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Federal Register / Vol. 86, No. 187 / Thursday, September 30, 2021 / Rules and Regulations
production costs and incentivize new or continued production of helium. 86 FR
4628. But as noted in Section III.A
above, ONRR lacks evidence to substantiate that an extraordinary processing allowance will incentivize gas production, and more particular to this discussion, lacks evidence that an extraordinary processing allowance is likely to boost helium production.
Moreover, of the two prior extraordinary processing allowances that ONRR
approved, only one impacted a heliumbearing gas stream. Likewise, none of the public comments contain any support for the proposition that reinstating the extraordinary processing allowance will result in additional helium production from this stream.
Thus, even if the United States has important economic and national security interests in ensuring the continuation of a reliable supply of heliumas noted in the 2020 Rule and referenced in the public commentthe extraordinary processing allowance has not been shown to be an effective means to increase helium production. Id.
Finally, DOI recently implemented other statutory shifts that encourage investment in helium production, but which were not mentioned in the 2020
Rule or by the commenter. The Dingell Act, Public Law 1169, Section 1109, Maintenance of Federal Mineral Leases Based on Extraction of Helium, amended the MLA on March 12, 2019, to allow the production of helium to maintain a Federal oil and gas lease beyond its primary term. See 30 U.S.C.
181 extraction of helium from gas produced from such lands shall maintain the lease as if the extracted helium were oil and gas. Prior to this amendment, the initial ten-year lease term could only be extended if oil or gas, not helium, was produced in paying quantities. A consequence of the prior MLA framework was that revenue from the sale of helium was not factored into whether a well was producing in paying quantities and thus qualified for an extension of the initial lease term beyond ten years. The shift away from considering only the production of oil and natural gas as holding the lease seems likely to encourage investment in helium production. The targeted amendment to the MLA negates any contention that the modest relief potentially available through an extraordinary processing allowance is effective to encourage helium production.
2. ONRRs Authority To Modify Processing Allowance Regulations Public Comment: A commenter suggested that withdrawing ONRRs
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authority to permit extraordinary processing allowances would improperly inflate royalties due because a lessee cannot deduct its reasonable, actual gas processing costs as allowed under the gas valuation rules. The commenter further noted that the Proposed Withdrawal Rule does not question whether the previously approved extraordinary processing allowances comprised reasonable, actual processing costs for qualifying operations.
ONRR Response: ONRR agrees that the gas valuation rules permit a lessee to deduct most reasonable and actual gas processing costs. 30 CFR
1206.159a1. But gas processing allowances have never been without limits. Rather, the mineral leasing statutes recognize ONRRs authority to create and subsequently modify regulations, including those related to processing allowances. See, e.g., 30
U.S.C. 189 authorizing the Secretary, under the MLA, to prescribe necessary and proper rules and regulations and to do any and all things necessary to carry out and accomplish the purposes of this chapter; 43 U.S.C. 1334a authorizing the Secretary to prescribe such rules and regulations as may be necessary to carry out the provisions of OCSLA; 30 U.S.C. 1751a authorizing the Secretary, under FOGRMA, to prescribe such rules and regulations as he deems reasonably necessary to carry out this chapter.
The MLA, OCSLA, and FOGRMA do not define royalty value. None of those statutes mention processing costs, let alone mandate adoption of regulations allowing a deduction for processing costs. Instead, the agencydeveloped regulations at 30 CFR part 1206 to authorize processing allowances. The agency established the deductions by regulation and is authorized to change the regulations, as it did here. In Cloud Peak Energy Inc.
v. U.S. Dept of the Interior, 415 F.
Supp. 3d 1034, 1046 D. Wyo. 2019, the United States District Court for the District of Wyoming commented on the wide latitude of discretion ONRR has to enact rules and regulations enabling the DOI to complete the tasks it is assigned. This discretion would necessarily include the ability to change allowances adopted by regulation. Id. at 17, 24, 29; see also Am. Trucking Assns v. Atchison, Topeka, & Santa Fe Ry. Co., 387 U.S. 397, 416 1967 stating that regulatory agencies do not establish rules of conduct to last forever; FCC v.
Fox Television Stations, 556 U.S. 502, 515 2009 recognizing agency authority to change regulatory course.

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Public Comment: A commenter asserted that the extraordinary processing allowance prevented receipt of fair market value for minerals extracted from Federal land and should be withdrawn.
ONRR Response: ONRR is withdrawing the extraordinary processing allowance for the reasons discussed herein, consistent with the comment.
3. Additional Administrative Burden and Reduced Royalties The 2020 Rule states that ONRR
anticipates . . . it will again receive very few requests and will rarely grant approval under this provision, as was the case when the language was in place between March 1, 1988, and December 31, 2016. 86 FR 4628. Consistent with this, a commenter asserts that ONRR
will not be impacted if it reinstates its authority to approve extraordinary processing allowances because ONRR
maintains control of the approval process and is not required to grant all requests. Notably, however, when ONRR drafted the 2020 Rule, no consideration was given to the potential interplay between the reinstatement of ONRRs authority to permit extraordinary processing allowances and the retention of the hard cap on processing allowances, which could impact the number of extraordinary processing allowance applications submitted.
Prior to the adoption of the 2016
Valuation Rule, a lessee could apply, under specified circumstances, for an extraordinary processing allowance and to exceed the soft cap of 6623 percent on processing allowances. The 2016
Valuation Rule eliminated extraordinary processing allowances and changed the soft cap to a hard cap i.e., a firm limit on the processing allowance cap. See 30 CFR 1206.159c2. The Proposed 2020 Rule proposed to reinstate both the extraordinary processing allowance and soft caps. 85 FR 62058.
Between the publication of the Proposed 2020 Rule and the publication of the 2020 Rule, ONRR performed a new economic analysis. Based thereon, the 2020 Rule reinstated ONRRs authority to permit extraordinary processing allowances but did not restore a lessees ability to seek to exceed the cap on processing allowances. 86 FR 4625. Thus, under the 2020 Rule, an extraordinary processing allowance application is the only mechanism by which a lessee can request to exceed limits on processing allowances, a circumstance that might cause ONRR to receive more applications for approval of an
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