02.23.17

Daines Praises Stay of Harmful Federal Coal, Oil and Gas Valuation Rule

U.S. SENATE —U.S. Senator Steve Daines today released the following statement after the Office of Natural Resources Revenue stayed the rule to reform royalty valuation for federal and Indian coal, and federal oil and gas.

“This rule would have had immediate detrimental effects to American energy producers and the hardworking Montanans and workers across the country they support,” Daines stated. “I am glad the Trump Administration has heeded my call to take immediate action to stay the rule.”

On February 11, 2015, Daines called on the Department of Interior to allow the state of Montana, Montana tribes, union members and business owners more time to provide input on the Office of Natural Resources Revenue proposed rule to reform royalty valuation for federal and Indian coal and federal oil and gas. 

This rule was finalized in July 2016. The default provision creates substantial uncertainty about the feasibility of fully complying with the rule – especially considering that operators faced their first payment deadline on February 28, 2017. This provision makes operators liable for royalty payments that could be interpreted differently several years down the line by auditors. For other operators, the final rule eliminates longstanding exemptions for subsea energy infrastructure used to develop and transport product to processing facilities, which could substantially increase the cost of offshore energy production that has already been underway for decades. Other provisions of the rule give no clarity to how mine mouth operators should value their coal when the first arms-length transaction occurs between the electricity generator and its power customers. These changes could cause many energy operators across the country to shut-in what is already very capital-intensive production.

Alan Olson, Executive Director, Montana Petroleum Association: “Montana Petroleum Association appreciates this action by the Administration to halt this problematic rule and Senator Daines’ leadership to fight back against this and other senseless Obama Administration rules that stifle Montana energy production.”

Colin Marshal, President and CEO Cloud Peak Energy: “Suspension of this rule is important to Cloud Peak Energy, our employees in Montana, and other coal producers and mine mouth power generators in the Powder River Basin. It was among the most egregious of the Obama administration’s punitive regulations designed to close coal mines, kill coal jobs, destroy coal communities, and raise energy prices for most Americans. Senator Daines, along with Senators Enzi and Barrasso and others, have been critical advocates for coal communities in opposing this rule and its suspension reflects their tireless commitment.”

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