As elwood pointed out these changes won't allow any dishonesty that wasn't capable in the first place. I've done independent audits as well as have had them done for me when I was in management. Inside the industry we knew which companies we could pay for the "right numbers" as well as the ones you could trust. I always knew how to discount numbers from the audit whores (that's actually what we call them).

There are valid reasons for the changes. If you didn't know the monetary values of all audited reserves were based upon the price of oil/NG on 31 Dec. Needless to say this always offered an unrealistic high estimate of monetary value. And this naturally lead shareholders to overvalue their stock. As far as allowing probable and probable reserves this is probable a response to rules changes years ago when the SEC went overboard trying to correct previous bad practices. I've audited reserves under those new rules which grossly underestimated volumes and actually hurt investors who then undervalued their stock values IN SOME CASES. The insiders knew the truth and took advantage of the misrepresentation. There were companies which greatly benefited from those tighter rules by doing stock buybacks and corporate acquisitions for less then they were actually worth and thus cheated the shareholders with the blessings of the SEC. Underestimating stock value is just as costly to shareholders as overestimating.

I also suspect part of the reason for the change was to provide increased visibility to the unconventional NG plays. Typical volumetric analysis doesn't work with these reservoirs (long explanation...it’s why they are called unconventional in the first place). Thus company undrilled assets were grossly undervalued by previous SEC rules. This also underestimated stock value for shareholders and allowed unfair trades. Reserve estimating by analogy isn't a fool proof method but it does allow some approach to presenting the true vaule of undeveloped assets. Unconventional NG was also undervalued when it came to credit availability. The new rules should allow some reasonable improvement of credit availability/cost with the new rules. This might have a huge impact on maintaining the high NG rates we've gained from the expansion of the unconventional NG plays in the last couple of years. I consult for one of the biggest UNG players in the country and we just cut our UNG 2009 budget from $1.4 billion to under $700 million. We’ll be dropping 40% of our rigs in the next couple of months. Most of the other UNG players are doing likewise. We have a sufficient credit line but don’t want to add credit costs to the current pricing uncertainty. Thus we’ll be drilling only from cash flow. It’s clear that this cut back in UNG drilling will likely send us into something of a NG cliff in the next couple of years if the slow up continues. The rapid decline rates of UNG wells are well known. As quickly as the national NG rate rose it will also decline. Even if demand destruction continues with a worsening economy we might actually see NG prices rise. Certainly not a scenario we want to see.

I should also point out that these rule changes have no bearing on reserves reported by the KSA or any other non-US public companies. None of the other sources are required to play by any rules.