The Trump Administration’s decision to postpone compliance of a new rule on coal royalties after it was in effect was unlawful, a California district court ruled Wednesday.
Rules and regulations from the Obama-era have come under considerable pressure from Congress and President Donald Trump. Congress has gone after a number of rules passed in the final days of Obama’s tenure, and departments like the Environmental Protection Agency have been ordered to review some of the more recent controversial environmental regulations.
Wednesday’s decision is being taken as a win by environmental groups who hope the courts stand in between the new White House and federal regulations.
The contested rule from the Office of Natural Resources laid new guidelines on royalty evaluations for federally owned minerals, including new restrictions on how coal companies define fair market value for coal.
Environmentalists said companies were selling to subsidiaries and sister companies at a discount price and paying taxes on that sum, a loophole that shorted taxpayers, they argued.
Coal companies have long refuted that claim, pointing out the extensive auditing of coal sales done by the federal government and the millions that they pay in taxes each year.
The Trump Administration favored the coal industry’s position. The rule went into effect in January. The Trump team delayed the rule the following month and rescinded it in August.
The latter action followed proper public comment procedure, the former did not.
U.S. Magistrate Judge Elizabeth Laporte found that the Trump administration broke the law by ignoring the Administrative Procedures Act in delaying the rule.
Though the Administration does have legal authority to delay an effective date when a rule is contested or in litigation, it cannot do that retroactively, the judge wrote in her decision.
Environmental groups hope the case sets a precedent reining in the Trump Administration’s tactics in undoing Obama-era regulations,
“It does potentially affect a number of other actions that the Trump Administration is trying to take,” said Connie Wilburt, director of the Wyoming Sierra Club. “We’re pleased with the clear requirement that this is establishing that they can’t do those types of actions without going through the right process. They can’t unilaterally do as they wish; they have to follow the law.”
The Sierra Club advocates a rapid move away from fossil fuels, but in the meantime supports stricter rules on mineral royalties, Wilburt said.
“While we transition from fossil fuels, it does not make any sense to be giving big energy corporations the kind of benefit through allowing them to take advantage of loopholes in the law to avoid paying a reasonable and fair tax of the public minerals that they are mining,” she said.
Coal companies lobbied hard against the ONRR rule during its development.
Gillette-based Cloud Peak Energy, which accounted for about 4 percent of the U.S. production in 2014, argued that the rule subjected the coal industry to an unlawful value added tax. The environmentalists’ take that coal companies were swindling public resources was simply false, they argued.
“The Office of Natural Resource Revenue (ONRR) of the Department of Interior receives detailed information on every single ton of coal sold from a federal lease-hold: how much was sold, to whom, on what date, and how much it was sold for,” said spokesman Richard Reavey said in a recent interview.
“They have the power to investigate any sale to any entity and to determine the sale was made under market value or below the value of comparable sales to third parties, and to fine and penalize any such sales,” he added. “There are no loopholes.”