Institute for Policy Integrity

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Comments to the Office of Natural Resources Revenue on the Reform Rule

May 5, 2017

We recently submitted two sets of comments to the Office of Natural Resources Revenue (ONRR), making the case against repealing an Obama-era reform that promised to recover millions of dollars in royalties from mining companies—a reform that would have ensured that taxpayers receive fair market value for the use of public lands. Our first set of comments objects to the proposed repeal of the Consolidated Federal Oil & Gas and Federal & Indian Coal Valuation Reform Rule (the “Reform Rule”), while our second set responds to ONRR’s request for comments on whether revisions are necessary to the regulations governing coal, oil, and gas royalties. We previously submitted comments to ONRR on the proposed Reform Rule.

We argue in our comments that ONRR should not repeal the Reform Rule for two reasons. First, the changes in the Reform Rule are crucial to ensuring that ONRR comply with its statutory mandate to obtain the fair market value for the use of public lands. For example, the Reform closed a harmful loophole that had allowed mining companies to pay royalties on the value of their coal, oil, or gas as sold to a captive affiliate instead of on the much higher value obtained through an arm’s length sale. The Reform Rule also made changes to transportation allowances, which increased transparency and provided important protections to taxpayers. Second, we explain that the proposal to repeal the Reform Rule is defective because ONRR did not analyze the record compiled to issue the Reform Rule or provide a reasoned explanation for its repeal. Furthermore, ONRR’s stay of the Reform Rule violates the APA.

Additionally, while we argue that there is no valid basis to repeal the Reform Rule, we recommend that if ONRR does successfully repeal the rule, ONRR must reform the regulations by closing the loophole again, ending the use of royalty relief for uneconomical mining, and eliminating the transportation allowance.

Filed under Climate Change and Energy Policy, Natural Resources, Public Comments