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Is Coal A Mineral And Why Ask?

The Securities and Exchange Commission is trying for the third time to implement Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act relating to disclosure of payments by resource extraction issuers.  In that Act, Congress defined "resource extraction issuer" as "an issuer that - (i) is required to file an annual report with the Commission; and (ii) engages in the commercial development of oil, natural gas, or minerals.  15 U.S.C. § 78m(q)(1)(D).  Congress, however, did not define "mineral" in the statute, leading to the question of whether coal is a mineral.

The Mineralogical Society of America defines a "mineral" as:

"a naturally-occurring, inorganic solid which possesses a characteristic internal atomic structure and a definite chemical composition."

The American Society for Testing and Materials has defined "coal," as:

"a readily combustible rock containing more than 50 weight percent and more than 70 volume percent of carbonaceous material including inherent moisture, formed from compaction and induration of variously altered plant remains similar to those in peat."

Annual Book of ASTM Standards, 548 (1974) (Definition promulgated in 1972) cited in Holmes Limestone Co. v. U.S., 946 F. Supp. 1310, 1321 (1996).   While coal is naturally occurring, it is organic and thus does not meet the ASTM's definition of "mineral".

It is unclear whether Congress intended to include coal as a type of mineral.  However, the text of the Dodd-Frank Act separately refers to "coal" and "minerals".  Section 1504, requiring disclosure by resource extraction issuers, makes no mention of coal but is preceded by a section that expressly deals with reporting requirements with respect to "coal or other mine safety".  15 U.S.C. § 78m-2. 

Thus far, the SEC has resisted my importuning that it define "mineral" in its resource extraction issuer rules.  Instead it is proposing to add an instruction that “minerals” include “any material for which an issuer with mining operations would provide disclosure under the Commission’s existing disclosure requirements and policies, including Industry Guide 7 or any successor requirements or polices (see subpart 1300 of Regulation S-K (12 CFR 229.1300 et seq.)”.  Because Guide 7 refers to coal, the SEC has apparently concluded that coal is a type of mineral.  The mystery is how and why the SEC has arrived at this conclusion.

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