Zinke repeals Obama-era oil and gas royalties rule

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The U.S. Department of the Interior is repealing an Obama-era rule for the evaluation of oil, gas, and coal fees extraction companies need to pay and report on.

According to the DOI, the rule named the Consolidated Federal Oil and Gas and Federal and Indian Coal Valuation Reform Rule had created confusion on how companies report and pay royalties on energy and other mineral resources from federal onshore and offshore areas and American Indian lands.

The rule was repealed on Tuesday to create more workable oil, gas and mineral valuation regulations “and avoid costly litigation.“

The department said that the valuation rule had increased the regulatory burden on the nation’s energy production,adding that the repealing the rule will reduce costs to oil, gas, and coal companies that would otherwise be passed to the American consumer.

Industry stakeholders and trade associations filed three lawsuits challenging the rule, the DOI said. The petitioners also sent a joint letter to the ONRR Director asserting that it would be impossible for them to comply with the rule’s new royalty reporting and payment requirements by the deadline, exposing non-compliant lessees to significant civil penalties.

In response to these and other concerns lessees expressed in writing and workshops, ONRR identified several areas in the rule warranting reconsideration to meet policy and implementation objectives. ONRR stayed the Valuation Rule on February 27, 2017 via Federal Register Notice and published an April 4, 2017 Notice of Proposed Rulemaking to repeal the rule, DOI said.

“Repealing the Valuation Rule provides a clean slate to create workable valuation regulations,” said Secretary of the Interior Ryan Zinke. “We are committed to working closely with stakeholders and the newly chartered Royalty Policy Committee to explore options for future rulemakings and to avoid the structural defects that were found in the prior rule. The Department and the Office of Natural Resources Revenue remain committed to collecting every dollar due. These are taxpayer and American Indian assets, and the public and American Indians deserve an accurate accounting and valuation.”

“The United States is a safer and more sustainable nation when we rely on our own natural resource development,” Secretary Zinke said. “Repealing the Valuation Rule restores our economic freedom by ensuring our energy independence. The increased costs associated with the Valuation Rule had the potential to decrease exploration and production on Federal lands, both onshore and offshore, making us rely more and more on foreign imports of oil and gas.”

“I support Interior’s decision to repeal this rule and provide greater certainty to companies seeking to produce our valuable domestic resources, from Alaska to the Atlantic,” Senator Lisa Murkowski (R-Alaska) said. “While the federal government will continue to collect its fair share of revenues from responsible development, the repeal of this rule will help prevent negative impacts to exploration and production that would put our energy dominance at stake.”

“The Obama Administration’s changes to royalties for coal, oil, and natural gas was just one in a series of barriers it put up to hold back energy production on federal lands,” said Congressional Coal Caucus Chairman David McKinley, P.E. (R-WV). “Returning to the more reasonable previous standards paves the way for further investment and development of energy resources. I applaud Secretary Zinke’s commitment to supporting American energy dominance.”

Not everyone is happy about the change. Ranking Member of the Senate Energy and Natural Resources Committee Maria Cantwell, a democrat from Washington said: “The Interior Department admits it is giving away up to $750 million over a decade to private companies making profits on a public resource. Suspending this rule was not lawful in the first place, and this repeal violates Interior’s obligation to ensure a fair return to taxpayers.”

Cantwell wrote a letter to the Interior Department in March urging that they refrain from suspending the valuation rule. In the letter, Sen. Cantwell argued that suspending the rule violates the Administrative Procedure Act.  Last week Sen. Cantwell and Rep. Grijalva (D-Ariz.) sent a letter to Sec. Zinke asking he explain how he plans to ensure a fair return to taxpayers before attempting to streamline drilling and mining on federal lands.


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