California, New Mexico Challenge White House Favors to Oil, Gas & Coal

SAN FRANCISCO (CN) – On the heels of two victories over efforts to roll back Obama-era regulations, California and New Mexico launched a fresh challenge Tuesday against the Trump administration’s repeal of higher royalty payments to states for oil, gas and coal leases on public lands.

Over the last seven weeks, U.S. Magistrate Judge Elizabeth Laporte has invalidated two postponements of Obama-era Interior Department regulations at the request of California and New Mexico.

On Oct. 5, Laporte overturned a rule that delayed an emissions-reducing, waste-prevention regulation for oil and gas wells on federal land.

And in August, Laporte found the Interior Department unlawfully postponed another rule that boosted royalty payments to states for fossil fuels extracted on federal and Indian lands. However, Laporte refused to reinstate the rule because a new one invalidating the higher royalties was set to take effect Sept. 6.

In their lawsuit filed Tuesday, California and New Mexico claim the Interior Department’s latest repeal of the royalties rule was arbitrary and capricious because the agency “failed to supply a reasoned basis” for its decision.

The Interior Department’s Office of Natural Resources Revenue “failed to explain why it reversed course based on the same information that it considered when it formulated and promulgated the rule just a year earlier,” the 14-page complaint states.

California receives an average $82.5 million annually for about 600 oil and gas leases on more than 200,000 acres of federal land. The leases produce about 15 million barrels of oil and 7 billion cubic feet of natural gas every year, according to its complaint.

New Mexico, second only to Wyoming in the number of oil and gas leases on federal land in its state, gets an average $470 million each year in royalties. The state says it uses most of that money to help fund public education.

The Obama-era royalties rule was finalized in July 2016 and took effect on Jan. 1 this year. The Office of Natural Resources Revenue estimated it would increase royalty collections by $72 million to $85 million per year, and reduce the industry’s administrative costs by $3.6 million.

But the Trump administration’s Interior Department postponed the rule on Feb. 22 without notice or an opportunity for public comment, a move that Laporte deemed unlawful in August.

On April 4, the Interior Department proposed a new rule to repeal the higher royalty values, with a public comment period ending May 4. The repeal took effect on Sept. 6.

In August, Interior Secretary Ryan Zinke defended the repeal, saying the royalties rule created confusion and uncertainty on how companies must pay royalties for the extraction of natural resources on federal land.

“Repealing the Valuation Rule restores our economic freedom by ensuring our energy independence,” Zinke said in August. “The increased costs associated with the Valuation Rule had the potential to decrease exploration and production on federal lands, both onshore and offshore, making us rely more and more on foreign imports of oil and gas.”

In a statement issued Tuesday, California Attorney General Xavier Becerra called the repeal “yet another example of the Trump administration bending over backwards to please the oil, gas and, in particular, coal industry.”

“The president has shown what side he is on, and it is not the side of American taxpayers,” Becerra said. “My job is to protect Californians against this administration’s attempts to illegally roll back commonsense regulations that benefit the American people.”

The Interior Department did not immediately respond to an email seeking comment Tuesday afternoon.

A Justice Department representative declined to comment.


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