Conservation Groups Seek to Join Wyoming Suit Over Coal, Oil, Gas Revenue
Cheyenne, Wyo.— Five conservation groups moved today to intervene in a lawsuit to preserve the 2016 Valuation Rule, a set of federal requirements requiring fossil fuel companies to pay full royalties when extracting publicly owned minerals. The lawsuit was initially filed by multiple fossil fuel industry companies and trade associations aiming to overturn the rule issued by the Department of Interior’s Office of Natural Resources Revenue.
The Valuation Rule closed a loophole under which energy companies pay a deflated royalty to the federal government by selling coal, oil, and gas to affiliated companies at below-market rates. The companies then sell the minerals to a third-party at a higher price without paying a cent in royalties on the markup. This has particularly been an issue with exported coal, where international prices are often much higher than domestic ones.
The 2016 rule required that royalties be paid at full market value when federal minerals leave an energy company’s hands, rather than based on an internal company transaction. Energy companies have increasingly used affiliated companies to internally sell resources, often at lower prices. In 2016, 42% of coal sales in Wyoming were “captive transactions” from a coal company to an affiliated company, up from just 4% in 2004.
In adopting the rule, the Interior Department estimated conservatively that it will increase royalty collections by more than $70 million per year. In 2017, Former Montana Director of Revenue Dan Bucks estimated the rule could generate substantially more revenue for taxpayers. The federal government is bound by law to seek fair market value for the use of public lands and their resources, and half of federal royalties are returned to states to fund schools, roads, and other infrastructure. ONRR received nearly 200,000 public comments on the proposed rulemaking during the comment period in May 2015, the vast majority of which strongly supported the Rule.
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The groups seeking to join the lawsuit are the Natural Resources Defense Council (NRDC), Northern Plains Resource Council, Powder River Basin Resource Council, The Wilderness Society, and the Western Organization of Resource Councils (WORC).
“Public lands belong to all Americans, and polluting companies shouldn’t be allowed to use accounting gimmicks to avoid paying their fair share when mining or drilling,” said Bobby McEnaney, Director of the Dirty Energy Project at the Natural Resource Defense Council. “We are asking for an opportunity to defend this commonsense rule from an attack by dirty energy companies seeking to preserve another Trump Administration giveaway.”
“The Trump Administration killed this rule for the coal industry once, and now industry is trying to do it again,” said Bob LeResche, board member of WORC and Vice Chair of Powder River Basin Resource Council. “If companies want to profit from taking America’s public resources and selling them back to us, they need to pay a fair return. States, counties, and towns depend on mineral revenue for schools, roads, and more. As coal markets collapse, it’s more important than ever to insure the coal industry can’t keep gaming the system with subsidies, loopholes, and special breaks, as they have done for years.”
“Returning to an old, flawed royalty rate that benefits industry and shortchanges taxpayers makes no sense and is illegal. This administration needs to remember that it works for the American people, who should be getting the fair market value for the minerals being extracted from our shared public lands,” said Bruce Pendery, Litigation and Energy Policy Specialist with The Wilderness Society.
– Western Organization of Resource Councils
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