American Oil and Gas Reporter - May 2017 - 14

IndustryDigest
DOI Announces Repeal
Of Its 2017 Royalty Rule
WASHINGTON-The U.S.
Department of Interior is proposing to
repeal the Consolidated Federal Oil &
Gas and Federal & Indian Coal
Valuation Reform Rule, which became
effective Jan. 1.
At the same time, DOI announces,
the Office of Natural Resources
Revenue published an advance notice of
proposed rule making in the April 4
Federal Register seeking comments on
whether revisions were needed "on the
pre-existing regulations governing
royalty values, including comments on
whether the 2017 valuation rule should
ultimately be retained or
repromulgated."
In an April 3 announcement of those
actions, DOI said it identified several
areas in the valuation rule that appeared
not to meet the agency's original intent
to offer greater simplicity, certainty,
clarity and consistency to product
valuation.
"The repeal (will) provide certainty
and clarity to the regulated community
by continuing to require compliance
with lawful, longstanding and wellknown procedures," DOI says, adding
that its re-evaluation is intended to
"ensure that valuation and revenue
collection for the nation's mineral
resources remain free from loopholes,
and that Americans receive every dollar
due."
The National Ocean Industries
Association praised the action, saying
the 2017 valuation rule "created a cloud
of regulatory uncertainty (and) put at
risk billions of dollars of federal oil and
gas leases."
NOIA criticized the royalty valuation
rule for "banning the use of non-arm'slength sales and removing royalty
deductions for business-related
expenses. The rule gave DOI essentially
unreviewable discretion to establish
royalty value on a case-by-case basis."
"This regulatory rollback is simply
good government and restores muchneeded certainty for America's
independent producers," comments the
Independent Petroleum Association of
America.
The first royalty reports under the
new valuation rule were to be due Feb.
28, but DOI suspended those
requirements while three lawsuits filed
14 THE AMERICAN OIL & GAS REPORTER

in the U.S. District Court for the District
of Wyoming challenging the rule-
including one by the American
Petroleum Institute-were litigated
(AOGR, March 2017, pg. 16). DOI
signaled its intent to repeal the rule in a
request for a stay filed with that court
on March 23.
The royalty valuation rule's default
provisions were among its most
problematic, IPAA, NOIA and API
contended in joint comments on the
proposed rule in 2015. Those provisions
enabled ONRR to determine
unilaterally the valuation and royalty
due if it disliked "any lessee's reported
oil or gas valuation for any reason," the
associations worried (AOGR, June
2015, pg. 127).
A mere inadvertent paperwork error
could trigger the default provision, the
three associations commented, as well
as a low arm's-length price or high
allowance that ONRR solely determined
to be "unreasonable." ❒

Korea, Spain Are Guilty
Of Dumping OCTG,
Steel Flanges, U.S. Says
WASHINGTON-The U.S.
Department of Commerce has ruled two
countries have been selling oil field
products in the United States below fair
value.
The agency has determined the
prices at which the Republic of Korea
has been selling oil country tubular
goods in U.S. markets falls short of fair
value, and has ordered Customs and
Border Protection agents to assess
duties and collect cash deposits equal to
the dumping margins. In a separate
action, the Commerce Department says
its anti-dumping investigation of
finished carbon steel flanges from Spain
shows exporters have been unfairly
dumping those in U.S. markets.
From July 2014 to August 2015, the
agency says, OCTG imports from Korea
were valued at an estimated $1.1 billion,
accounting for nearly 25 percent of all
U.S. OCTG imports. The dumping
margins, or the rate at which the
imported materials were sold below fair
value in the United States, were found
to range from 2.76 to 24.92 percent.
According to the agency, the Korean
antidumping case is the first time the
DOC is exercising its authority to

address market distortions in foreign
merchandise production, and to
calculate dumping margins that more
accurately account for the unfair pricing
practices of foreign exporters.
Meanwhile, the Department of
Commerce has determined, Spanish
exporters dumped $16.5 million of
flanges in the U.S. market at prices
18.81 percent to 24.43 percent below
fair value in 2016 and the U.S.
International Trade Commission is
investigating whether domestic flange
producers have been injured. If injuries
are found, the agency says cash deposits
equal to the dumping margins will be
collected.
Petitioners for the Spanish
investigation are Boltex Manufacturing
Co. LP of Texas and Weldbend
Corporation of Illinois.
"We will not stand for the distortions
in foreign markets being used against
U.S. businesses. The Trump
administration will continue to employ
all of the tools provided under the law
to take swift action against harmful
trade practices from foreign nations
attempting to take advantage of our
markets, workers and businesses," says
Secretary of Commerce Wilbur Ross. ❒

Groups File A Lawsuit
To Stop Keystone XL
TUCSON, AZ.-Six environmental
groups are suing the U.S. departments
of State and Interior, challenging the
presidential permit the Trump
administration granted the Keystone XL
Pipeline.
The lawsuit was filed March 30 in
the U.S. District Court for the District
of Montana Great Falls Division by the
Center for Biological Diversity (CBD),
Northern Plains Resource Council, Bold
Alliance, Friends of the Earth, Natural
Resources Defense Council and Sierra
Club, according to an announcement
from the CBD.
The groups contend the State
Department relied on an out-of-date
environmental impact statement to grant
Keystone XL a border-crossing permit.
The lawsuit calls the 2014 EIS
"woefully out of date" and says it
"grossly underestimated the pipeline's
impacts." Relying on the 2014 EIS
violates both the National
Environmental Policy Act and the



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