Caucus Members Applaud Repeal of Obama Admin’s Energy-Stifling Valuation Rule

Aug 7, 2017
Press Release

                                                                                                                                                          

For Immediate Release

Date:  August 7, 2017

Contact: Tanner Hanson

Tanner.Hanson@mail.house.gov

 

WASHINGTON, D.C. – Today, Congressional Western Caucus Chairman Paul A. Gosar D.D.S. (AZ-04), Chairmen Emeritus Steve Pearce (NM-02) and Rob Bishop (UT-01), Executive Vice-Chairman Scott Tipton (CO-03), and Western Caucus Member Liz Cheney (WY-AL) released the following statements after the Office of Natural Resources Revenue (ONRR) within the Department of the Interior repealed the Obama Administration’s Consolidated Federal Oil & Gas and Federal & Indian Coal Valuation Reform Final Rule:

“The Obama Administration’s ONRR 2017 Valuation Rule was another misguided attack on affordable energy that would have caused significant harm to tribal, rural and Western economies. This burdensome new regulation would have bankrupt small businesses, discouraged responsible energy production and hit the pocketbooks of hard-working American families,” said Chairman Gosar. “Furthermore, the Obama-era Valuation Rule would have imposed unnecessary and costly new reporting requirements that would have siphoned important revenues from local community coffers and the U.S. Treasury, creating a problem where there wasn’t one and having the exact opposite effect of what the regulation intended. I applaud Secretary Zinke’s leadership and am grateful he took action to provide certainty for job creators and to protect good-paying careers that are the backbone of many of our communities.” 

Congressman Tipton stated, “The federal government shouldn’t be picking winners and losers when it comes to U.S. energy production, and this is exactly what the ONRR’s regulation did. By adding more red-tape, complexity, and confusion to the mineral valuation process, the regulation created uncertainty for businesses, a disincentive for responsible development of our natural resources on federal land, and ultimately hurt hardworking Americans, their families, and their communities the most. I am pleased that the Department of the Interior is acting to permanently rescind this rule.”

Congressman Pearce said, “The Office of Natural Resource Revenue (ONRR) valuation rule for coal, oil, and gas was a direct attack on the production of energy on federal lands. The valuation rule must be substantially changed or repealed to ensure taxpayers in New Mexico, and across the nation, are getting a fair return. Unchanged, the rule will make it more difficult to develop domestic energy resources, which reduces federal, state, and tribal royalty revenue and will take away good-paying jobs. I am pleased to see the Department of the Interior take action to allow for the affordable and reliable production of energy, so New Mexicans can have greater access to jobs and lower energy costs.”

“This rescindment is another important step by the Trump administration to position Interior as a facilitator of responsible energy development. I look forward to working with Secretary Zinke on ONRR policies, and many other areas, to spur more investment in Federal and Indian lands, foster greater regulatory certainty and eliminate or address pre-existing policies that work against these goals, ” said Congressman Rob Bishop.

Congressman Cheney concluded, “The decision by the Department of the Interior’s Office of Natural Resources Revenue (ONRR) to repeal the Obama Administration’s Consolidated Federal Oil & Gas and Federal & Indian Coal Valuation Reform Final Rule comes as welcome news to Wyoming and communities throughout the West. This rule would have discouraged mineral extraction on federal and tribal lands across Wyoming by implementing an ambiguous and complicated process for establishing royalty rates and requiring unnecessary, burdensome reporting requirements. Repealing this misguided and costly rule will help to reduced burdensome federal overreach and bring jobs and added economic certainty back to Wyoming."


Background:

Today, the Office of Natural Resources Revenue (ONRR) within the Department of the Interior announced a final rule in the Federal Register repealing the Consolidated Federal Oil & Gas and Federal & Indian Coal Valuation Reform Final Rule and reinstating the regulations governing the valuation of oil, natural gas, and coal produced from Federal leases and coal produced from Indian leases that were in effect before January 1, 2017.

To read the press release from the Department of the Interior click HERE.

On July 1, 2016 the Obama Administration’s ONRR published a new rule for the valuation of federal onshore and offshore oil & gas production, as well as for coal production on federal and Indian lands. The agency premised the final rule on a need for greater clarity and simplicity in the calculation of royalties owed on produced natural resources. However, the new regulation achieved the opposite – injecting uncertainty and arbitrary bureaucracy into complex accounting determinations. If left in place, the rule would have bankrupt small, independent energy producers, and discouraged production on federal lands across the West and offshore in the Gulf of Mexico and Alaska, meaning less revenue for the U.S. Treasury and our nation’s rural communities.

In 2016, the federal revenue generated from onshore and offshore energy production brought over $5.4 billion into the federal treasury. Despite the regulatory onslaught from the Obama Administration, the energy industry managed to continue to provide quality job opportunities to thousands of Americans and contribute billions of dollars to both the federal treasury and local communities.

The 247-page ONRR rule would have imposed burdensome, costly, and unnecessary reporting requirements on small oil and gas producers, arbitrarily requiring the collection of unneeded information. In many cases, the rule changed the reporting requirements without changing the method by which natural resources were valued, i.e., the valuation process, which is a perfect example of the government raising the costs of doing business with no tangible benefit to show for it.

Especially in a time of low commodity prices, unnecessary and costly government regulations with no actual benefit do nothing but raise energy prices, jeopardize America's source of domestically-produced energy, and cost good-paying jobs. Further, the subjective nature of the rule’s language created more uncertainty, not less, and increased the chance that businesses and government bureaucrats would interpret the requirements of the rule differently.

This regulation also hit the coal industry very hard in a number of ways. Under prior rules, in non-arm’s length situations coal royalties were based upon public indicators of the value of the coal, such as published coal prices from arm’s length transactions. The United States thus received royalties on the fair market value of the coal. The new rule eliminated any ability to pay royalties based upon arm’s length sales prices for coal, and requires the value of the coal be calculated by starting with the sale price of the electricity.

Promulgated under the guise of updating the mineral valuation method to ensure a fair return to the taxpayer for the resources extracted on both federal and tribal lands, as well as offshore sites, the final version of this rule made one thing clear: the Obama Administration wanted to make it virtually impossible to develop the resources in its vast holdings. If allowed to remain, this rule would have lead to further job loss, economic hardship for the hard-working families, and the loss of an important revenue source for the federal treasury and local communities.

On February 13, 2017, Reps. Scott Tipton and Steve Scalise introduced H.J. Res. 71, a resolution of disapproval under the Congressional Review Act that would have rescinded the onerous rulemaking and prohibited substantially similar rules from being considered. Further information on the bill can be found HERE.

Reps. Steve Pearce and Doug Lamborn have led multiple appropriations requests to prohibit funding for carrying out this rule.


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