Industry, Interior worked to reverse royalties rule

WASHINGTON» Top Interior Department officials worked privately with energy industry representatives during the first weeks of the Trump administration to suspend a new accounting system that would have forced companies to pay millions of dollars more in royalties to the government, documents show.

The push to suspend the Obama-era rule, which is the subject of three federal lawsuits in Wyoming, took on a sense of urgency after an attorney for the coal company Cloud Peak Energy first suggested the move in late January. In email exchanges contained in more than 1,000 pages, obtained by the environmental group Natural Resources Defense Council under the Freedom of Information Act, top Interior officials raced to address industry concerns by halting a system that had just taken effect Jan. 1.

Under Secretary Ryan Zinke, the department has launched a broad reassessment of what to charge firms extracting oil, natural gas, coal and other minerals from federal lands and waters, with an eye toward boosting domestic energy production.

The Interior Department on Wednesday held the inaugural meeting of a new Royalty Policy Committee, with Zinke’s energy counselor, Vincent DeVito, saying President Donald Trump’s desire for “energy dominance” will help guide royalty rules as well as other aspects of department decision-making.

“This committee has a job unlike any other in the past,” DeVito said of the industry-heavy panel. It “has an agenda and authorization to pursue” energy development, he added.

Before Zinke or DeVito even arrived at Interior, though, career officials were reassessing how they should regulate these industries in light of Trump’s victory. The discussion focused on whether to revisit a method the Office of Natural Resources Revenue (ONRR) had adopted just months earlier for calculating royalties for minerals extracted on federal land.

The goal behind the change was to prevent firms from underpaying what they owe the government by selling coal to subsidiaries at an artificially low price — a strategy the government estimates costs taxpayers $75 million a year.

Industry officials called the new requirements unclear and burdensome and wanted them halted before they had to file under the system for the first time.

On Jan. 31, according to the documents, a staffer emailed Acting Secretary Kevin “Jack” Haugrud with the message that Cloud Peak Energy lawyer Kelly Johnson and other industry attorneys wanted to meet with him and a member of Trump’s transition team at Interior. Haugrud subsequently checked with the solicitor for the Rocky Mountain Region, Matt McKeown.

“If this is about (the royalty) valuation rule, then I think a meeting is timely,” McKeown replied the next day. “An internal discussion in advance would likely be a good idea.”

By Feb. 6, other Interior officials had been enlisted to work to stay the rule so the new accounting system did not take effect.

“Timeline?” one ONRR staffer emailed another.

“ASAP” her colleague replied.

Three days later, as Interior officials emailed how they would justify the change, another replied, “RIP rule.”