On 21 June 2018, during the oversight hearing held by the House Financial Services Committee, SEC Chairman Jay Clayton stated that the agency was considering amendments to the SEC oil and gas reserves reporting rules, notably given the increasing significance of the shale formations in U.S. energy supply.
Under current SEC rules, companies may generally only report estimates of oil and gas quantities as "proved undeveloped reserves" for up to five years without being developed, unless the specific circumstances justify a longer time. The SEC has provided guidance that no particular type of project per se justifies a longer time period, and any extension beyond five years should be the exception, and not the rule. A relaxation of this five-year rule could potentially allow companies to include reserves as proved undeveloped reserves that take more than five years to develop, such as shale projects.
Answering a question from Representative Frank Lucas highlighting both changes in domestic energy production and the fact that "the five-year rule might not reflect the realities of the new American energy landscape," Chairman Jay Clayton stated: "I'm concerned in this space that the way our rules require disclosure is inconsistent with the way investors value these companies. So they are looking for additional disclosures, and we should make sure that our rules line up with what investors think is the material information."
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