Interior Department cans Obama-era rule on energy evaluation

The Interior Department on Monday said it is killing a new coal, oil and gas valuation rule adopted during the Obama administration to revise how companies report and pay royalties for development of federal mineral resources.

The action was heralded by rule critics, including U.S. Rep. Scott Tipton, R-Colo., who contended the rule unnecessarily stifled energy development. But others say repealing the new rule preserves costly loopholes that shortchange taxpayers.

The Interior Office of Natural Resources Revenue rule took effect Jan. 1. In February Tipton and House Majority Whip Steve Scalise, R-La., introduced a bill to repeal it, but the agency later delayed the rule pending resolution of legal challenges by groups including the American Petroleum Institute.

The agency previously had said the regulations needed updating to align them with current market conditions. The new rule included measures aimed at preventing companies from selling coal at below market value to an affiliated company to pay lower royalties to the government, and eliminating some cost allowances for oil and gas companies in valuing their production and royalties.

In a news release, Interior said Monday the rule had caused confusion and uncertainty for companies in terms of compliance, and getting rid of it would avoid costly litigation.

“Repealing the Valuation Rule provides a clean slate to create workable valuation regulations,” Interior Secretary Ryan Zinke said in the release.

In a Federal Register notice, the government said that if not repealed, the rule would compromise its ability to collect royalty revenues, thus affecting distributions to state and tribal partners. It also would “impose a costly and unnecessary burden” on federal mineral lease holders, the notice said, pointing out that President Trump has ordered suspension, revision or repeal of rules that burden domestic energy development beyond what’s necessary to protect the public interest or otherwise comply with the law.

Tipton said in a prepared statement Monday, “By adding more red-tape, complexity, and confusion to the mineral valuation process, the regulation created uncertainty for businesses, (and) a disincentive for responsible development of our natural resources on federal land, and ultimately hurt hardworking Americans, their families, and their communities the most.”

But Steve Charter, with the Western Organization of Resource Councils, which includes the Western Colorado Congress, said in a news release that as a result of the repeal, “Fossil fuel companies will pay $60 million to $75 million less each year for mining and drilling taxpayer-owned coal, oil and gas. Half of this money would have gone to the states where mining and drilling occurs to fund schools, roads, and other essential services. It’s a shame the Trump administration is backing away from this common-sense rule that would have closed loopholes and brought much-needed transparency.”

Zinke said a new Royalty Policy Committee will consider future regulations that avoid the defects in the repealed rule.

“The (Interior) Department and the Office of Natural Resources Revenue remain committed to collecting every dollar due,” he said.


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