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Jul 13 2017

DC Circuit Says EPA Cannot Stay Methane Rule

July 13, 2017 (Houston)

James SmithBy James Smith – “Environmental Alert” (Schirrmeister, Diaz-Arrastia, Brem LLP)

The U.S. Court of Appeals for the District of Columbia Circuit (“DC Circuit”) ruled that EPA could not issue a stay of new source performance standards regulating fugitive emissions from oil and gas operations (“Methane Rule”).  With this ruling, the Methane Rule remains in effect.

Staying a Rule Is Rulemaking

The Methane Rule became effective August 2, 2016, during the Obama administration.  The EPA, now under Trump appointee Scott Pruitt, issued a stay of the Methane Rule as of June 2, 2017.

In Clean Air Council v Pruitt, several environmental groups challenged the stay.  A three judge panel of the DC Circuit, with one dissent, ruled that a stay of an existing rule is “tantamount to amending or revoking a rule.”  While the EPA has authority to amend or revoke rules, these actions are themselves rulemaking, and must be done using notice and comment procedures.

The dissent argued that the DC Circuit lacked jurisdiction to rule against the stay, because the stay was not final agency action.

CRA Revocation Attempt Failed

Earlier this year, the Methane Rule was the subject of a Congressional Review Act (“CRA”) resolution, which would have revoked it.  The CRA resolution passed in the House, but three republicans joined all Senate democrats to defeat the CRA resolution in the Senate.  The Senate’s failure to pass the CRA resolution kept the rule in effect.  (This prior alert has more background on the CRA.)

The EPA Cannot Stay if Reconsideration Is Discretionary

After the failed CRA attempt, the EPA issued its stay of the Methane Rule, based on certain industry groups’ request for reconsideration.  The statute makes reconsideration mandatory when the requester raises an objection that it can demonstrate was impractical to have been made during the formal rulemaking process, and when that objection is central to the rulemaking.  If the objector can make this demonstration, reconsideration is mandatory, and the EPA may, at its discretion, stay the rule.  However, unless reconsideration is mandatory, the EPA cannot issue a stay during reconsideration based on this procedure.

The DC Circuit ruled that the industry objector failed to demonstrate that reconsideration is mandatory, so that that EPA had no authority to stay the Methane Rule.

Reconsideration Goes Forward, but the Methane Rule Remains in Effect

The DC Circuit specifically said that its decision in no way limits the EPA’s power to revoke or modify the Methane Rule using the formal rulemaking process, but the Methane Rule must stay in effect during that process.  Also, EPA has initiated other administrative procedures to stay the Methane Rule.  This decision does not directly impact those procedures, although court challenges to those stay attempts are also expected.

Federal Government Moves Slowly

As I explained in another prior alert and in my presentation at the 4-C Conference, our federal system resists rapid change.  Eventually, the EPA will revoke or significantly ease the Methane Rule.  This will require the completion of the full rulemaking process, which will take months if not years, unless EPA succeeds in using a different stay procedure or the full DC Circuit or the U.S. Supreme Court reverses this decision.

Ongoing Enforcement Risks

While the EPA may choose not to enforce the Methane Rule while it remains in effect, operators must not forget possible enforcement from states, local governments, and citizen organizations.

For a copy of the DC Circuit opinion click here.

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