Interior Department Annuls Coal Valuation Rule

The Interior Department said Monday that it has annulled an Obama administration rule that rectified how energy companies value trade of coal, gas and oil extracted from tribal and federal land, in order to protect taxpayers, due to causing “confusion and uncertainty” for the companies, Reuters reports.

Secretary of the Interior Ryan Zinke said the department has formed new royalty policy committee, that would make proposals for alternatives and “remain committed to collecting every dollar due.”

“Repealing the valuation rule provides a clean slate to create workable valuation regulations,” Zinke said in a statement.

The rule of valuation was suggested by former Secretary Sally Jewell in 2016 in order to close a loophole enabling companies to avoid royalty payments when extracting on a taxpayer-owned public soil. This meant that energy companies were required to pay royalties on sales to their first unaffiliated customer as the fuel moves to market, which is known as arm’s-length sale.
A Reuters investigation found in 2012 that coal companies were using affiliated brokers to settle royalty payments on exports to Asia at much lower domestic prices.

Ryan Zinke said the Obama-era rule had raised costs for coal, oil and gas companies, which curbed production on federal lands, “making us rely more and more on foreign imports of oil and gas.”
Industry stakeholders and trade associations filed three lawsuits opposing the validation rule.

Meanwhile, the Institute for Energy Economics and Financial Analysis, a taxpayer watchdog group, found that taxpayers missed out on nearly $30 billion in revenues over three decades because of the loophole.

The annulment of the valuation rule was published in the Federal Register on August 7 and will become effective on September 6.

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