IPAA/BakerHostetler Policy Summit on ONRR Rules

Event Details

The Independent Petroleum Association of America (IPAA) and BakerHostetler have partnered to present a program regarding the rulings in Continental Resources, Inc. v. Jewell and State of California v. Department of the Interior. Please join us on May 1, 2019, for a two-hour live discussion regarding these important issues. A cocktail reception will follow.

A federal district court in Washington, D.C., has reversed the Department of the Interior for arbitrary and erroneous application of its “processed gas” royalty rules to wellhead sales of unprocessed gas. In Continental Resources, Inc. v. Jewell, et al., Case No. 1:14-cv-00065-RDM [Dkt. 77], 2019 WL 1440111 (D.D.C. March 30, 2019), the court reviewed Interior’s decision to value allegedly non-arm’s-length sales of unprocessed gas at the wellhead by comparing it to the first buyer’s sales of processed liquids and residue gas downstream. Finding Interior’s actions arbitrary and plainly inconsistent with regulation, the court reversed the decision and remanded the case.

Additionally, a federal district court in Oakland, California, has vacated the Trump Administration’s repeal of the Obama Administration’s revisions to the royalty valuation rules for oil, natural gas, and coal. State of California v. Department of the Interior, Case No. 4:17-cv-05948-SBA [Dkt. 72], (N.D. Cal. March 29, 2019) (order dated March 29, 2019, but released April 12, 2019). The rationale behind the ruling is complicated, but the bottom line is clear: Without further action by the Department and the industry, the Obama rules will go back into effect.

What happens next? Whatever the next steps in the courts may be, the rulings are likely to lead to a revolution in the Department’s treatment of sales of unprocessed gas, an inflection point on subsea transportation of OCS crude oil and natural gas, a rethinking of benchmarks, and perhaps a long-overdue examination of the rules on “affiliation.” What can lessees do to ensure the results are rational, workable, and fair?

BakerHostetler attorneys Rosario Doriott Domínguez and Poe Leggette will discuss the rulings and their implications on the industry.

2.0 hours CLE credit have been approved for the live program in Texas.