On December 29, 2008, The United States Securities and Exchange Commission (SEC) adopted new regulations for reporting oil and gas reserves, effective January 1, 2010. Earlier, on December 12, 2007, the SEC issued a concept release, requesting comments on a need to modernize its regulations for reporting oil and gas reserves. Eighty comments, nearly all supporting change, were received. Then, on June 27, 2008, the SEC proposed regulations to modernize its oil and gas regulations. The SEC received 68 comments from accounting firms, consultants and analysts, corporations, government entities, individuals, law firms, legislators (U.S. Senators), professional societies and industry associations, and public interest groups through September 8, 2008. These comments generally supported proposed changes in definitions, although some suggested modifications in proposed new disclosure requirements.
Public interest in modifying the regulations for reporting oil and gas reserves information has intensified in recent years, and many commenters have noted that the previous rules did not serve the interests of investors well because of changes in the industry in the 25-30 years since the rules were adopted.
The new rules will permit (1) use of a 12-month average price (instead of a single-day price at year end) to calculate reserves; (2) use of new, unspecified technologies to estimate reserves instead of specific field tests currently prescribed; (3) classification of bitumen (the “tar” in tar sands) and other non-renewable natural resources from which synthetic oil and gas can be extracted as oil and gas reserves, rather than as mining reserves; (4) “reasonable certainty” rather than “certainty” to be a criterion for establishing proved undeveloped reserves; and (5) the optional disclosure of probable and possible reserves.