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The Energy 202: Interior Department could cost taxpayers at least $60 million by rolling back Obama rule

with Paulina Firozi


During his confirmation hearing for the job of running the Department of the Interior, Ryan Zinke told the Senate he wanted taxpayers to get “fair value” on resources extracted from public lands by private companies. But a recent move by him means taxpayers will get millions of dollars less from companies that extract oil and gas from public lands.

Five months into the job, Zinke has arrived at a final decision, to the consternation of environmental and fiscal critics, on exactly how Interior will define what is an appropriate value for oil, gas and coal taken from lands collectively owned by U.S. citizens.

On Monday, the Interior Department officially repealed an Obama administration rule that in effect required oil, gas and coal extractors to pay more in royalties to the federal government and states. The Trump administration stayed the rule in February, less than two months after it had taken effect.

Here's the backstory: In July 2016, as President Obama’s term wound down, the Office of Natural Resources Revenue (ONRR) issued a rule closing a loophole in Interior policy that critics said allowed fossil-fuel companies to sell oil, gas and coal to subsidiaries for an artificially low price. The maneuver allowed the companies to pay less in royalties to the federal government -- calculated as a percentage of that sales price -- before the subsidiaries in turn sold the fuel at market value to the parties that ultimately refined or consumed it.

The original Obama policy "was not a terribly controversial rule at the time," said Greg Zimmerman, deputy director of the Center for Western Priorities.

But the energy industry -- along with Republican allies in Congress -- is deriding the Obama-era rule as, in the words of Rep. David B. McKinley (R-W.Va.), “just one in a series of barriers [the Obama administration] put up to hold back energy production on federal lands.” In his statement accompanying the Interior Department's announcement, McKinley added the previous rule was poised to siphon revenue “from local community coffers and the U.S. Treasury.”

But a June report from the U.S. Government Accountability Office said otherwise. The internal government watchdog agency found that while raising the royalty rate failed to increase the amount of onshore oil, gas and coal extracted -- one of the goals of Trump’s “energy dominance” strategy -- local governments collected more money under that policy.

In its Monday notice posted to the Federal Register, the Interior Department suggested that it will address the issue at a later date.ONRR “expects to in the near future promulgate a new, revised valuation rule that will address the various problems that have been identified in the rule we are repealing.”

In a statement, Erik Milito of the American Petroleum Institute said, “It’s important we continue working with the administration and Congress on forward-looking policies that support America’s energy renaissance and help our nation meet its energy needs.” The oil and gas lobbying group had signaled to Trump its interest in reversing the Obama rule by filing a lawsuit challenging ONRR one month after Trump's election.

But until the regulation is reformulated, the new rule is the old rule -- one that was originally installed in the 1980s.

“The prior regulations they are putting back in place are ancient,” said Bruce Pendery, a litigation and energy policy specialist at The Wilderness Society. “I don’t see how that can be painted as a step forward.”

The Interior Department acknowledged that the rescinding the rule will cost taxpayers between $60.1 million and $74.8 million annually.

“The Interior Department admits it is giving away up to $750 million over a decade to private companies making profits on a public resource,” Sen. Maria Cantwell (D-Wash.) said in a statement on Monday. “Suspending this rule was not lawful in the first place, and this repeal violates Interior’s obligation to ensure a fair return to taxpayers.”

During his confirmation hearing, Zinke assured Cantwell, the ranking member of the Senate Energy and Natural Resources Committee, that coal companies would make the proper royalty payments under his watch.

"You don't have an objection to taxpayers getting a fair value?" Cantwell asked in January.

"I think taxpayers should always get a fair value," Zinke said.

“Including on coal?”

“Including our coal, wind and all the above.”


-- Following the New York Times's publication of a story regarding a major climate change report from the federal government that may or may not have been a "leak," the White House went into attack mode against the newspaper. Said White House press secretary Sarah Huckabee Sanders:

It's very disappointing, yet entirely predictable to learn the New York Times would write off a draft report without first verifying its contents with the White House or any of the federal agencies directly involved with climate and environmental policy. As others have pointed out — and the New York Times should have noticed — drafts of this report have been published and made widely available online months ago during the public comment period.

To her credit, Sanders' last sentence is true. But she did not dispute the substance of the Times reporting.

-- The U.S. Court of Appeals for the District of Columbia struck down an Obama-era regulation to limit certain chemicals used in air conditioners and refrigerators.

In a 2-1 decision, the court said the Environmental Protection Agency could not ban hydrofluorocarbons. In the court’s ruling, Judge Brett Kavanaugh wrote that the refrigerants don’t damage the ozone layer, Bloomberg reported. Though the EPA has worked to reverse a number of President Obama’s climate regulations, this was one rule that the Trump administration had defended.

“EPA’s authority to regulate ozone-depleting substances under Section 612 and other statutes does not give EPA authority to order the replacement of substances that are not ozone depleting but that contribute to climate change,” the court ruled.

“Congress has not yet enacted general climate change legislation. Although we understand and respect EPA’s overarching effort to fill that legislative void and regulate HFCs, EPA may act only as authorized by Congress. Here, EPA has tried to jam a square peg (regulating non-ozonedepleting substances that may contribute to climate change) into a round hole (the existing statutory landscape).”

-- U.S. Secretary of State Rex Tillerson advised diplomats to avoid questions from foreign governments on whether the United States could re-enter the Paris climate accord, Reuters reported. The diplomatic cables obtained by the publication also note that diplomats should tell foreign governments that the Trump administration is looking to help countries boost their fossil fuel use.

-- The Nuclear Regulatory Commission has directed its staff to begin gathering input from an advisory panel and from the public on the Yucca Mountain nuclear waste depository in Nevada. The commission also allocated up to $110,000 of the Nuclear Waste Fund toward the “information-gathering activities,” according to a statement from the commission.

The state's congressional delegation, both Democrats and Republicans, fiercely oppose the project. Rep. Dina Titus (D-Nev.) called the vote “another sign the Trump administration continue to stack the deck against Nevada,” according to local CBS station KTVN.

-- As The Energy 202 has pointed out before, the point of Scott Pruitt's "red team-blue team” climate exercise seems not to be to undo his agency's scientific finding that carbon dioxide endangers human health by warming the planet. It's to sway public opinion on climate science.

But several conservative groups, like the U.S. Chamber of Commerce, have not publicly backed that plan yet. A new report from Politico's Emily Holden explains why. "Some advocates privately worry that the debate would politically harm moderate Republicans, while wasting time and effort that’s better spent on the Environmental Protection Agency’s regulatory rollback," she writes.


-- Trump promised to build the Keystone XL. But three votes in Nebraska could stop it. TransCanada, the company building the controversial pipeline, still needs to win the approval of state regulators. This week they got a taste of how difficult that could be as the Public Service Commission kicked off public hearings in Nebraska, according to a preview from The Post's Steven Mufson.

Two possible "no" votes on the Nebraska commissions are Democrat Crystal Rhoades and independent-minded Republican Mary Ridder. The swing vote will likely be Frank E. Landis, Jr., a lawyer and a Republican member since 1988 from a relatively progressive area of Lincoln.

-- Meanwhile, the Standing Rock Sioux and Cheyenne River Sioux tribes are using another venue, the federal court system, to shut down the Dakota Access oil pipeline immediately while it waits for the Army Corps of Engineers to conduct a new environmental study of its project.The tribes asked for that shutdown in a court filing on Monday.  

The U.S. District Judge James Boasberg ruled in June that the Corps did not adequately consider how the pipeline and oil spills may affect surrounding tribes. He ordered further environmental analysis and said he would later rule on whether to shut down the pipeline in the interim. The Texas-based pipeline developer Energy Transfer Partners argued that the shutdown would cost $90 million a month. 


-- U.S. Ambassador to the United Nations Nikki Haley pushed back on the charges that the Trump administration would reject government scientists’ report on climate change.

"Just because we pulled out of the Paris accord doesn't mean we don't believe in climate protection," Haley said on NBC’s “Today” show on Tuesday.  "I think we're very aware that we need to do that. What we're saying is, we're not going to sell out American businesses to do that."

Haley said she hasn’t seen the report but adds “I don't see any reason why they wouldn't” accept the results of the report.

"We're not saying that climate change is not real. It is real. It's how do you have that balance between making sure you've got jobs and businesses moving and then also making sure you protect your climate," she added.

Watch a clip from the interview below:

-- Environmentalists are urging the Agriculture Department not to grant approval for genetically engineered, freeze-tolerant eucalyptus trees over the potential environmental impact, Chelsea Harvey reports for The Post. Environmental groups are concerned about the trees’ increased risk of wildfire, excess use of water, and believe they could turn into an invasive species, Harvey writes.

She adds that while eucalyptus trees are a popular pick for wood-pulp plantations in warm climates because of a quicker growth rate, the trees have a slower time growing in parts of the United States where winters get too cold.

“If there are no new significant issues or information that’s relevant to the environmental impacts, that would require any substantial changes, then we’ll finalize the environmental impact statement and send it on [to the Environmental Protection Agency] to publish,” Richard Coker, a legislative and public affairs specialist with the USDA’s Animal and Plant Health Inspection Service, told Harvey.

The USDA is accepting public comments and will consult with the U.S. Fish and Wildlife Service regarding the trees before making a decision.


-- Irony alert: A floating art installation meant to resemble a rowhouse sinking as a result of a hurricane has actually sunk into the Schuylkill River in Philadelphia.

Created by New York environmental artist Mary Mattingly, the piece named “WetLand” was docked in Bartram’s Garden as part of a program with the University of Pennsylvania’s Program in Environmental Humanities. The installation had taken in water, the Philadelphia Inquirer reported, and sunk on Sunday.

Bartram’s Garden said Monday that along with the partners, it was “aware of the damage and pursuing assessment and repair, but the hull took on water on Sunday morning before repairs could commence. We expect the boat to be lifted and towed tomorrow, and its repair needs will be assessed at that point.”



  • The Offshore Wind Executive Summit is set for Wednesday and Thursday in Houston, Tex.

Coming Up

  • Resources for the Future is holding a webinar on “Exploring the Effects of Energy Resource Booms on Public Education” on Thursday.
  • The Boston Climate Action Network Meeting will be held on Thursday.
    Michelle Romero, deputy director of Green For All, moderates a panel on “Forging a state-led path to climate justice in the era of Trump” at the Netroots Nation conference in Atlanta, which starts on Thursday.
  • The International Food Policy Research Institute is holding a datathon event to support agricultural research and development on Friday
  • Congress is on recess until September 5. 

Does the Trump administration believe in climate change?:

Does the Trump administration believe in climate change? (Video: Peter Stevenson/The Washington Post)

A palm oil spill causes Hong Kong beach closures:

Hong Kong closed 13 beaches following a palm oil spill caused by two vessels colliding in the Pearl River estuary. (Video: Reuters)

Watch the best of SNL Season 42, in three minutes:

From Alec Baldwin as Donald Trump to Kate McKinnon as everyone else, here's a look back at the highest-rated season of "Saturday Night Live" in nearly a quarter-century. (Video: Nicki DeMarco/The Washington Post)

German artists seek to build the world's tallest sandcastle:

A group of German artists seek to break the Guinness World Record for the tallest sandcastle. (Video: Reuters)

Hikers filmed their dangerous encounter with a mountain lion:

Stephen Colbert on the draft climate report by scientists from 13 federal agencies: