviewing disclosures on allocations, leverage, and affiliated service providers. The 2027 Exam Priorities identify disclosures related to certain investments and allocations, the use of debt and fund-level lines of credit, and the use of affiliated service providers as examples. Confirming the accuracy of fee and expense calculations. The Division states that it will assess the accuracy of fee and expense calculations at both the fund and investment levels, and it identifies fee rebates, cash management, quid pro quo arrangements, deposits, and withdrawals as areas in which economic conflicts of interest may affect the impartiality of advice. Reviewing recommendations of illiquid or hard-to-trade products. The Division states that it will prioritize advisers that recommend products that are difficult to trade, have unusual features, or are illiquid, including loans provided by private funds or BDCs and investments in private companies through SPVs. Confirming that the compliance program is implemented and reviewed. The Division states that it will review compliance program components such as marketing, valuation, and custody, as appropriate, and will typically analyze the annual compliance review. It will also focus on compliance practices when advisers have started advising new asset classes or clients or grown through mergers or acquisitions. 1 SEC Division of Examinations 2027 Examination Priorities. 2 See Dorsey’s Client Alert on the SEC’s fiscal year 2026 exam priorities.

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The Methane Regulatory Pendulum Swings Again: EPA Proposes Sweeping Changes to Federal Standards for the Oil and Natural Gas Sector

Few environmental regulations better illustrate Washington’s regulatory “ping-pong” than EPA’s methane standards for the oil and natural gas sector. Over the last decade, successive administrations have repeatedly expanded, narrowed, rescinded, reinstated, and revised federal methane requirements, leaving industry to navigate a shifting compliance landscape with each change in administration. EPA’s October 27, 2026 proposal to reconsider significant portions of the 2024 oil and natural gas New Source Performance Standards (“NSPS”) and Emission Guidelines (“EG”) under Subparts OOOOb and OOOOc represents the latest swing of the regulatory pendulum. If finalized, the proposal would substantially reduce compliance obligations in several areas, particularly with respect to lower-producing wells, associated gas flaring, equipment and control-device standards, and the Super Emitter Program. EPA estimates that the proposal would result in approximately $45 billion in savings, while preserving what the agency considers appropriate methane emission controls. EPA’s proposal was published in the Federal Register on October 29, 2026. Comments must be received on or before December 16, 2026.  Significantly, EPA is not using this rulemaking to reconsider its general authority to regulate methane emissions from the oil and natural gas sector. Rather, the agency is addressing specific requirements adopted in the 2024 methane rule, while broader questions concerning greenhouse gas regulation are being addressed in separate proceedings. The present proposal therefore focuses on the appropriate design and scope of particular methane regulations, rather than resolving the threshold question of whether methane may be regulated under the Clean Air Act at all. I.    EPA Proposes to Eliminate the Super Emitter Program Among the proposal’s most consequential changes is the complete elimination of the Super Emitter Program. Adopted in 2024, the program created a regulatory framework under which EPA-certified third parties could identify large methane releases using approved remote-sensing technologies. Upon receiving a qualifying notification from EPA, owners and operators were required to investigate the reported emissions event, report findings to EPA, and take corrective action where necessary. EPA now proposes to repeal the Super Emitter Program in its entirety. The agency questions the program’s legal and policy foundations, including the role of third parties in identifying emissions events and triggering regulatory obligations. EPA also questions whether the program is necessary or effective given other requirements applicable to regulated sources and whether its expected emissions reductions justify its costs and implementation challenges. Because the program was incorporated into both the NSPS applicable to new, modified, and reconstructed sources and the EG applicable to existing sources, its removal would affect federal requirements as well as the presumptive requirements that States otherwise would be expected to address in Clean Air Act § 111(d) plans. Importantly, EPA’s proposed repeal does not prevent States from developing and implementing their own Super Emitter Program based on the existing requirements, which several states are already doing.  II.    EPA Reconsiders Associated Gas Requirements Another centerpiece of EPA’s proposal is its reconsideration of the 2024 rule’s restrictions on flaring associated gas from oil wells. The 2024 rule determined that the best system of emission reduction (“BSER”) generally required operators to capture and beneficially use associated gas by routing it to a sales line, using it onsite, or reinjecting it, rather than routinely flaring it. Although EPA provided certain transition periods and compliance flexibilities, particularly for wells facing infrastructure constraints, the rule ultimately established a framework strongly favoring capture and utilization over flaring. Since promulgation, EPA has received significant feedback regarding gathering-system limitations, gas quality issues, and other practical barriers operators face in securing outlets for associated gas. In response, EPA proposes to replace the existing capture-focused approach with a substantially more flexible standard. EPA argues that the 2024 rule relied too heavily on the availability of third-party gathering and processing infrastructure that is often beyond an operator’s control, raising questions regarding achievability and cost-effectiveness. Under the proposal, BSER would be based on routing associated gas to a flare or other control device capable of achieving at least a 95 percent reduction in methane and volatile organic compound (“VOC”) emissions. Operators could continue to capture gas for sale, use it onsite, or reinject it where feasible, but those practices would no longer be required. EPA also proposes that if a portion of associated gas is routed to sales or used for another purpose, the remaining portion must comply with the 95 percent standard. For example, if a company can route 40 percent of its associated gas to a sales line, the company would need to route the other 60 percent to a control device with a 95 percent reduction, or to a flare. EPA is also soliciting comment on less sweeping alternatives that would preserve the basic structure of the 2024 associated-gas program, while providing additional compliance flexibility. In particular, EPA requests comment on whether it should retain the current capture-and-sales framework but expand the circumstances under which temporary flaring is permitted or extend the duration of temporary flaring allowances where operators face infrastructure constraints. EPA appears to recognize that gathering-system availability, processing constraints, and other third-party factors can affect an operator's ability to route gas to sales, even where the operator ultimately intends to comply with the capture requirements. These requests for comment suggest that EPA is considering whether targeted revisions to the existing framework could address implementation concerns without fully abandoning the 2024 rule's underlying preference for gas capture and beneficial use. III.    EPA’s Reconsideration of the “No Identifiable Emissions” Standard EPA's proposal would substantially revise the 2024 rule’s “no identifiable emissions” (“NIE”) requirements applicable to certain covers and closed vent systems (“CVS”) associated with storage tanks. Under the existing rule, covered equipment generally must operate without identifiable emissions, creating a compliance framework that focuses heavily on the absence of observable emissions rather than solely on equipment design or overall control effectiveness. Since promulgation, industry has argued that the standard effectively functions as a zero-emissions requirement that may be difficult to satisfy under all operating conditions, even where equipment and vapor control systems are properly designed, maintained, and operated. Moreover, EPA stated in the preamble to the 2024 rule that any identified emissions would constitute a deviation of the emissions limitation, resulting in a framework under which the observation of emissions could itself establish noncompliance. EPA now proposes to separate the requirements into distinct design and operational components and to fundamentally alter how compliance with the operational NIE requirement is evaluated. EPA proposes to distinguish between deviations of the design requirements and deviations of the operational NIE requirements. Under the proposed approach, failure to repair an identified emission or defect within 24 hours would constitute a deviation of the design requirement, although not necessarily an underlying violation. Separately, operators could demonstrate compliance with the operational NIE requirement by making repairs as soon as practicable, with an initial repair attempt within five days and final repair within 30 days, or by qualifying for the existing delay-of-repair provisions. A deviation of the operational requirement would occur if the applicable repair deadlines are not met and the delay-of-repair provisions do not apply. The proposal also establishes a new framework for addressing recurring or “chronic” emissions events. After the third emissions event or defect from the same cover or CVS within a year, the owner or operator would be required to conduct an investigative analysis within 10 days to determine whether the underlying cause relates to equipment design, operation, maintenance, or prior repair efforts. The results of that investigation would have important compliance implications. If recurring emissions are attributable to a design flaw, EPA would treat the issue as a deviation of the design requirements. If the emissions result from inadequate prior repairs, the deviation would be attributed to the repair requirements. If operations, maintenance, or other site practices are responsible, the deviation would be classified under the operational requirements. EPA would also require implementation of corrective measures identified through the analysis, including design modifications within 90 days and operational or maintenance-related corrective actions within 30 days. Taken together, these revisions would shift the NIE standard away from a framework in which the mere presence of emissions may establish noncompliance and toward one that focuses on whether operators identify emissions, complete timely repairs, investigate recurring problems, and address the root causes of repeated emissions events. IV.    Solicitation of Comment on “Legally and Practicably Enforceable” Standard EPA is also soliciting comment on the definition of “legally and practicably enforceable” (“LPE”), which industry has identified as one of the more problematic existing requirements. Under the 2024 rule, EPA adopted an interpretation of LPE that many commenters argued effectively disqualifies numerous state regulatory programs, permits, and other federally enforceable mechanisms from serving as the basis for remaining below applicable Subpart OOOOb storage tank thresholds. In particular, stakeholders have asserted that the current LPE framework makes it difficult for state air permitting programs and other state regulatory requirements to satisfy EPA's criteria, thereby causing more storage tanks and other emission units to remain subject to Subpart OOOOb requirements than would otherwise be the case. EPA now requests comment on whether its current interpretation of LPE is overly restrictive and whether alternative approaches would better account for the manner in which state permitting and regulatory programs are administered and enforced. The request is significant because a broader interpretation of LPE could allow a wider range of federally enforceable state permits and regulatory requirements to satisfy exemption criteria under OOOOb, potentially reducing the number of storage tanks and other sources subject to direct NSPS regulation. As a result, the LPE issue has implications that extend beyond compliance mechanics and could materially affect the scope of sources regulated under the federal methane program. V.    Revised Requirements for Marginal Wells EPA is also proposing significant revisions to the treatment of lower-producing wells under Subparts OOOOb and OOOOc. The agency notes that marginal wells constitute a substantial portion of the nation’s producing well inventory but account for a relatively small share of overall production. At the same time, EPA discusses studies estimating that marginal wells contribute a disproportionate share of methane emissions from oil and natural gas production. The agency is evaluating whether the 2024 rule appropriately accounts for the operational characteristics, emissions profiles, and compliance costs associated with these wells. To address those concerns, EPA is proposing two alternative approaches to well-site subcategorization. Under the first option, EPA would distinguish between marginal and non-marginal well sites. EPA proposes to define a marginal well as a well that produced no more than 15 barrels of oil equivalent (“BOE”) per day over the prior 12-month period and a marginal well site as a site consisting exclusively of marginal wells with total site-wide production of no more than 15 BOE per day over the same period. EPA is also soliciting comment on whether marginal wells should be further subdivided based on production levels, including a potential distinction between sites producing 6 BOE per day or less and sites producing more than 6 BOE but no more than 15 BOE per day, which could result in additional regulatory flexibility for the lowest-producing wells. Under the second option, EPA would distinguish between conventional and unconventional well sites and tailor requirements based on that classification, including reduced requirements for conventional wells. The agency is seeking comment on which framework better reflects the operational and emissions characteristics of different well sites, as well as whether additional subcategories should be established within the marginal-well population and the extent to which compliance requirements should differ among categories. VI.    LDAR, Pneumatic Controllers, Control Device Monitoring, and Facility Modifications EPA's proposal also includes several targeted revisions to the 2024 rule's leak detection and repair (“LDAR”) requirements. Most notably, EPA proposes additional flexibility in the use of advanced monitoring technologies and seeks to move away from compliance frameworks that rely heavily on a single detection method. The agency is proposing changes intended to facilitate the use of multiple monitoring technologies, including optical gas imaging and other alternative detection approaches, and is seeking comment on whether technology-neutral compliance options can achieve equivalent emissions reductions at lower cost. EPA also proposes revisions for components and equipment that are particularly difficult to monitor using conventional LDAR methods, reflecting concerns that certain 2024 requirements may not be practical or cost-effective in the field. More broadly, EPA questions whether some of the monitoring frequencies adopted in 2024 appropriately balance compliance burdens and emissions-reduction benefits and seeks comment on additional opportunities to tailor LDAR obligations based on emissions risk and source characteristics. EPA also proposes technical revisions to requirements governing control devices and related equipment. These include changes addressing continuous pilot-flame requirements, flame-monitoring data deviations, control-device alerts, visible-emissions test conditions, temporary or backup control devices, temporary process controllers, and control-device categories. The agency’s stated objective is to provide additional compliance flexibility while maintaining appropriate emissions controls. The practical effect will depend on the final requirements and the equipment and circumstances to which each amendment applies. The proposal also addresses pneumatic controllers and equipment leaks at gas processing plants. For certain high-pressure process controllers at transmission compressor stations, EPA proposes a separate regulatory approach based on its reassessment of technical feasibility and cost. The proposal should not be read as establishing a general exemption for pneumatic controllers across the industry. EPA also proposes changes to other equipment-specific requirements, including requirements applicable to pumps, storage vessels, and equipment leaks at gas plants, in response to concerns raised following promulgation of the 2024 rule. Finally, EPA proposes changes to certain requirements governing liquids unloading and other well-site operations, as well as technical corrections and clarifications to the existing regulatory text. These provisions form part of EPA’s broader effort to address implementation concerns and reassess the costs and expected emissions reductions associated with selected requirements in the 2024 rule. Operators should evaluate the specific proposed amendments applicable to their facilities rather than assume that the proposal would provide across-the-board relief from existing monitoring, equipment, or control-device obligations. VII.    Implications for States and Future Congressional or Administrative Action EPA’s proposal would substantially revise several consequential elements of the 2024 methane rule, but it would not eliminate regulation of existing oil and natural gas sources under Clean Air Act § 111(d). As a result, states remain subject to the existing obligation to develop and submit plans for existing sources. If the proposed revisions are finalized, states currently developing those plans may need to reevaluate key program elements, including requirements relating to associated gas, well-site subcategories, the Super Emitter Program, and other compliance obligations. The proposal does not itself extend the January 22, 2027 deadline for state-plan submissions established under the existing framework. The Congressional Review Act (“CRA”) remains a potential source of uncertainty. Depending on when EPA submits a final rule to Congress and the applicable congressional-session timing, a future Congress and President could seek to disapprove the rule under the CRA. A successful disapproval would invalidate the rule and generally restrict the agency from issuing a rule in substantially the same form absent subsequent statutory authorization. The CRA’s lookback provisions can affect the period during which a rule remains subject to congressional review, so the risk cannot be assessed solely by reference to the calendar year in which the rule is finalized. The timing of finalization and submission to Congress, together with the applicable congressional calendar, will determine the extent of that exposure. Finally, unlike the CRA, which can nullify a recently promulgated rule through legislative action, a future administration seeking to unwind this rule would generally need to proceed through a new notice-and-comment rulemaking. EPA would need to revisit the underlying BSER determinations, cost analyses, technical feasibility findings, and enforceability conclusions that support the final rule. Because this proposal is grounded heavily in findings regarding achievability, legal and practical enforceability, and cost-effectiveness, a future administration would need to develop a sufficient record supporting different conclusions before reinstating more stringent requirements. Consequently, the final rule may prove more durable than prior pendulum swings, even if it remains politically controversial.

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Minnesota Consumer-Fraud Enforcement: Disclaimers Won’t Cure Deception, and Penalties Can Add Up

Misleading advertising claims can lead to costly consequences. In State of Minnesota ex rel. Ellison v. Wall & Associates, Inc., No. A25-2064, 2026 WL 3118291 (Minn. App. Oct. 19, 2026), the Minnesota Court of Appeals recently affirmed a bench trial verdict against a tax-relief company and two executives for violations of the Minnesota Consumer Fraud Act (“MCFA”) and the Minnesota Deceptive Trade Practices Act (“MDTPA”). The decision, which affirmed a substantial restitution and civil penalty judgment, underscores the broad power of the Minnesota Attorney General to act against deceptive sales practices. The decision also offers practical lessons for businesses seeking to reduce liability risks in consumer-facing communications. Background Wall & Associates (“W&A”), a Virginia-based tax-relief company, marketed assistance to taxpayers seeking relief from outstanding federal and state tax liabilities, often with offers in compromise—agreements to settle tax liabilities for less than the amount owed. In its extensive advertising campaigns, W&A represented that its average client received a 90% reduction in their tax debt, that it was a local company with Minnesota offices, that it provided legal services, and that it would “Solve ALL Tax Problems.” In reality, W&A’s promises bore little resemblance to what many clients received. Most of W&A’s clients saw just a 9.5% reduction in federal tax debt and 1.2% in state tax debt. W&A had no permanent Minnesota offices. And W&A provided neither legal representation nor assistance with filing tax returns—those services required referrals to separate firms for an additional fee. All the while, W&A clients paid upfront and recurring fees, including during periods when W&A did no work on their cases. Minnesota Attorney General Keith Ellison sued W&A, its founder and owner Ernest Kenneth Wall, and its president and CEO Patrick Mark Yates, alleging violations of, among other laws, the MCFA and the MDTPA. Following a 12-day bench trial, the district court determined that W&A violated the MCFA and MDTPA through its false and embellished advertising. The district court also held Wall and Yates individually liable for those violations because they directed, participated in, and acquiesced in the violations. The district court ordered injunctive relief, $2.7 million in restitution (with Wall and Yates jointly and severally liable for $1.3 million), and civil penalties of $786,517 against W&A, $415,500 against Wall, and $207,750 against Yates. The district court also awarded over $2.5 million in attorneys’ fees and costs to the state. W&A, Wall, and Yates appealed to the Minnesota Court of Appeals, which affirmed the district court’s decision on October 19, 2026. Although W&A, Wall, and Yates challenged the judgment on numerous grounds, several highlights of the decision provide important takeaways for consumer-facing businesses. Individual Reliance Is Not Required for Statutory Liability W&A argued that Attorney General Ellison had to prove a causal nexus between each violation of the MCFA and MDTPA and the injury to a particular consumer to establish liability. In W&A’s view, this required proof that each injured consumer had personally relied on W&A’s false representation. The Court of Appeals rejected this argument based on the MCFA’s and MDTPA’s plain language, which requires no proof of actual deception or confusion by consumers. The Court of Appeals finally pointed to the Minnesota Supreme Court’s decision in State v. Minnesota School of Business, Inc., which held that when a defendant’s misrepresentations are directed at and affected “a broad group of consumers, proof of direct individual reliance is not required to establish a causal nexus between MCFA violations and the harm suffered by consumers.” 935 N.W.2d 124, 135 (Minn. 2019). The Court of Appeals affirmed, however, that a causal nexus is necessary to support an award of damages under the MCFA and MDTPA. In making that determination, district courts look to various factors, including whether the misrepresentations were “longstanding, pervasive, and widespread in communications directed to consumers,” whether the seller intended and understood that consumers would rely on the misrepresentations, and whether the information was of a kind on which consumers would typically rely. The Court of Appeals’ decision continues Minnesota School of Business’s broad interpretation of liability under the MCFA and the MDTPA. Coordinated marketing campaigns to a “broad group of consumers” may expose businesses to MCFA and MDTPA liability without customer-by-customer proof of injury. That said, a causal nexus remains an element of an MCFA and MDTPA claim, and businesses involved in litigation should build a clear record at trial and on appeal showing how each of the relevant factors bears on the causal-nexus inquiry. Contractual Disclaimers Are Not an Automatic Defense to a Misleading Pitch W&A next argued that disclaimers in its client contracts prevented consumers from claiming they had been misled by its advertising. Reiterating that individual reliance is not required under the MCFA and MDTPA, the Court of Appeals held that a contractual disclaimer does not necessarily defeat a claim based on a conflicting oral representation. And on the facts of this case, the Court of Appeals agreed with the district court that W&A’s contractual disclaimers were insufficient given the extensive misrepresentations by W&A and the unequal bargaining power between it and its customers. This holding confirms that contractual disclaimers are not a cure-all for misleading advertising or sales practices. Businesses should review the entire customer journey, including pre-contract representations, as those representations may survive a contractual disclaimer to the contrary. And if faced with litigation, businesses should build a strong record, both at trial and on appeal, showing why any disclaimer is effective in context. The State Has Broad Authority to Seek Restitution W&A also challenged Attorney General Ellison’s authority to seek restitution under the state’s parens patriae authority to protect residents’ collective interests, arguing that injury to only 228 Minnesotans did not affect a sufficiently substantial segment of the population. The Court of Appeals rejected a simple headcount approach, instead explaining that the state had a legitimate interest in protecting residents’ economic well-being as a whole. In any event, the Court of Appeals held that if restitution was not appropriate under the state’s parens patriae authority, then it would still be appropriate under the Attorney General’s enforcement powers under Minn. Stat. § 8.31. The decision reinforces that the broader and more sustained the deceptive advertising, the stronger the case for restitution to protect Minnesotans’ economic interests. Civil Penalties Accrue Per Violation, Not Per Defendant The Court of Appeals finally rejected W&A’s claim that the Attorney General’s enforcement powers under Minn. Stat. § 8.31 permit only civil penalties of up to $25,000 for each defendant. Rather, the Court of Appeals explained that penalties are limited to $25,000 per violation. Multiple violations can therefore produce substantially greater penalties. The Court of Appeals also rejected the argument that restitution made penalties unnecessary: repaying consumers does not eliminate the need to address gains from deceptive conduct and deter future violations. Final Takeaways Align every consumer-facing communication. Broad and extensive marketing campaigns can expose businesses to stronger enforcement standards under the MCFA and MDTPA, making it critical that consumer communications remain accurate and consistent from the first advertisement through the final sale. Plan for layered enforcement exposure. Penalties under the MCFA and MDTPA can add up quickly: W&A, Wall, and Yates ultimately faced more than $6 million in civil penalties, restitution, and attorneys’ fees. The decision continues a line of Minnesota cases recognizing the Attorney General’s broad consumer-protection authority. Details matter. Although the Attorney General’s enforcement power is broad, it is not boundless. As the Court of Appeals explained, issues of causation, the effectiveness of contractual disclaimers, and the availability of restitution and civil penalties all turn on the specific facts of the case. Effective advocacy at trial and on appeal is critical to developing the facts relevant to liability and damages.

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Dorsey & Whitney Advises Beijing Xunzhong on Two Consecutive H Share Placings Raising HK$418.5 Million

International law firm Dorsey & Whitney LLP acted as Hong Kong legal advisors to Beijing Xunzhong Communication Technology Co., Ltd. (“Xunzhong”) as to Hong Kong law in connection with two consecutive placings of new H shares under general mandate (the “First Placing” and the “Second Placing”, respectively, and together, the “Placings”). Xunzhong’s H shares are listed on the Main Board of the Hong Kong Stock Exchange (Stock Code: 2597). Winbull Securities International (Hong Kong) Limited acted as sole overall coordinator and placing agent on both Placings. The First Placing of 11,190,000 new H shares at HK$28.20 each was completed on September 17, 2026, followed by the Second Placing of 3,550,000 new H shares at HK$29.00 each on October 30, 2026. The Placings raised approximately HK$315.56 million and HK$102.95 million in gross proceeds, respectively, or approximately HK$418.51 million in aggregate (approximately HK$415.96 million in aggregate net proceeds). Both Placings were conducted under the same general mandate granted by shareholders at Xunzhong’s 2025 annual general meeting, and each was completed within one week of the signing of its placing agreement. Completing placings in consecutive months is relatively uncommon in the Hong Kong market, and doing so called on the technical depth of Dorsey’s Hong Kong Capital Markets team. Working closely with Xunzhong to understand its business needs and prepare the transaction documents, the team addressed in quick succession the remaining capacity under the general mandate, disclosure of the use of proceeds and the maintenance of Xunzhong’s public float, enabling both Placings to be completed seamlessly. “We are pleased to have advised Xunzhong on both Placings,” said Rachel Han, Partner and Co-Head of Dorsey’s Asia Capital Markets practice. “We appreciate the trust placed in our team and the close collaboration among all parties involved. We look forward to supporting Xunzhong as it continues to execute its growth strategy and pursue future capital markets opportunities.” Xunzhong is principally engaged in cloud-based communications services and enterprise digitalization services in the PRC. As disclosed in its announcements, the net proceeds of the First Placing are allocated to developing Xunzhong’s new computing power operation services business, while those of the Second Placing will be used to integrate model-as-a-service (MaaS) and AI agent capabilities into its existing cloud communications platform-as-a-service (PaaS) platform and software-as-a-service (SaaS) products. Approximately 55% of the net proceeds of the Second Placing will be used for computing power equipment upgrades for the MaaS system, approximately 35% for MaaS, PaaS and SaaS platform upgrades, and approximately 10% for working capital and general corporate purposes. With a single MaaS platform and shared computing power supporting its PaaS and SaaS offerings, Xunzhong intends for its MaaS, PaaS and SaaS capabilities to complement and reinforce one another, and to address customer needs from multiple angles, from embedding AI in customer communications and business workflows to maintaining stable performance at scale and keeping customer data within controlled environments. Partner and Co-Head of Dorsey’s Asia Capital Markets practice Rachel Han and Of Counsel in the Capital Markets and Corporate Compliance group Carlton Ng, along with Associate Kristy Ting, led the Dorsey Hong Kong Capital Markets & Corporate Compliance group in advising Xunzhong on both Placings.