Western Caucus Members Applaud Zinke Proposal to Repeal Job-Killing ONRR Rule

April 3, 2017
Press Release

WASHINGTON – Today, Congressional Western Caucus Chairman Paul A. Gosar D.D.S. (AZ-04), Executive Vice Chairman Rep. Scott Tipton (CO-03), Chairman Emeritus Rep. Rob Bishop (UT-01), Chief Forestry Officer Rep. Bruce Westerman (AR-04), and Chairman Emeritus Rep. Steve Pearce (NM-02) and Western Caucus member Rep. Steve Scalise (LA-01) released the following statements following the announcement from the Department of the Interior  of a proposal to repeal the Obama Administration’s Consolidated Federal Oil & Gas and Indian Coal Valuation Reform Rule in its entirety:

Chairman Gosar remarked, “I am thrilled to hear that Secretary Zinke is taking action to roll back another duplicative and costly  regulation from the Obama Administration. ONRR’s valuation rule would disproportionately impact small producers by burying them with compliance costs, ultimately driving up energy prices for everyday consumers. By taking steps to repeal this unconstitutional tax on job creators, the Trump Administration continues to follow through on the promise to get America back on the path toward energy independence and job creation.”

“The ONRR’s mineral valuation rule added more red-tape, complexity and confusion to an already overly-complicated mineral valuation process, creating a disincentive for responsible development of our natural resources on federal land and ultimately hurting hardworking Americans and their families the most. I am glad to see that Secretary Zinke joins us in recognizing the harmful impact this rule would have on energy producers and consumers alike and has started the process for withdrawing the regulation through the rulemaking process,” Congressman Tipton stated.

“The Trump administration should be commended for beginning the process of reversing the impossible regulatory requirements imposed on energy development by this rule. Endless layers of regulation don’t yield greater returns for taxpayers, they paralyze economic activity. In this case, the rule hit marginal producers – the small businesses that support local economies – the hardest,” Congressman Bishop said.

“The ONRR Coal, Oil, and gas valuation reform rule does nothing to help consumers. Instead, it would result in high costs for energy used to heat homes, fuel cars, and more. The Interior Department is right to repeal this overreach by the Obama administration. It is my hope that the Interior Department continues to unwind unnecessary and burdensome regulations handed down by an administration bent on protecting a political legacy instead of standing with the American people,” said Congressman Westerman.

“These rules are a direct attack on energy production taking place on federal lands and I applaud the Administration’s decision to review them. The valuation rule must be substantially changed or repealed to ensure taxpayers in New Mexico and across the nation are getting a fair return. The proposed rules will reduce federal, state, and tribal royalty revenue and will take away good-paying jobs by making it more difficult to develop domestic energy resources,” said Congressman Pearce. “I am pleased to see the Department of the Interior take action to allow for the affordable and reliable production of energy, bringing American taxpayers more jobs and lower costs.”

Congressman Scalise remarked, “Let’s be clear—the ONRR mineral valuation rule was nothing but a shadow tax on American energy. In my home state of Louisiana, it meant reduced state revenue sharing dollars, hindering our ability to make major investments to restore our coast and protect Louisiana families and businesses from devastating storms. I applaud Secretary Zinke’s action to begin withdrawing this damaging rule, and look forward to working with the Department of Interior to promote safe and responsible energy production throughout the U.S.” 

(Courtesy of Western Caucus members Tipton and Scalise as well as westerncaucus.house.gov):

Today, April 3, 2016, the Department of the Interior announced a proposal to repeal the Obama Administration’s Consolidated Federal Oil & Gas and Indian Coal Valuation Reform Rule in its entirety

On July 1, 2016 the Office of Natural Resource Revenue (ONRR) published its Final Rule for the valuation of federal onshore and offshore oil & gas production, as well as for coal production on federal and Indian lands for the purposes of calculating federal royalties. The agency premised the rule on a need for greater clarity and simplicity in the calculation of royalties owed on produced natural resources. However, the Rule achieves the opposite – injecting uncertainty and arbitrary bureaucracy into complex accounting determinations. In turn, the rule would bankrupt small, independent energy producers, and discourage 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.

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 rescind the onerous rulemaking and prohibit substantially similar rules from being considered. Further information on the bill can be found HERE.

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

In 2016, the federal revenue generated from onshore and offshore energy production brought over $5.4 billion to the federal treasury.  Despite the regulatory onslaught from the Obama Administration, the energy industry managed to provide well-paying jobs to thousands of Americans and contribute billions of dollars to both the federal treasury and local communities in which the production takes place.

When the ONRR’s 247-page Royalty Valuation Rule was finalized on June 30, 2016, the Department of the Interior insisted it was trying to improve and update its regulatory framework. However, rather than simplifying the valuation process, the ONRR rule would impose burdensome, costly, and unnecessary reporting requirements on small oil and gas producers, arbitrarily requiring the collection of unneeded information. In many cases, the rule changes the reporting requirements without changing the method by which natural resources are 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 like this with no actual benefit do nothing but raise energy prices, jeopardize America's source of domestically-produced energy, and cost good-paying, quality jobs. Further, the subjective nature of the rule’s language creates more uncertainty, not less, thus increasing the chance that businesses and government bureaucrats will interpret the requirements of the rule differently.

This regulation also hits 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 eliminates 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 makes 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 will lead to further job loss, economic hardship for the hardworking families in our districts, and the loss of an important revenue source for the federal treasury and our local communities.