California is leading its first lawsuit against the Trump administration under new Attorney General Xavier Becerra. The suit is nominally about payments for fossil fuels extracted on federal lands, but—at its most basic—it pits the state against the administration over the economics of burning coal.
The state claims it will lose its share of greater royalties that oil, gas and coal companies would have paid using a revised calculation created by the Obama administration. The rule requiring that calculation went into effect January 1. But the fossil fuel industry quickly sued, arguing the formula is both too vague and too complex. In February, the Department of the Interior suspended the rule until the court case is resolved.
In the lawsuit, California and New Mexico say the federal government cannot simply withdraw a rule it has promulgated. But the actual money on the line is a relative pittance—an estimated $18 million across all states.
Perhaps more significantly, the rule targets the coal industry, which has long paid royalties from selling extracted coal to sister companies, rather than to users at the end of the supply chain. Coal companies argue the new rule disadvantaged them against the oil and gas industry.
That means, by lifting the rule, the Trump administration effectively removed a new cost to the industry and, by challenging that action, California would like to re-impose that cost.
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