Cantwell: Interior Department’s Postponement of Coal Royalty Valuation Rule Is ‘Unlawful’

Rule Would Have Ensured Taxpayers Get Fair Value for Resources Extracted from Public Lands

March 7, 2017

Download a PDF of Sen. Cantwell’s letter to Secretary Zinke here.

Washington, D.C. – Today, Ranking Member of the Senate Energy and Natural Resources Committee Maria Cantwell (D-Wash.) asked Interior Secretary Ryan Zinke to lift the stay on a coal royalty valuation rule so that taxpayers can get fair value from coal mined on public lands.

Postponing the effective date of the new rule in this manner was plainly contrary to law,” Sen. Cantwell wrote. “You[, Secretary Zinke,] testified at your confirmation hearing that you ‘will follow the law.’ This may be a good place to start. You should lift the stay and let the royalty valuation rule go back into effect.

Last July, the U.S. Department of the Interior amended its regulations governing the valuation of oil and gas produced from federal onshore and offshore leases and coal produced from federal and Indian leases. One of the objectives of the rule is to ensure that mining “companies have paid every dollar due” to the American people.

The new valuation rule went into effect more than two months ago on January 1, 2017. On February 22, 2017, the director of the Interior Department’s Office of Natural Resources Revenue “postponed the effectiveness” of the new rule, even though it had been effect for 53 days, citing section 705 of the Administrative Procedure Act as authority.

Sen. Cantwell believes that section 705 does not give the department the authority claimed by the ONRR director; in fact, she believes his attempt to postpone the effectiveness of the rule is unlawful.

Section 705 “permits an agency to postpone the effective date of a not yet effective rule, pending judicial review.” The department cannot “postpone” on February 22 the effectiveness of a rule that went into effect more than seven weeks before—on January 1.

Additionally, courts have made it clear that section 705 does not allow agencies to grant stays based on their own notions of what constitutes “justice;” the department may only grant stays under section 705 using a four-part test to determine whether to grant preliminary injunctions.

Sen. Cantwell argues that the administration has failed to show sufficient grounds for staying the effective date of the valuation rule under the four-part test. First, by acknowledging that “the 2017 Valuation Rule was properly promulgated,” the department hasn’t “made a strong showing” that they are “likely to prevail on the merits.” Secondly, purely economic harm is not considered sufficiently grave to meet the threshold of “likely to suffer irreparable harm.” Third, the department must consider whether postponing the effective date of the rule will “substantially harm other parties,” but the department fails to address the $78 million in royalties that will be lost without the valuation rule in place. Lastly, Sen. Cantwell argues that the department did not explain how staying the rule is in the public interest.

In sum, the department’s action in postponing the effective date of the new royalty valuation rule, which had already taken effect, exceeded the department’s authority under section 705 of the Administrative Procedure Act and does not meet the standards the courts have long required to apply when they seek to use their authority under the section,” Sen. Cantwell writes.

Sen. Cantwell concludes the letter by urging Secretary Zinke to lift the stay and let the royalty valuation rule go back into effect.

Since becoming ranking member of the committee in 2015, Sen. Cantwell has pushed for reforms to the federal coal program, including a letter to then-Secretary Jewell detailing the senator's reform priorities. Visit here for more details of Sen. Cantwell's work on coal issues.

Download a PDF of her complete letter here.