Differing Capitalization Thresholds Between Mining Activities and Oil and Gas Producing Activities

As noted elsewhere in this release, extraction of products such as bitumen now will be considered oil and gas producing activities, and not mining activities. Under current U.S. accounting guidance, costs associated with proven plus probable mining reserves may be capitalized for operations extracting products through mining methods, like bitumen. Under the new rules, bitumen extraction and operations that produce oil or gas through mining methods are included under oil and gas accounting rules, which only permit capitalization of costs associated with proved reserves.310 Moreover, the mining guidelines do not provide specified percentages for establishing levels of certainty for proven or probable reserves for mining activities. It is possible that these differences could result in changing reserves estimates for these resources during the transition to the new rules.

308 _{See letters from Canadian Natural, Deloitte, Evolution, Petrobras, and Shell.} 309 _{See letters from CAQ, Petrobras, and PWC.}

310 _{See Rule 4-10(c) of Regulation S-X [17 CFR 210.4-10(c)].}

One commenter believed that the industry would need guidance regarding how to transition operations that are disclosed and accounted for as mining operations to oil and gas disclosure and accounting.311 It noted that this issue would be relevant not only coincident with the new rules, but could be relevant to future events, such as a coal mining company that in subsequent years changes its operations to in situ coal

gasification.312 That commenter believed that, without guidance, the change from mining treatment to oil and gas treatment could be considered a change in accounting principle which requires retroactive revision.313 We acknowledge this commenter’s concerns. With respect to resources formerly considered mining activities, we view the change from mining treatment to oil and gas treatment as a change in accounting principle that is inseparable from a change in accounting estimate, which does not require retroactive revision.

VIII. Application of Interactive Data Format to Oil and Gas Disclosures

In the Proposing Release, we sought comment on the desirability of rules that would permit, or require, oil and gas companies to present the tabular disclosures in Subpart 1200 in interactive data format in addition to the currently required format. Most commenters addressing the topic supported the use of XBRL for oil and gas

disclosures.314 They believed using interactive data would be very helpful to investors and analysts.315

311 _{See letter from KPMG.} 312 _{See letter from KPMG.} 313 _{See letter from KPMG.}

314 _{See letters from Audit Policy, CFA, Deloitte, Devon, E&Y, ExxonMobil, PWC, Shell, Standard}

Advantage, StatoilHydro, and Zakaib.

315 _{See letters from CFA, Devon, E&Y, StatoilHydro, and Zakaib.} 94

However, they also recommended that the Commission wait until a well-

developed taxonomy exists.316 Some recommended that the Commission implement it in stages, initially with a voluntary program.317 One commenter recommended that the SEC work with other groups like SPE, IASB, and the United Nations to ensure tags ultimately become the industry standard.318

We agree that much of the disclosures regarding oil and gas companies would be conducive to interactive data. We intend to continue to work on developing a taxonomy for such disclosure. Once a well-developed taxonomy is created, we will address this issue further. We are not, however, adopting interactive data requirements in this release. We will continue to consider whether to require interactive oil and gas disclosure filings in the future and, if so, when such filings should be required based on the development status of an oil and gas disclosure taxonomy.

IX. Implementation Date

A. Mandatory Compliance

We proposed to require companies to begin complying with the disclosure requirements for registration statements filed on or after January 1, 2010, and for annual reports on Forms 10-K and 20-F for fiscal years ending on or after December 31, 2009. A company may not apply the new rules to disclosures in quarterly reports prior to the first annual report in which the revised disclosures are required.

316 _{See letters from Audit Policy, Deloitte, Devon, E&Y, ExxonMobil, PWC, Shell, StatoilHydro, and}

Zakaib.

317 _{See letters from Audit Policy, Devon, E&Y, PWC, StatoilHydro, and Zakaib.} 318 _{See letter from Zakaib.}

Fifteen commenters agreed that a delayed compliance date would be helpful in allowing companies to familiarize themselves with the new disclosure requirements before having to comply with them.319 Four commenters supported the proposed January 1, 2010 compliance date of Securities Act filings and Exchange Act filings related to fiscal periods ending on or after December 31, 2009.320 However, one conditioned this approval upon the adoption of the rules before December 31, 2008.321 Another suggested one year after adoption of the rules.322

Four commenters believed that the proposed compliance date would be too soon.323 One recommended a compliance date of December 31, 2010 to enable companies to make necessary changes in IT systems and data processing.324 Another noted the magnitude of the proposed changes, length of time to design, program and implement system changes, and the goal of getting the best possible disclosure.325 One commenter suggested delaying implementation for two years after adoption.326

We continue to believe that the proposed compliance dates are appropriate. However, as we discuss our revisions with the FASB and IASB, we will consider whether to delay the compliance date further.

319 _{See letters from Apache, Chevron, Davis Polk, Deloitte, ExxonMobil, KPMG, Newfield,}

Petrobras, Petro-Canada, PWC, Ryder Scott, Shell, Southwestern, Talisman, and Total.

320 _{See letters from Davis Polk, ExxonMobil, Shell, and StatoilHydro.} 321 _{See letter from ExxonMobil.}

322 _{See letter from Talisman.}

323 _{See letters from Apache, Petrobras, PWC, and Total.} 324 _{See letter from Petrobras.}

325 _{See letter from Apache.} 326 _{See letter from Devon.}