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Federal Register / Vol. 86, No. 187 / Thursday, September 30, 2021 / Rules and Regulations A. Impacts of Frequent Rule Changes on Industry Public Comment: Rule changes are costly and time consuming.
Commenters stated that, if new rules or rule revisions become more frequent, confusion increases, and industry will be tempted to not make changes because industry may anticipate that those rules will be reversed in a few years.
Commenters stated that rules should not change with each new administration, especially reversing and re-doing the rules every term. One commenter expressed its desire to see an ONRR rule that is fair and equitable for both sides.
ONRR Response: ONRR agrees that rule changes should not be based solely on a change in administration. However, duly promulgated rule changes can reduce confusion by eliminating ambiguities, addressing new industry practices and technology, or otherwise improving the regulations. In addition, ONRR must update and modernize its regulations when necessary and appropriate. In doing so, ONRR strives to promulgate fair and equitable regulations compliant with governing law. Consistent with this, ONRR is withdrawing the 2020 Rule. See Sections II and III.
B. Reliance on E.O.s Now Revoked Public Comment: A few commenters referenced E.O.s that ONRR cited during the promulgation of the 2020 Rule that have since been revoked. Specifically, the commenters cite E.O. 13783
Promoting Energy Independence and Economic Growth and E.O. 13795
Implementing an America-First Offshore Energy Strategy. Commenters also cite E.O.s now in effect, including E.O. 13990 Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis, 86
FR 7037 Jan. 25, 2021.

ONRR Response: ONRR acknowledges that E.O.s 13783 and 13795 were revoked after the publication of the 2020
Rule but before its effective date. ONRR
likewise acknowledges the E.O. 13990
directs agencies to consider certain matters such as science and climate change. ONRRs statutory directives pertain to the collection of royalties based on the fair market value. ONRR
has no statutory framework within which to consider climate change as part of its rulemakings. ONRR addressed similar comments in the Proposed Withdrawal Rule. See 86 FR 31205.
C. Royalty Impacts to States Public Comment: A commenter stated that the 2020 Rule failed to consider certain reasons for promulgating the 2016 Valuation Rule, such as ensuring the accurate calculation of royalties, which may be subsequently disbursed to States sharing in royalty revenues.
ONRR Response: ONRR distributes the royalties that it collects under Federal oil and gas leases as directed by the relevant disbursement statutes. See 30 U.S.C. 191a and 43 U.S.C.
1337g2 and 7; see also 30 CFR part 1219. The Proposed 2020 Rule, the 2020
Rule, the Proposed Withdrawal Rule and this final rule estimate the impact of the amendments to States that share in royalty revenues in the respective sections entitled Economic Analysis.
See 85 FR 6206962070 and 86 FR 4649, 3121431215.
D. Comments on the Merits of the Revenue-Neutral Amendments Public Comment: ONRR received comments supporting and opposing withdrawal of some of the revenueneutral amendments.
ONRR Response: ONRR is withdrawing the 2020 Rule for the reasons set forth above. As stated above,
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ONRR plans to publish proposed rules on some or all of the topics covered by the now withdrawn amendments.
V. Economic Analysis ONRRs economic analysis of withdrawal of the 2020 Rule remains unchanged following publication of the Proposed Withdrawal Rule, except for the one-time administrative cost associated with the optional use of the index-based valuation method. The economic analysis is set forth in the Proposed Withdrawal Rule 86 FR
3120831215 and summarized again below.
ONRR recognizes that estimated changes to royalty obligations and regulatory costs in the 2020 Rule impact many groups, including the Federal Government, State and local governments, and industry. These potential changes to royalty obligations can have broader impacts beyond the amount of royalties. Royalty collections are used by these governments in a variety of ways that include funding projects, developing infrastructure, and fueling economic growth.
Further, changes to royalties are transfers that are distinguishable from regulatory costs or cost savings. The estimated changes in royalties would affect both the private cost to the lessee and the amount of revenue collected by the Federal Government and disbursed to State and local governments. The net impact of the withdrawal of the 2020
Rule is an estimated $64.6 million annual increase in royalty collections over what would have been realized if the 2020 Rule went into effect.
Please note that, unless otherwise indicated, numbers in the tables in this section are rounded to the nearest thousand, and that the totals may not match due to rounding.

ESTIMATED CHANGES TO ROYALTY COLLECTIONS RESULTING FROM WITHDRAWAL OF THE 2020 RULE
Annual Net change in royalties paid by lessees
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Rule provision Index-Based Valuation Method Extended to Arms-Length Gas Sales
Index-Based Valuation Method Extended to Arms-Length NGL Sales
Highest to Average Bidweek Price for Non-Arms-Length Gas Sales
Transportation Deduction Non-Arms-Length Index-Based Valuation Method
Extraordinary Processing Allowances
Allowances for Certain OCS Gathering Costs

$6,800,000
660,000
5,062,000
8,033,000
11,131,000
32,900,000

Total

64,600,000

ONRR also estimated that the oil and gas industry would face increased annual administrative costs of $2.8

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million under the 2020 Rule. As discussed below, this is the net impact of various cost increasing and cost
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saving measures. Withdrawal of the 2020 Rule will result in an estimated net cost savings for industry.

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