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54046

Federal Register / Vol. 86, No. 187 / Thursday, September 30, 2021 / Rules and Regulations TABLE OF ABBREVIATIONS AND COMMONLY USED ACRONYMS IN THIS RULEContinued Abbreviation
What it means
NGL
OCS
OCSLA
OMB
ONRR
Proposed 2020 Rule
Proposed Withdrawal Rule

Natural Gas Liquids.
Outer Continental Shelf.
Outer Continental Shelf Lands Act of 1953, 43 U.S.C. 1331, et seq.
Office of Management and Budget.
Office of Natural Resources Revenue.
ONRR 2020 Valuation Reform and Civil Penalty Rule a proposed rule, 85 FR 62054 October 1, 2020.
ONRR 2020 Valuation Reform and Civil Penalty Rule: Notification of Proposed Withdrawal, 86 FR 31196 June 11, 2021.
ONRR 2020 Valuation Reform and Civil Penalty Rule: Delay of Effective Date, 86 FR 20032 April 16, 2021.
Secretary of the Department of the Interior.
Secretarial Order.

Second Delay Rule
Secretary
S.O.

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I. Introduction The 2020 Rule, as published, amends a number of provisions adopted by ONRR in the 2016 Valuation Rule and the 2016 Civil Penalty Rule relating to the valuation of oil and gas produced from Federal leases for royalty purposes;
the valuation of coal produced from Federal and Indian leases for royalty purposes; and the assessment of civil penalties. 86 FR 4612. The 2020 Rule amended the following portions of ONRRs valuation regulations that were adopted via the 2016 Valuation Rule in the following ways:
1. Deepwater gatheringcodifies the principles of the Deepwater Policy to allow certain gathering costs to be deducted as part of a lessees transportation allowance for Federal oil and gas produced on the OCS at depths greater than 200 meters.
2. Extraordinary processing allowancesreinstates a lessees ability to apply for approval to claim an extraordinary processing allowance for Federal gas in situations where the gas stream, plant design, and/or unit costs are extraordinary, unusual, or unconventional relative to standard industry conditions and practice.
3. Index to be used in index-based valuation optionlowers the applicable index from the highest bidweek price to the average bidweek price.
4. Percentage deduction allowable for transportation in index-based valuation optionincreases the percentage reduction to index stated in the 2016
Valuation Rule to reflect an average of more recently reported transportation cost data.
5. Arms-length valuation option extends the index-based valuation option previously allowed in nonarms-length sales to arms-length Federal gas sales.
6. Default provisioneliminates the default provision and references thereto from the Federal oil and gas and Federal and Indian coal regulations, which provision established criteria explaining
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how ONRR would exercise the Secretarys authority to establish royalty value when typical valuation methods are unavailable, unreliable, or unworkable.
7. Misconducteliminates the definition of misconduct.
8. Signed contractseliminates the requirement that a lessee have contracts signed by all parties.
9. Citation to legal precedent eliminates the requirement to cite legal precedent when seeking a valuation determination.
10. Valuation of coal based on electricity saleseliminates the requirement to value certain Federal and Indian coal based on the sales price of electricity.
11. Coal cooperativeremoves the definition of coal cooperative and the method to value sales between members of a coal cooperative for Federal and Indian coal.
12. Non-substantive corrections amends various regulations by making non-substantive corrections.
The 2020 Rule amended the following provisions of ONRRs civil penalty regulations that were adopted in the 2016 Civil Penalty Rule in the following ways:
1. Facts considered in assessing penalties for payment violations specifies that ONRR considers unpaid, underpaid, or late payment amounts in the severity analysis for payment violations.
2. Consideration of aggravating and mitigating circumstancesspecifies that ONRR may consider aggravating and mitigating circumstances when calculating the amount of a civil penalty.
3. Conforming civil penalty regulations to a court decision eliminates 30 CFR 1241.11b5, which permitted an ALJ to vacate a previouslygranted stay of an accrual of penalties if the ALJ later determined that a violators defense to a notice of noncompliance or assessment of civil penalties was frivolous.

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The 2020 Rule has not, however, gone into effect. See 86 FR 9286 and 86 FR
20032.
The Proposed Withdrawal Rule described the procedural history of ONRRs publication of the Proposed 2020 Rule, the 2020 Rule, the First Delay Rule, and the Second Delay Rule.
See 86 FR 3119731198. ONRR
published the Proposed 2020 Rule on October 1, 2020. On January 15, 2021, ONRR published the 2020 Rule. The effective date of the 2020 Rule was originally February 16, 2021.
On January 20, 2021, two memoranda were issued, one by the Assistant to the President and Chief of Staff and one by OMB, which directed agencies to consider a delay of the effective date of rules published in the Federal Register that had not yet become effective and to invite public comment on issues of fact, law, and policy raised by those rules. 86
FR 7424.
On February 12, 2021, ONRR
published the First Delay Rule which delayed the effective date of the 2020
Rule by 60 days and opened a 30-day comment period on the facts, law, and policy underpinning the 2020 Rule as well as on the impact of a delay in the effective date of the 2020 Rule. After the close of the First Delay Rules comment period, ONRR determined that a second delay of the 2020 Rules effective date was needed. Thus, on April 16, 2021, ONRR published a second final rule which further delayed the effective date until November 1, 2021.
ONRR published the Proposed Withdrawal Rule on June 11, 2021. The Proposed Withdrawal Rule invited comment on a complete withdrawal of the 2020 Rule as well as potential alternatives. See 86 FR 31215. The Proposed Withdrawal Rule also requested comments pertaining to the substance or merits of the 2020 Rule and the regulatory scheme it replaced. Id.
In response to the Proposed Withdrawal Rule, ONRR received ten comment submissions and 151 pages of new comment materials from oil, gas,
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