The "Reliable Technologies" Rule: What Did the SEC Intend?
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SummaryThis paper provides background information on the US Securities and Exchange Commission's (SEC) newly defined term, reliable technology, which plays a prominent role in the SEC's modernized regulations for reporting oil and gas reserves. This background information will include criteria that reliable technology must meet to ensure that it will provide the confidence level required to categorize certain resources as reserves of any category (proved, probable, or possible).The new SEC rules for disclosing reserves no longer require that a limited number of rigidly specified technologies be used to establish the confidence level of reserves that a filer discloses. Reasonable certainty was required in the past because only proved reserves could be disclosed, and, as an example, reasonable certainty of economic production required either flow tests or actual production to the surface except in the deepwater Gulf of Mexico. The new rules allow any technology that has been proved empirically to lead to correct conclusions, including proprietary technology, to be used to determine the proper classification for a given petroleum accumulation. Unfortunately, the industry has been provided with only limited guidance on which technologies will be satisfactory and which technologies will not. This paper will present an analysis of SEC publications for possible insight into its thinking about this important issue.Proper disclosure of reserves will depend vitally on a proper interpretation of reliable technology. Note: The opinions expressed in this paper are the author's alone. They represent the opinions of neither the US SEC nor its staff members.
