US Department of the Interior Overrides Coal Valuation Rule

© Reuters. Zinke hopes to take the stage with Trump for his infrastructure improvements, at the Washington Department of Transportation.

By Valerie Volcovici

WASHINGTON (Reuters) – The U.S. Department of the Interior said on Monday it struck down an Obama-era rule that reformed the way energy companies value sales of oil, gas and coal extracted from federal lands and tribes to protect taxpayers because it caused “confusion and uncertainty” for energy companies.

Interior Secretary Ryan Zinke said the department’s newly formed royalty policy committee will propose alternatives to the rule and “remain committed to collecting every dollar owed.”

“The repeal of the valuation rule provides a clean slate for creating viable valuation regulations,” Zinke said in a statement.

The valuation rule was proposed by former Home Secretary Sally Jewell last year to close a loophole that allowed companies to avoid royalty payments when mining on taxpayer-owned public lands. It required energy companies to pay royalties on sales to the first unaffiliated customer, known as arm’s length sale, as the fuel moves to market.

A Reuters investigation in 2012 found that coal companies were using affiliated brokers to settle royalty payments on exports to Asia at much lower domestic prices.

Zinke said the valuation rule had increased costs for coal, oil and gas companies, hampering production on federal lands, “making us increasingly dependent on foreign oil and gas imports.”

Industry stakeholders and trade associations filed three lawsuits against the Obama-era government.

Meanwhile, the Institute for Energy Economics and Financial Analysis, a taxpayer watchdog group, found that taxpayers lost nearly $ 30 billion in revenue over three decades due to the loophole.

The repeal of the valuation rule was published in the Federal Register on August 7 and will take effect on September 6.

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