California Set to Lose Out on Royalties Because of the Trump Administration’s Unlawful Delay of Rule
SACRAMENTO – California Attorney General Xavier Becerra, together with New Mexico Attorney General Hector Balderas, filed a lawsuit yesterday against the U.S. Department of the Interior for delaying the implementation of one of its own rules promulgated to ensure that taxpayers receive their fair share of royalties from companies that extract oil, gas, and coal from federal lands.
The rule, known as the Valuation Rule, was finalized by the Office of Natural Resources Revenue (ONRR) in the Department of the Interior on July 1, 2016, and went into effect on January 1, 2017. The product of five years of public engagement, the Valuation Rule replaced outdated regulations that no longer ensured that taxpayers received adequate compensation from the extraction of federally-owned natural resources. It also addressed a loophole that allowed the coal industry to sell coal at artificially low prices.
On February 27, nearly two months after the Valuation Rule had gone into effect, ONRR – under the direction of the Trump Administration – issued a notice “postponing” the rule until pending litigation is resolved. To justify the delay, ONRR invoked Section 705 of the Administrative Procedure Act (APA), which allows an agency to “postpone the effective date of action taken by it, pending judicial review.” However, ONRR’s action is unlawful, as Section 705 does not apply to rules that have already gone into effect.
“The Trump Administration has once again displayed its disdain for playing by the rules," declared Attorney General Becerra. "The winners here are the private mining interests that profit from paying less for our natural resources. The losers are -- surprise, surprise -- the American taxpayers. Attorney General Balderas and I won't let this blatant violation of the law by the Trump Administration go unchallenged."
ONRR estimated that the Valuation Rule would increase royalty collections for taxpayers by more than $78 million annually, of which approximately $18 million would be disbursed to states. Since 2008, California has received an average of $82.5 million annually in all royalties from federal mineral extraction within the state.
A copy of the lawsuit is attached to the electronic version of this release at oag.ca.gov/news.