[Federal Register Volume 86, Number 28 (Friday, February 12, 2021)]
[Rules and Regulations]
[Pages 9286-9289]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-03052]


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DEPARTMENT OF THE INTERIOR

Office of Natural Resources Revenue

30 CFR Parts 1206 and 1241

[Docket No. ONRR-2020-0001; DS63644000 DRT000000.CH7000 212D1113RT]
RIN 1012-AA27


ONRR 2020 Valuation Reform and Civil Penalty Rule: Delay of 
Effective Date; Request for Public Comment

AGENCY: Office of Natural Resources Revenue (``ONRR''), Interior.

ACTION: Final rule; delay of effective date and opening of comment 
period.

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SUMMARY: In accordance with the January 20, 2021 White House Memorandum 
on Regulatory Freeze Pending Review and the Office of Management and 
Budget Memorandum M-21-14 of the same date, this action delays the 
effective date of the final rule entitled ``ONRR 2020 Valuation Reform 
and Civil Penalty Rule'' that published in the Federal Register on 
January 15, 2021 (``2020 Rule''). In addition, this action opens a 30-
day comment period to allow interested parties to comment on the impact 
of the delay to the 2020 Rule's effective date as well as issues of 
fact, law, and policy raised by that rule.

DATES: Effective date: This action is effective February 12, 2021. The

[[Page 9287]]

effective date of the 2020 Rule, published in the Federal Register at 
86 FR 4612, is delayed for 60 days, from February 16, 2021 to April 16, 
2021.
    Comment Period: To be assured consideration, comments must be 
received at one of the addresses provided below, by 11:59 p.m. EST on 
March 15, 2021.

ADDRESSES: You may submit comments to ONRR using either of the 
following methods. Please reference the Regulation Identifier Number 
(``RIN'') for this action, ``RIN 1012-AA27'' in your comment:
    <bullet> Electronically via the Federal eRulemaking Portal: Please 
visit https://www.regulations.gov. In the Search Box, enter Docket ID 
``ONRR-2020-0001'' and click ``search'' to view the publications 
associated with the docket folder. Locate the document with an open 
comment period and then click ``Search.'' Follow the instructions to 
submit your public comments prior to the close of the comment period.
    <bullet> Email Submissions: For comments sent via email, please 
address them to Dane Templin, Regulations Supervisor, at 
<a href="/cdn-cgi/l/email-protection#6420050a014a30010914080d0a240b0a16164a030b12"><span class="__cf_email__" data-cfemail="397d58575c176d5c54495550577956574b4b175e564f">[email protected]</span></a> and Luis Aguilar, Regulatory Specialist, at 
<a href="/cdn-cgi/l/email-protection#88c4fde1fba6c9effde1e4e9fac8e7e6fafaa6efe7fe"><span class="__cf_email__" data-cfemail="89c5fce0faa7c8eefce0e5e8fbc9e6e7fbfba7eee6ff">[email protected]</span></a> with ``RIN 1012-AA27'' listed in the subject line 
of your message. Email submissions must be postmarked on or before the 
close of the comment period.
    Instructions: All comments must include the agency name and docket 
number or RIN for this rulemaking. All comments, including any personal 
identifying information or confidential business information contained 
in a comment, will be posted without change to https://www.regulations.gov.
    Docket: For access to the docket to read background documents or 
comments received, go to https://www.regulations.gov and locate the 
docket folder by searching the Docket ID (ONRR-2020-0001) or RIN number 
(RIN 1012-AA27).

FOR FURTHER INFORMATION CONTACT: For questions on procedural issues, 
contact Dane Templin, Regulations Supervisor, at (303) 231-3149 or 
<a href="/cdn-cgi/l/email-protection#490d28272c671d2c24392520270926273b3b672e263f"><span class="__cf_email__" data-cfemail="eca88d8289c2b889819c808582ac83829e9ec28b839a">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION:

I. Background

    On January 15, 2021, ONRR published a final rule in the Federal 
Register, at 86 FR 4612, to amend certain regulations that inform the 
manner in which ONRR values oil and gas produced from Federal leases 
for royalty purposes; values coal produced from Federal and Indian 
leases for royalty purposes; and assesses civil penalties for 
violations of certain statutes, regulations, leases, and orders 
associated with mineral leases. In addition, the rule, referred to as 
the 2020 Rule, made some minor, non-substantive corrections to ONRR's 
regulations. The 2020 Rule had an effective date of February 16, 2021, 
and, for amendments to 30 CFR part 1206, a compliance date of May 1, 
2021.

II. Purpose of This Action

    On January 20, 2021, the Assistant to the President and Chief of 
Staff issued a memorandum entitled ``Regulatory Freeze Pending Review'' 
(``Regulatory Freeze Memorandum'') which, along with the guidance on 
implementation of the memorandum issued by the Office of Management and 
Budget (``OMB'') in Memorandum M-21-14 dated January 20, 2021, directs 
agencies to consider delaying the effective date of rules published in 
the Federal Register that have not yet become effective, consistent 
with applicable law, for the purpose of reviewing any questions of 
fact, law, and policy the rules may raise.
    The OMB memorandum directed that the decision to delay should 
include consideration of whether:
    (1) The rulemaking process was procedurally adequate;
    (2) the rule reflected proper consideration of all relevant facts;
    (3) the rule reflected due consideration of the agency's statutory 
or other legal obligations;
    (4) the rule is based on a reasonable judgment about the legally 
relevant policy considerations;
    (5) the rulemaking process was open and transparent;
    (6) objections to the rule were adequately considered, including 
whether interested parties had fair opportunities to present contrary 
facts and arguments;
    (7) interested parties had the benefit of access to the facts, 
data, or other analyses on which the agency relied; and
    (8) the final rule found adequate support in the rulemaking record.
    In light of the withdrawal of existing and issuance of new 
Executive Orders relevant to the matters addressed in the 2020 Rule 
after its publication date, which are discussed further below, and 
protracted litigation over ONRR's recent rulemakings, ONRR concludes 
that postponement of the 2020 Rule and invitation for public comment is 
appropriate under criteria three and four above. Further, ONRR 
appreciates the strong public interest in its rulemakings and is 
especially interested in public comments on each of the eight decision 
criteria with respect to the 2020 Rule.
    Accordingly, this action delays the effective date of the 2020 Rule 
and opens a 30-day comment period on the facts, law, and policy 
underlying the rule as well as the effect of the delay. ONRR is 
delaying the effective date of its 2020 Rule from February 16, 2021, to 
April 16, 2021.
    The 60-day delay of the 2020 Rule's effective date--based on the 
good cause articulated below--is for the purpose of reviewing any 
questions of fact, law, and policy that are raised by that rule as well 
as the effect of the delay, consistent with the Regulatory Freeze 
Memorandum and OMB Memorandum M-21-14. To that end, ONRR invites the 
public to submit comment on any issue of fact, law, or policy raised by 
the 2020 Rule, including, without limitation, comment on the following:
    1. The 2020 Rule was premised, in part, on certain Executive Orders 
that are no longer in effect, including Executive Orders 13783 
``Promoting Energy Independence and Economic Growth,'' 13795 
``Implementing an America-First Offshore Energy Strategy,'' and 13892 
``Promoting the Rule of Law Through Transparency and Fairness in Civil 
Administrative Enforcement and Adjudication.'' Also, new Executive 
Orders, including Executive Orders 13990 ``Protecting Public Health and 
the Environment and Restoring Science to Tackle the Climate Crisis,'' 
13992 ``Revocation of Certain Executive Orders Concerning Federal 
Regulation,'' and 14008 ``Tackling the Climate Crisis at Home and 
Abroad,'' have been issued from and after January 20, 2021. Does the 
repeal of prior Executive Orders and issuance of new Executive Orders 
demonstrate a change in policy meriting or requiring reconsideration of 
some or all of the 2020 Rule?
    2. The 2020 Rule reinstituted an allowance for certain deepwater 
oil and gas gathering costs based, at least in part, on declining oil 
and gas production and revenues from the Gulf of Mexico, which 
allowance is estimated to reduce royalty due the United States by $32.9 
million per year. Is this allowance consistent with the current law and 
policy of the United States?
    3. The 2020 Rule reinstituted extraordinary processing allowances, 
which allowances are estimated to reduce royalty due the United States 
by $11.1 million per year. Are extraordinary processing allowances 
consistent with the current law and policy of the United States in the 
limited circumstances described in the 2020 Rule?

[[Page 9288]]

    4. Should the Department of the Interior (``the Department'') 
consider science on the source and impacts of climate change in setting 
royalty and revenue management policy?
    5. The 2020 Rule extended an option given to oil and gas lessees 
under an ONRR 2016 rulemaking to use an index-based valuation method to 
value gas and natural gas liquids for royalty purposes. The option--
previously only available for non-arm's-length transactions--was 
extended to arm's-length transactions. The economic analysis of the 
extension of the option to arm's-length transactions assumed as fact 
that one-half of eligible lessees would elect the option and that one-
half would not. As a result, the rule concluded that those lessees that 
elect the index-based valuation option may pay an additional $26.76 
million per year in royalties, though the election could save those 
lessees approximately $1.35 million in administrative costs. ONRR 
assumed as fact that a significant number of lessees will elect the 
index-based valuation option even though doing so would result in their 
paying royalties exceeding the administrative cost savings they would 
realize. If that assumption of fact is flawed, is the resulting 
conclusion still appropriate and supported by current law and policy?
    6. Does the index-based valuation option adopted in the 2020 Rule 
support ONRR's goals of clarity, early certainty, and transparency in 
royalty valuation?
    7. The Department has long viewed the gross proceeds received under 
an arm's-length contract between independent persons who are not 
affiliates and who have opposing economic interests to be the best 
indicator of value in most circumstances. See, e.g., 53 FR 1186 (Jan. 
15, 1988); 81 FR 43338 (July 1, 2016). Should ONRR have given lessees 
the option to substitute an index-based value for one based on arm's-
length sales, including in situations where that election may reduce 
the royalties owed to the United States?
    8. OMB Memorandum M-21-14 requires agencies to consider, among 
other things, whether the rulemaking process was procedurally adequate 
and whether interested parties had a fair opportunity to present 
contrary facts and arguments. Do you believe procedural issues exist in 
the 2020 Rule's rulemaking process and, if so, what are those issues 
and what could ONRR do to remedy those issues?
    9. What would be the impact of a potential further delay of 60 to 
120 days in the effective date of the 2020 Rule?
    10. Should the 2020 Rule be amended, rescinded, delayed pending 
further review by the agency, or allowed to go into effect?

III. Good Cause Under the Administrative Procedure Act

    This rule's delay of the 2020 Rule's effective date, without prior 
opportunity for public comment, will become effective immediately upon 
publication in the Federal Register. The immediate effective date is 
based on the good cause exceptions in 5 U.S.C. 553(b)(B) and (d)(3), in 
that seeking public comment is impractical and contrary to the public 
interest.
    The 60-day delay in the effective date of the 2020 Rule is 
necessary to allow opportunity for further review and consideration of 
that rule, consistent with the January 20, 2021 White House Memorandum 
on Regulatory Freeze Pending Review and the Office of Management and 
Budget Memorandum M-21-14 of same date on implementation of the White 
House Memorandum, as well as the withdrawal of the Executive Orders on 
which the 2020 Rule was, in part, based and the issuance of new 
Executive Orders. Given the imminence of the 2020 Rule's effective 
date, seeking prior public comment on this short delay would interfere 
with the public's interest in the orderly promulgation and 
implementation of regulations. A period of public notice and comment of 
any appreciable length would mean that the rule would go into effect 
before the agency was able to undertake a meaningful review of the 2020 
Rule. Subsequent action to modify or rescind an effective rule would 
then create further confusion among regulated entities and other 
interested parties.
    In the questions posed for comment in this document, the Department 
has identified several factors illustrating potential weaknesses of the 
2020 Rule and the need for additional public participation. Delaying 
the effective date provides certainty for the regulated industry while 
ONRR reconsiders the 2020 Rule, and prevents a situation wherein 
regulated entities would update their reporting systems in anticipation 
of compliance with a rule that may be subject to further revision, 
following notice and comment. The extensive litigation on prior ONRR's 
rulemakings further highlights the need for ONRR to take steps that 
ensure transparency and provide certainty in the adequacy and finality 
of the 2020 Rule. Thus, ONRR finds that it would be contrary to the 
public interest for the 2020 Rule to become effective, with its 
accompanying changes in reporting and payment requirements, which 
require extensive IT system, accounting, and other business process 
modifications, until it is certain that all public comments, including 
any additional comments that are submitted in the new comment period, 
are received and considered. To do otherwise could potentially result 
in uncertainty and confusion regarding reporting and payment 
requirements that could lead to duplication of effort, an unnecessary 
increase in administrative costs, and strain placed on lessees and 
recipient states as ONRR and the public struggle with application and 
interpretation of the valuation and payment rules.
    This action delays the effective date of the 2020 Rule that was 
promulgated through notice and comment rulemaking. A delay in the 
effective date and opening of a new 30-day comment period is necessary 
to ensure that ONRR has the opportunity to receive and is able to 
consider additional public comments to fully inform its decisions in 
light of current law and policy before the 2020 Rule becomes effective.
    The White House memorandum also recommends that, for rules 
postponed for further review, agencies consider opening a 30-day 
comment period to allow interested parties to provide comments about 
issues of fact, law, and policy raised by those rules, and consider any 
requests for reconsideration involving such rules. Consistent with this 
guidance, after reviewing comments received pursuant to this notice, 
ONRR may determine there is a need to postpone the effective date 
further to allow additional time to consider issues of fact, law, and 
policy or to reconsider the 2020 Rule.
    This rule provides notice and invites public comments on a 
potential further extension and requests interested parties to provide 
comments about issues of fact, law, and policy raised by the rule, so 
that ONRR can consider any requests for reconsideration involving the 
rule. As part of a further delay, ONRR may also invite additional 
public comments on whether the rule should be amended, rescinded, 
delayed pending further review by the agency, or allowed to go into 
effect.
    For the reasons stated above, ONRR finds that there is good cause 
under 5 U.S.C. 553(b)(B) and (d)(3) to publish this action without 
prior notice and comment, and for this action to become effective 
immediately upon publication in the Federal Register.

[[Page 9289]]

List of Subjects

30 CFR Part 1206

    Coal, Continental shelf, Geothermal energy, Government contracts, 
Indians-lands, Mineral royalties, Oil and gas exploration, Public 
lands-mineral resources, Reporting and recordkeeping requirements.

30 CFR Part 1241

    Administrative practice and procedure, Coal, Geothermal energy, 
Indians-lands, Mineral royalties, Natural gas, Oil and gas exploration, 
Penalties, Public lands-mineral resources.

Rachael S. Taylor,
Senior Advisor to the Secretary and exercising the delegated authority 
of the Assistant Secretary--Policy, Management, and Budget.
[FR Doc. 2021-03052 Filed 2-10-21; 4:15 pm]
BILLING CODE 4335-30-P


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