States Win Hollow Victory Over Trump’s Favors to Oil, Gas & Coal

SAN FRANCISCO (CN) – California and New Mexico won a hollow victory on Wednesday, as a federal judge found the U.S. Department of Interior unlawfully postponed a royalties rule for oil, gas and coal companies’ benefit – but refused to reinstate the rule.

California and New Mexico sued the Trump administration’s Interior Department in April, arguing its postponement of a new royalties rule this past February, after it took effect on Jan. 1, deprived states of an estimated $72 million to $85 million in royalties, which they depend on to help fund crucial services like public education. The rule would have required companies to pay higher royalties for extracting natural resources from federal lands.

While that lawsuit worked its way through court, the Interior Department had already proposed a new rule to roll back the increased royalty valuations on April 4, with a public comment period ending May 4. The repeal is set to take effect on Sept. 6.

In an 18-page ruling, U.S. Magistrate Judge Elizabeth Laporte found the department effectively repealed the royalties rule in February after it had taken effect and without allowing for public comment in violation of the Administrative Procedure Act.

But she said making companies comply with higher royalty valuations for a few days before the rule is repealed on Sept. 6 would be “unduly disruptive” for the oil, gas and coal industries. She declined to vacate the Interior Department’s postponement of the rule.

“Although plaintiffs are correct that vacatur is the usual remedy for illegal rulemaking under the APA, vacatur would be unduly disruptive because it would require the industry to comply with the rule for only a short time before switching gears to comply with its predecessor,” Laporte wrote.

In deciding to issue a ruling on the states’ motion for summary judgment, Laporte rejected arguments that the case should be dismissed entirely for prudential mootness.

It would set a bad precedent to reward the Justice Department’s tactic of trying to delay arguments on the states’ motion for summary judgment until after the repeal took effect and the case became moot, Laporte found.

“Defendants have repeatedly used procedures to delay the decision on plaintiffs’ summary judgment motion,” the judge wrote.

Laporte cited the Justice Department’s failure to address the issue of prudential mootness in its Aug. 18 motion to dismiss as evidence of a strategy to delay judgment until after the case became moot.

The omission “was apparently based on the self-fulfilling prophecy that delay in ruling on the merits until after the effective date of the repeal rule would render the issue of prudential mootness itself moot and divest this court of jurisdiction,” Laporte wrote.

The possibility that the Justice Department will use such tactics in the future to evade judicial oversight is “an appropriate factor” to consider, Laporte wrote, especially since it is currently fighting similar litigation over the delayed enforcement of another rule that affects oil and gas revenues.

In July, California and New Mexico sued the Interior Department for postponing enforcement of another rule that cracks down on methane emissions from oil and gas wells on federal land.

“The likelihood that one or more defendants will use the same strategy to effectively repeal regulations that California has a stake in maintaining in effect without statutory authority after their effective date is not remote,” Laporte wrote.

Laporte granted the states’ motion for summary judgment, finding the Interior Department unlawfully postponed the rule. But the royalties rule will remain off the books until it’s officially repealed Sept. 6.

In an emailed statement, New Mexico Attorney General Hector Balderas said the royalties rule is especially important to the Southwestern state because it spends 100 percent of the proceeds on public education.

“I’m pleased that a federal court agreed with us that Donald Trump broke the law, as this is a big win for New Mexico’s students, families and teachers.” Balderas said.

Although Wednesday’s ruling will not impact royalty payments to the state, a spokesman for Balderas’ office said the Interior Department’s repeal rule is also subject to challenge “so if there’s additional litigation to overturn the repeal, today’s decision could be a step toward increasing revenues.”

The California Attorney General’s Office did not immediately return emails seeking comment Wednesday afternoon.

An Interior Department representative deferred comment to the Justice Department, which offered no immediate comment on the ruling.

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