Grijalva Questions Potentially Illegal DOI Halt to Natural Resources Valuation Rule That Closed Corporate, Taxpayer Royalty Loopholes

Washington, D.C. – In a letter to Acting Interior Secretary Jack Haugrud today, Ranking Member Raúl M. Grijalva (D-Ariz.) asked for an explanation of the Office of Natural Resources Revenue’s (ONRR) decision to stop enforcing a months-old rule that fixed longstanding problems with the valuation of public resources and royalties owed to the public. The agency announced on Feb. 27 that it was indefinitely postponing implementation of the Consolidated Federal Oil & Gas and Federal & Indian Coal Valuation Reform rule due to pending legal challenges against it, despite the fact that the rule already went into effect on Jan. 1.

Among other impacts, the rule closed a loophole that allowed companies to sell coal extracted from public land to their own subsidiaries, artificially deflating the sale value and reducing royalties paid to the taxpayers. The Government Accountability Office (GAO) and Department of the Interior Subcommittee on Royalty Management have both found that the valuation and royalty collection system for federal and Indian oil, gas, and coal needs comprehensive reform, and GAO has had DOI’s oil and gas management program on its High Risk List since 2011.

Grijalva wrote today that he is “not aware of any situation where 5 U.S.C. 705 has been successfully invoked after the effective date of a rule. It appears that ONRR has used this provision to repeal an active and in-effect regulation in contravention of the notice-and-comment procedures required by the APA.”

Grijalva also points out in his letter that the delay could end up causing far more trouble for industry than leaving the rule in place:

This unwarranted and potentially illegal delay of the valuation rule will not only result in the potential loss of taxpayer revenue; as ONRR itself recognized in a February 22, 2017, memo on this action, many companies have already taken significant steps to comply with the new valuation rule, and “it may be difficult” for companies to change their systems to comply with the prior rule. If future court action dismisses the industry complaints against the valuation rule, companies will be required to convert their systems again to the new rule, creating considerable uncertainty and expense for companies operating on public lands. 

The full letter is available at http://bit.ly/2mprxi9.

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