Repeal of ONRR Valuation Rule Moves Forward

Repeal of ONRR Valuation Rule Moves Forward

Energy & Natural Resources  | Quick Takes
Sep 7, 2017  | 2 min read

On August 30, a U.S. District Court found that the Department of the Interior (DOI) had violated the Administrative Procedures Act (APA) earlier this year when it moved to repeal a recent Office of Natural Resources Revenue valuation rule.

The valuation rule would have increased annual taxpayer revenues by up to $75 million in royalties collected from oil, gas, and coal developed on federal land.

The APA provides procedures for proposing, establishing, and in this case, repealing regulations. Specifically, the court’s ruling cited DOI’s initial failure to open a public comment period before introducing a notice repealing the rule as a violation of APA procedures. In order to correct its misstep, DOI later opened a comment period asking the public to weigh in on whether there was in fact a need to alter the recent valuation regulation. Taxpayers for Common Sense submitted comments in favor of valuation reform.

Despite determining that DOI had violated APA rules, the District Court decision did not reinstate the underlying valuation rule, which was legally repealed, per DOI’s official rulemaking, on September 6.

The valuation rule, which took effect in January, was the product of a five-year process and the first attempt to update the pre-existing, decades-old valuation system, which has cost taxpayers billions of dollars in lost revenue. The valuation rule, while unpopular with industry because of the up-front capital costs it would have required, was a boon to taxpayers – it would have increased federal and state revenues from resource production on federally owned lands. The new rule was a step in the right direction towards providing taxpayers a fair return on publically owned resources, and its repeal, effective this week, is a step backward.