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Federal Register / Vol. 86, No. 28 / Friday, February 12, 2021 / Rules and Regulations
4. Should the Department of the Interior the Department consider science on the source and impacts of climate change in setting royalty and revenue management policy?
5. The 2020 Rule extended an option given to oil and gas lessees under an ONRR 2016 rulemaking to use an indexbased valuation method to value gas and natural gas liquids for royalty purposes.
The optionpreviously only available for non-arms-length transactionswas extended to arms-length transactions.
The economic analysis of the extension of the option to arms-length transactions assumed as fact that onehalf of eligible lessees would elect the option and that one-half would not. As a result, the rule concluded that those lessees that elect the index-based valuation option may pay an additional $26.76 million per year in royalties, though the election could save those lessees approximately $1.35 million in administrative costs. ONRR assumed as fact that a significant number of lessees will elect the index-based valuation option even though doing so would result in their paying royalties exceeding the administrative cost savings they would realize. If that assumption of fact is flawed, is the resulting conclusion still appropriate and supported by current law and policy?
6. Does the index-based valuation option adopted in the 2020 Rule support ONRRs goals of clarity, early certainty, and transparency in royalty valuation?
7. The Department has long viewed the gross proceeds received under an arms-length contract between independent persons who are not affiliates and who have opposing economic interests to be the best indicator of value in most circumstances. See, e.g., 53 FR 1186
Jan. 15, 1988; 81 FR 43338 July 1, 2016. Should ONRR have given lessees the option to substitute an index-based value for one based on arms-length sales, including in situations where that election may reduce the royalties owed to the United States?
8. OMB Memorandum M2114
requires agencies to consider, among other things, whether the rulemaking process was procedurally adequate and whether interested parties had a fair opportunity to present contrary facts and arguments. Do you believe procedural issues exist in the 2020
Rules rulemaking process and, if so, what are those issues and what could ONRR do to remedy those issues?
9. What would be the impact of a potential further delay of 60 to 120 days in the effective date of the 2020 Rule?

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10. Should the 2020 Rule be amended, rescinded, delayed pending further review by the agency, or allowed to go into effect?
III. Good Cause Under the Administrative Procedure Act This rules delay of the 2020 Rules effective date, without prior opportunity for public comment, will become effective immediately upon publication in the Federal Register. The immediate effective date is based on the good cause exceptions in 5 U.S.C. 553bB and d3, in that seeking public comment is impractical and contrary to the public interest.
The 60-day delay in the effective date of the 2020 Rule is necessary to allow opportunity for further review and consideration of that rule, consistent with the January 20, 2021 White House Memorandum on Regulatory Freeze Pending Review and the Office of Management and Budget Memorandum M2114 of same date on implementation of the White House Memorandum, as well as the withdrawal of the Executive Orders on which the 2020 Rule was, in part, based and the issuance of new Executive Orders. Given the imminence of the 2020 Rules effective date, seeking prior public comment on this short delay would interfere with the publics interest in the orderly promulgation and implementation of regulations. A period of public notice and comment of any appreciable length would mean that the rule would go into effect before the agency was able to undertake a meaningful review of the 2020 Rule.
Subsequent action to modify or rescind an effective rule would then create further confusion among regulated entities and other interested parties.
In the questions posed for comment in this document, the Department has identified several factors illustrating potential weaknesses of the 2020 Rule and the need for additional public participation. Delaying the effective date provides certainty for the regulated industry while ONRR reconsiders the 2020 Rule, and prevents a situation wherein regulated entities would update their reporting systems in anticipation of compliance with a rule that may be subject to further revision, following notice and comment. The extensive litigation on prior ONRRs rulemakings further highlights the need for ONRR to take steps that ensure transparency and provide certainty in the adequacy and finality of the 2020 Rule. Thus, ONRR
finds that it would be contrary to the public interest for the 2020 Rule to become effective, with its accompanying changes in reporting and payment
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requirements, which require extensive IT system, accounting, and other business process modifications, until it is certain that all public comments, including any additional comments that are submitted in the new comment period, are received and considered. To do otherwise could potentially result in uncertainty and confusion regarding reporting and payment requirements that could lead to duplication of effort, an unnecessary increase in administrative costs, and strain placed on lessees and recipient states as ONRR
and the public struggle with application and interpretation of the valuation and payment rules.
This action delays the effective date of the 2020 Rule that was promulgated through notice and comment rulemaking. A delay in the effective date and opening of a new 30-day comment period is necessary to ensure that ONRR
has the opportunity to receive and is able to consider additional public comments to fully inform its decisions in light of current law and policy before the 2020 Rule becomes effective.
The White House memorandum also recommends that, for rules postponed for further review, agencies consider opening a 30-day comment period to allow interested parties to provide comments about issues of fact, law, and policy raised by those rules, and consider any requests for reconsideration involving such rules.
Consistent with this guidance, after reviewing comments received pursuant to this notice, ONRR may determine there is a need to postpone the effective date further to allow additional time to consider issues of fact, law, and policy or to reconsider the 2020 Rule.
This rule provides notice and invites public comments on a potential further extension and requests interested parties to provide comments about issues of fact, law, and policy raised by the rule, so that ONRR can consider any requests for reconsideration involving the rule. As part of a further delay, ONRR may also invite additional public comments on whether the rule should be amended, rescinded, delayed pending further review by the agency, or allowed to go into effect.
For the reasons stated above, ONRR
finds that there is good cause under 5
U.S.C. 553bB and d3 to publish this action without prior notice and comment, and for this action to become effective immediately upon publication in the Federal Register.

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