Daily Rules, Proposed Rules, and Notices of the Federal Government
On July 1, 2016, ONRR published the 2017 Valuation Rule in the
On December 29, 2016, three separate petitions were filed in the U.S. District Court for the District of Wyoming.
Under Section 705 of the Administrative Procedure Act “[w]hen an agency finds that justice so requires, it may postpone the effective date of action taken by it, pending judicial review.” 5 U.S.C. 705. In light of the pending litigation, and for the following reasons, ONRR has concluded that justice requires it to postpone the effectiveness of the 2017 Valuation Rule until the judicial challenges to the Rule are resolved.
First, the postponement will preserve the regulatory status quo while the litigation is pending and the Court decides whether to uphold the regulation. While ONRR believes the 2017 Valuation Rule was properly promulgated, the petitioners have raised serious questions concerning the validity of certain provisions of the Rule, including the expansion of the “default provision” and the use of the sales price of electricity for certain coal-royalty valuations. Given this legal uncertainty, maintaining the status quo is critical for a number of reasons. First, a postponement will avoid the substantial cost of retroactively correcting and verifying all revenue reports if the 2017 Valuation Rule is invalidated, in whole or in part, as a result of the pending litigation. Federal and Indian lessees affected by the 2017 Valuation Rule submit approximately 450,000 reporting lines every production month. If the Court invalidates the 2017 Valuation Rule, affected lessees would be forced to correct and resubmit reporting lines for each production month that the Rule is in effect. ONRR would be required to review and verify the same. Thus, postponing the 2017 Valuation Rule will avoid forcing both the regulated community and ONRR to perform the complicated, time-consuming, and costly task of correcting and verifying revenue reports and payments if the 2017 Valuation Rule is invalidated as a result of the pending litigation.
In addition, the postponement will enhance the lessees' ability to timely and accurately report and pay royalties because they will be using a well-known system that has been in place for the last 25 years. ONRR has received numerous legitimate questions from lessees on how to apply the 2017 Valuation Rule, some of which will require additional consideration and time before ONRR can definitively answer them; thus increasing the likelihood that lessees will initially report incorrectly and later need to adjust their reports. In addition, the Court may resolve some of these issues differently than ONRR, again increasing the likelihood that lessees will need to submit corrected reports. Given these judicial and administrative uncertainties, relying on the previous regulatory system while the litigation is pending will reduce uncertainty and enhance ONRR's ability to collect and verify natural resource revenues, which is in the best interest of all those who benefit from royalty payments, including States, Tribes, individual Indian lessors, and the general public.
The United States will suffer no significant harm from postponing the effectiveness of the 2017 Valuation Rule while the litigation is pending. As noted in the preamble to the final rule, the implementation of the Rule is not expected to have a significant impact on
In sum, in light of the existence and consequences of the pending litigation, and given the potentially irreparable harm that could result if the 2017 Valuation Rule is immediately implemented, ONRR has determined that the public interest and justice requires postponing the effectiveness of the 2017 Valuation Rule until the litigation is resolved.
Accordingly, pursuant to Section 705 of the Administrative Procedure Act, 5 U.S.C. 705, ONRR has postponed the effectiveness of the Consolidated Federal Oil & Gas and Federal & Indian Coal Valuation Final Rule pending judicial review.