Singers from the Crow Tribe celebrate a coal development deal. Photo: Big Metal Coal

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Trump administration rolls over for energy firms on Indian land

Monday, February 27, 2017

Energy development firms that extract coal from Indian and federal land are getting a break on new royalties thanks to Republican President Donald Trump.

The firms were supposed to start paying new royalty rates under a rule that went into effect on January 1. The rates were supposed to make sure that tribes and individual Indians receive the "maximum revenues from coal resources on their land," according to a press release from the Interior Department.

But in response to a series of lawsuits that were filed after Trump was elected, the rule has been "stayed" indefinitely. Affected companies can continue to do business on federal and Indian lands without accounting for the new changes, which were years in the making.

"Federal and Indian lessees should continue to value, report, and pay royalties under the rules that were in effect prior to January 1, 2017," a February 22 letter to producers stated.

After he won the November election, Trump vowed to put "America first" when it comes to creating jobs and spurring economic development. He singled out the coal industry as one he would revive during his presidency.

"In other countries, they love their coal," Trump said earlier this month when he signed a bill that repealed a water protection rule. "Over here, we haven’t treated it with the respect it deserves. Even for defense, having that coal is a very important thing for us."

The industry and its Republican allies repeatedly accused the Obama administration of engaging in a "war on coal." Three lawsuits that were filed in federal court in December employed that term in challenging the new royalty rule.

"Arbitrarily discarding longstanding and well-functioning rules for valuation of federal and Indian coal for royalty purposes, the final rule instead creates widespread uncertainty and in many cases makes compliance possible," one of the petitions states.

The plaintiffs in the petition include Cloud Peak Energy, a firm that wants to develop coal owned by the Crow Tribe in Montana and ship it to markets in Asia. The Obama administration dealt a significant blow to the project last May when it rejected a proposed export terminal in Washington due to the negative impacts on the treaty rights of tribes in the Pacific Northwest.

Another plaintiff is the National Mining Association. According to the petition, a "significant number" of the organization's members "operate leases on federal and Indian lands with royalty obligations in Wyoming and other states."

"Royalty rates are already above market," the NMA said in a statement last year when the new rule was finalized. "Current royalties, bonus bids, taxes and fees delivers almost 40 cents of every dollar in federal coal sales to the government, undermining the specious claim that somehow taxpayers are being cheated."

Besides the Crows, the Hopi Tribe and the Navajo Nation have engaged in coal production on their lands. Falling prices, along with new regulatory requirements, have led to declines in revenues and have impacted their economies.

"This dilemma provides an opportunity for the Trump administration to live up to its promise to the American people that it will stand behind the coal industry," Navajo Nation President Russell Begaye said in response to the pending closure of a coal-fired power plant on tribal land in Arizona.

A notice that was published in the Federal Register on Monday announces the indefinite suspension of the coal valuation rule. It cites the "existence and potential consequences" of the litigation, which is still in the very early stages.

According to the notice, the Office of Natural Resources Revenue, an agency at Interior, "believes the 2017 valuation rule was properly promulgated" but agreed to suspend it anyway in response to the complaints from the industry.

Regardless of the way the courts handle the rule, the coal industry can find an ally in Rep. Ryan Zinke (R-Montana), who is President Trump's choice to lead the department. He is finally due for a vote in the Senate this week.

"The war on coal, I believe, is real," Zinke said during his confirmation hearing in January. During his time in Congress, Zinke has advocated for the Crow Tribe and its right to develop its coal resources.

Federal Register Notice:
Postponement of Effectiveness of the Consolidated Federal Oil & Gas and Federal & Indian Coal Valuation Reform 2017 Valuation Rule (February 27, 2017)