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Court Overturns Repeal of Valuation Rule

April 12, 2019

The Institute for Policy Integrity helped contribute to a significant legal victory, as a federal district court in California today overturned the Trump administration’s repeal of the Interior Department’s Valuation Rule. The Valuation Rule sought to ensure that states and the federal government receive the full value of royalties due for oil, gas, and coal extracted from public lands. While the administration has lost numerous court cases related to deregulation, this is the first decision overturning a repeal of a rule. Policy Integrity submitted an amicus brief in the case and comments on the original rule and the repeal efforts.

In our amicus brief, we argued that the repeal was unreasonable because of the agency’s inaccurate assessment of the repeal’s economic impact. District Judge Saundra Brown Armstrong’s opinion echoed some of the arguments from our brief and cited an academic article on deregulation written by Bethany Davis Noll and Denise Grab.

By law, ONRR must accurately determine oil and gas royalties. Those royalties are divided between the federal government and the states where the mining takes place and are an important source of revenue for states and municipalities. Under President Obama, ONRR had reformed its royalty payment procedures to help close a loophole that had allowed companies to pay royalties on non-arm’s length or captive transactions. The rule was expected to deliver $80 million each year in added industry payments, money that would support schools, infrastructure, and more.

Shortly after President Trump’s inauguration, ONRR suspended the rule and then repealed it. The suspension has previously been vacated as illegal. The repeal cited as its basis a smattering of “defects” in the Valuation Rule. But in the repeal, the administration failed to grapple with the agency’s prior findings that the Valuation Rule would improve and simplify royalty payment procedures. As a result, Judge Armstrong vacated the repeal, holding that ONRR had failed to provide a reasoned explanation for reversing course and had failed to provide a meaningful opportunity for public comment. Now that the repeal has been vacated, the Valuation Rule is in full effect.

Members of our staff discussed the importance of this ruling in E&E News and Bloomberg Law.

Filed under Climate Change and Energy Policy, Natural Resources, News, Jobs and Regulation