[Federal Register Volume 82, Number 63 (Tuesday, April 4, 2017)]
[Proposed Rules]
[Pages 16323-16325]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-06617]



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DEPARTMENT OF THE INTERIOR

Office of Natural Resources Revenue

30 CFR Parts 1202 and 1206

[Docket No. ONRR-2017-0001; DS63644000 DR2000000.CH7000 178D0102R2]
RIN 1012-AA20


Repeal of Consolidated Federal Oil & Gas and Federal & Indian 
Coal Valuation Reform

AGENCY: Office of Natural Resources Revenue, Interior.

ACTION: Proposed rule.

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SUMMARY: The Office of Natural Resources Revenue (ONRR) proposes to 
repeal the Consolidated Federal Oil & Gas and Federal & Indian Coal 
Valuation Reform Rule that was published in the Federal Register on 
July 1, 2016 (``2017 Valuation Rule'').
    Repeal of the 2017 Valuation Rule would maintain the current 
regulatory status quo by keeping the longstanding pre-existing 
regulations in effect.

DATES: You must submit comments on or before May 4, 2017.

ADDRESSES: You may submit comments to ONRR on this proposed rulemaking 
by any of the methods listed below. Please reference the Regulation 
Identifier Number (RIN) 1012-AA20 in your comments. See also Public 
Availability of Comments under Procedural Matters.
     Electronically: Go to www.regulations.gov. In the entry 
titled ``Enter Keyword or ID,'' enter ``ONRR-2017-0002,'' and then 
click ``Search.'' Follow the instructions to submit public comments. We 
will post all comments.
     [Egr]mail comments to Armand Southall, Regulatory 
Specialist, at [email protected].
     Hand-carry or mail comments, using an overnight courier 
service, to the Office of Natural Resources Revenue, Building 53, 
Entrance E-20, Denver Federal Center, West 6th Ave. and Kipling St., 
Denver, Colorado 80225.

FOR FURTHER INFORMATION CONTACT: For comments or questions on 
procedural issues, contact Armand Southall, ONRR, at (303) 231-3221, or 
email to [email protected].

SUPPLEMENTARY INFORMATION:

I. Background

    On July 1, 2016, ONRR published in the Federal Register the 
Consolidated Federal Oil & Gas and Federal & Indian Coal Valuation 
Reform Rule, which was effective on January 1, 2017 (2017 Valuation 
Rule). 81 FR 43338. The 2017 Valuation Rule changes how Federal oil and 
gas and Federal and Indian coal lessees value production for royalty 
purposes. It also revises revenue-reporting requirements.
    On December 29, 2016, three different sets of petitioners filed 
three separate petitions challenging the 2017 Valuation Rule in the 
United States District Court for the District of Wyoming. In those 
lawsuits the petitioners allege that certain provisions of the 2017 
Valuation Rule are arbitrary, capricious, and contrary to the law. The 
petitioners raise serious questions concerning the validity or prudence 
of certain provisions of the 2017 Valuation Rule, such as the expansion 
of the ``default provision'' and the use of the sales price of 
electricity to value coal.
    In addition to initiating litigation, on February 17, 2017, the 
petitioners sent a joint letter to the ONRR Director. In that letter 
the petitioners asserted that the 2017 Valuation Rule's new reporting 
and payment requirements would be difficult or impossible to comply 
with by the royalty reporting-deadline, a problem that would be 
exacerbated by the fact that non-compliant lessees may be exposed to 
significant civil penalties.
    The petitioners' lawsuits and correspondence echoed the concerns 
voiced by many industry representatives in workshops during the public 
comment period that preceded the 2017 Valuation Rule's promulgation. 
Records of those workshops, industry comments, and other public 
comments may be viewed at https://onrr.gov/Laws_R_D/FRNotices/AA13.htm.
    On February 27, 2017, in response to the petitioners' lawsuits and 
their request to ONRR to stay implementation of the 2017 Valuation 
Rule, ONRR postponed implementation of the 2017 Valuation Rule, pending 
judicial review, by notice published in the Federal Register. 82 FR 
11823.
    ONRR is now proposing to repeal the 2017 Valuation Rule in its 
entirety. Repeal would be consistent with the President's January 30, 
2017, Executive Order on Reducing Regulation and Controlling Regulatory 
Costs. It would (a) preserve the regulatory status quo while ONRR 
reconsiders whether revisions are appropriate or needed to the pre-
existing regulations governing royalty values; (b) avoid the costs to 
both government and industry of converting to controversial new royalty 
reporting and payment systems while the reconsideration takes place; 
(c) eliminate the need for continued and uncertain litigation over the 
validity of the 2017 Valuation Rule, and (d) enhance the lessees' 
ability to timely and accurately report and pay royalties, because they 
would continue to use a well-known system that has been in place for 
decades.
    ONRR's original intent behind the 2017 Rule was to offer greater 
simplicity, certainty, clarity, and consistency in product valuation 
and reporting for mineral lessees. But ONRR has since identified 
several areas in the rule that warrant reconsideration to meet policy 
and implementation objectives, including but not limited to, how to 
value coal production in certain non-arm's length transactions, how to 
value coal when the first arm's-length sale of the coal is electricity, 
how to value gas in certain no-sale situations, and under what 
circumstances, and on whom, ONRR's valuation determinations are 
binding. The repeal would allow ONRR to reconsider whether the changes 
made by the 2017 Valuation Rule are needed, while providing certainty 
and clarity to the regulated community during that reconsideration by 
continuing to require compliance with lawful, longstanding, and well 
known procedures. Absent repeal, ONRR would also be required to 
continue litigation over the 2017 Valuation Rule, even though that Rule 
may not reflect ONRR's current conclusions on how best to value 
production for royalty purposes. Concurrently with this notice, ONRR is 
publishing an Advance Notice of Proposed Rulemaking seeking comments on 
whether revisions are appropriate or needed to the pre-existing 
regulations governing royalty values, including comments on whether the 
2017 Valuation Rule should ultimately be retained or repromulgated, in 
whole or in part.
    ONRR's pre-existing valuation rules are still authorized by, and 
consistent with, applicable law, including 5 U.S.C. 301 et seq., 25 
U.S.C. 396 et seq., 396a et seq., 2101 et seq.; 30 U.S.C. 181 et seq., 
351 et seq., 1001 et seq., 1701 et seq.; 31 U.S.C. 9701; 43 U.S.C. 1301 
et seq., 1331 et seq., and 1801 et seq.

II. Explanation of Proposed Amendments

    ONRR proposes to repeal the 2017 Valuation Rule in its entirety. 
If, following public comment, ONRR publishes a final rule repealing the 
2017 Valuation Rule in its entirety, then 30 CFR parts 1202 and 1206 
would revert to read as they did before ONRR promulgated the 2017 
Valuation Rule. Part 1202 would read as published in the July 1, 2015, 
edition of title 30 of the Code of Federal Regulations (CFR), which is 
at https://www.gpo.gov/fdsys/pkg/CFR-2015-title30-vol3/pdf/CFR-

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2015-title30-vol3-part1202.pdf. Part 1206 would read as published in 
the July 1, 2015, edition of title 30 of the Code of Federal 
Regulations, which is at https://www.gpo.gov/fdsys/pkg/CFR-2015-title30-vol3/pdf/CFR-2015-title30-vol3-part1206.pdf.

III. Section-by-Section Analysis

    The proposed and final rules for the 2017 Valuation Rule, including 
their section-by-section analyses, are at https://onrr.gov/Laws_R_D/FRNotices/AA13.htm. A repeal of the 2017 Valuation Rule would return 
each section to its reading prior to the July 1, 2016, publication of 
the 2017 Valuation Rule. With repeal, the section-by-section analyses 
may be found in the preambles for ONRR's and its predecessors' prior 
rulemakings as published in the Federal Register. The Federal Register 
volume and page number citations for those prior rulemakings, including 
their preambles, may be found in the Code of Federal Regulations, 30 
CFR parts 1202 and 1206, as they existed before the July 1, 2016, 
publication of the 2017 Valuation Rule. For part 1202 the Federal 
Register citations are at https://www.gpo.gov/fdsys/pkg/CFR-2015-title30-vol3/pdf/CFR-2015-title30-vol3-part1202.pdf. For part 1206, the 
Federal Register citations are at https://www.gpo.gov/fdsys/pkg/CFR-2015-title30-vol3/pdf/CFR-2015-title30-vol3-part1206.pdf.

IV. Procedural Matters

1. Summary Cost and Royalty Impact Data

    Repeal would negate the cost and royalty impact of the 2017 
Valuation Rule. That cost and royalty impact is described in the final 
2017 Valuation Rule, under Procedural Matters, item 1, starting at 81 
FR 43359.

2. Regulatory Planning and Review (Executive Orders 12866, 13563, and 
Executive Order 13771 on Reducing Regulation and Controlling Regulatory 
Costs Dated January 30, 2017)

    Executive Order (E.O.) 12866 provides that the Office of 
Information and Regulatory Affairs (OIRA) of the Office of Management 
and Budget (OMB) will review all significant rules. The Office of 
Information and Regulatory Affairs has determined that this rule is not 
significant.
    Executive Order 13563 reaffirms the principles of E.O. 12866, while 
calling for improvements in the Nation's regulatory system to promote 
predictability, to reduce uncertainty, and to use the best, most 
innovative, and least burdensome tools for achieving regulatory ends. 
The Executive Order directs agencies to consider regulatory approaches 
that reduce burdens and maintain flexibility and freedom of choice for 
the public where these approaches are relevant, feasible, and 
consistent with regulatory objectives. E.O. 13563 emphasizes further 
that regulations must be based on the best available science and that 
the rulemaking process must allow for public participation and an open 
exchange of ideas. We developed this proposed rule in a manner 
consistent with these requirements.
    The President's January 30, 2017, Executive Order on Reducing 
Regulation and Controlling Regulatory Costs, as implemented under 
February 2, 2017, Interim Guidance issued by OIRA, imposes certain 
requirements for every rule considered significant under E.O. 12866. 
First, every new significant rule requires the repeal of two rules. 
Second, an agency must fully offset the total incremental cost of 
significant new regulations, including repealed regulations, finalized 
in fiscal year 2017. Since this proposed rule--which is itself a repeal 
of an existing rule--is not a significant rule under E.O. 12866, it 
does not require the repeal of two other existing rules, and the agency 
is not required to offset its cost against the cost of other fiscal 
year 2017 rules.

3. Regulatory Flexibility Act

    The Department of the Interior certifies that this proposed rule 
would not have a significant economic effect on a substantial number of 
small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et 
seq.). See the 2017 Valuation Rule, Procedural Matters, item 1, 
starting at 81 FR 43359, and item 3, starting at 81 FR 43367.

4. Small Business Regulatory Enforcement Fairness Act

    This proposed rule is not a major rule under 5 U.S.C. 804(2), the 
Small Business Regulatory Enforcement Fairness Act. This proposed rule:
    a. Would not have an annual effect on the economy of $100 million 
or more. We estimate the maximum effect as a reverse of the impacts 
described in the 2017 Valuation Rule, under Procedural Matters, item 1, 
starting at 81 FR 43359, and item 4, 81 FR 43368.
    b. Would not cause a major increase in costs or prices for 
consumers, individual industries, Federal, State, or local government 
agencies, or geographic regions. See the 2017 Valuation Rule, under 
Procedural Matters, item 1, starting at 81 FR 43359, and item 4, 81 FR 
43368.
    c. Would not have significant adverse effects on competition, 
employment, investment, productivity, innovation, or the ability of 
U.S.-based enterprises to compete with foreign-based enterprises. This 
proposed rule would benefit U.S.-based enterprises.

5. Unfunded Mandates Reform Act

    This proposed rule would not impose an unfunded mandate on State, 
local, or Tribal governments, or the private sector of more than $100 
million per year. This proposed rule would not have a significant or 
unique effect on State, local, or Tribal governments, or the private 
sector. Therefore, we are not required to provide a statement 
containing the information set out in the Unfunded Mandates Reform Act 
(2 U.S.C. 1501 et seq.). See the 2017 Valuation Rule, under Procedural 
Matters, item 1, starting at 81 FR 43359, and item 5 at 81 FR 43368.

6. Takings (E.O. 12630)

    Under the criteria in E.O. 12630, this proposed rule would not have 
significant takings implications. This proposed rule would apply to 
Federal oil, Federal gas, Federal coal, and Indian coal leases only. 
This proposed rule would not be a governmental action capable of 
interference with constitutionally protected property rights. This 
proposed rule does not require a Takings Implication Assessment.

7. Federalism (E.O. 13132)

    Under the criteria in E.O. 13132, this proposed rule would not have 
sufficient Federalism implications to warrant the preparation of a 
Federalism Assessment. The management of Federal oil and gas leases and 
Federal and Indian coal leases is the responsibility of the Secretary 
of the Interior. This proposed rule would not impose administrative 
costs on States or local governments. This proposed rule also does not 
substantially and directly affect the relationship between the Federal 
and State governments. Because this rule, if promulgated as a final 
rule, would not alter that relationship, it does not require a 
Federalism summary impact statement.

8. Civil Justice Reform (E.O. 12988)

    This proposed rule would comply with the requirements of E.O. 
12988, for the reasons we outline in the following paragraphs. 
Specifically, this proposed rule:
    a. Would meet the criteria of Sec.  3(a), which requires that we 
review all regulations to eliminate errors and

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ambiguity and to write them to minimize litigation.
    b. Would meet the criteria of Sec.  3(b)(2), which requires that we 
write all regulations in clear language using clear legal standards.

9. Consultation With Indian Tribal Governments (E.O. 13175)

    The Department strives to strengthen its government-to-government 
relationship with the Indian Tribes through a commitment to 
consultation with the Indian Tribes and recognition of their right to 
self-governance and Tribal sovereignty. Under the Department's 
consultation policy and the criteria in E.O. 13175, we evaluated this 
proposed rule and determined that it would potentially affect 
Federally-recognized Indian Tribes. We determined that this rule would 
restore the historical valuation methodology for coal produced from 
Indian leases. Our previous and planned activities include:
    (a) As described in the 2017 Valuation Rule under Procedural 
Matters, item 9, at 81 FR 43368, we consulted with the affected Tribes 
on a government-to-government basis in preparing the 2017 Valuation 
Rule. We also will consult with the affected Tribes about potential 
repeal of the 2017 Valuation Rule.
    (b) We will fully consider Tribal views in the final rule.

10. Paperwork Reduction Act

    This proposed rule:
    (a) Does not contain any new information collection requirements.
    (b) Does not require a submission to OMB under the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3501 et seq). See 5 CFR 1320.4(a)(2).
    This proposed rule, if promulgated as a final rule, will leave in 
tack the information collection requirements that OMB already approved 
under OMB Control Numbers 1012-0004, 1012-0005, and 1012-0010.

11. National Environmental Policy Act of 1969 (NEPA)

    This proposed rule would not constitute a major Federal action, 
significantly affecting the quality of the human environment. We are 
not required to provide a detailed statement under NEPA because this 
rule qualifies for categorically exclusion under 43 CFR 46.210(i) in 
that this is ``. . . of an administrative, financial, legal, technical, 
or procedural nature. . . .'' This rule also qualifies for 
categorically exclusion under Departmental Manual, part 516, section 
15.4.(C)(1) in that its impacts are limited to administrative, 
economic, or technological effects. We also have determined that this 
rule is not involved in any of the extraordinary circumstances listed 
in 43 CFR 46.215 that would require further analysis under NEPA. The 
procedural changes resulting from the repeal of the 2017 Valuation Rule 
would have no consequences on the physical environment. This proposed 
rule would not alter, in any material way, natural resources 
exploration, production, or transportation.

12. Effects on the Energy Supply (E.O. 13211)

    This proposed rule would not be a significant energy action under 
the definition in E.O. 13211, and, therefore, would not require a 
Statement of Energy Effects.

13. Clarity of This Regulation

    Executive Orders 12866 (section 1(b)(12)), 12988 (section 
3(b)(1)(B)), and 13563 (section 1(a)), and the Presidential Memorandum 
of June 1, 1998, would require us to write all rules in Plain Language. 
This means that each rule that we publish must: (a) Have logical 
organization; (b) use the active voice to address readers directly; (c) 
use clear language rather than jargon; (d) use short sections and 
sentences; and (e) use lists and tables wherever possible.
    If you feel that we have not met these requirements, send your 
comments to [email protected]. To better help us revise this 
rule, make your comments as specific as possible. For example, you 
should tell us the numbers of the sections or paragraphs that you think 
we wrote unclearly, which sections or sentences are too long, the 
sections where you feel lists or tables would be useful, etc.

14. Public Availability of Comments

    Before including your address, phone number, email address, or 
other personal identifying information in your comment, you should be 
aware that your entire comment--including your personal identifying 
information--may be made publicly available at any time. While you can 
ask us, in your comment, to withhold your personal identifying 
information from public view, we cannot guarantee that we will be able 
to do so.

List of Subjects in 30 CFR Parts 1202 and 1206

    Coal, Continental shelf, Government contracts, Indian lands, 
Mineral royalties, Natural gas, Oil, Oil and gas exploration, Public 
lands--mineral resources, Reporting and recordkeeping requirements.

    Dated: March 30, 2017.
Amy Holley,
Acting Assistant Secretary for Policy, Management and Budget.
[FR Doc. 2017-06617 Filed 4-3-17; 8:45 am]
 BILLING CODE 4335-30-P