Last week, the U.S. Court of Appeals for the District of Columbia Circuit struck down a 90-day stay imposed by the U.S. Environmental Protection Agency on portions of its methane rule for new oil and gas infrastructure, finding the agency lacked authority under the Clean Air Act to issue the stay. Clean Air Council v. Pruitt, No. 17-1145 (D.C. Cir. July 3, 2017).  The methane rule, which establishes “New Source Performance Standards” for fugitive emissions of methane and other pollutants by the oil and natural gas industries, was finalized in June 2016 by the Obama administration.  Notably, the Court’s 2-1 decision puts back into effect the June 3, 2017 deadline for regulated entities to conduct an initial monitoring survey to identify leaks from equipment.

By way of background, after EPA published the final methane rule in 2016, several industry groups filed administrative petitions seeking reconsideration of the rule under section 307(d)(7)(B) of the Clean Air Act. That provision requires EPA to reconsider a rule when (1) it was “impracticable” for a stakeholder to raise an objection during the public comment period, and (2) such an objection was of “central relevance” to the outcome of the rule.  The statute further provides that the effectiveness of a rule may be stayed during such reconsideration.  The industry groups argued that this provision required EPA to reconsider the methane rule because several of the rule’s final provisions were not included in the proposed rule and thus, they were unable to raise objections to the final rule during the public comment period. 

The EPA Administrator, Scott Pruitt, found that the industry group’s petition raised objections that warranted reconsideration of portions of the rule under section 307(d)(7)(B).  On June 5, two days after the deadline for regulated parties to conduct the emissions survey, EPA published a notice of reconsideration and partial stay of the rule in the Federal Register.  EPA granted reconsideration on four aspects of the rule: (1) the decision to regulate low-production wells; (2) the process for proving compliance through “alternative means”; (3) the requirement for a professional engineer to certify the proper design of vent systems; and (4) the decision to exempt pneumatic pumps from regulation only if a professional engineer certified that it was technically infeasible to route such pumps to a control device or process.  In addition, the notice stayed the rule for 90-days pending these reconsiderations and explained that the stay had gone into effect on June 2, 2017 – three days before notice of the stay was announced and one day before the deadline to complete the emission surveys.  In addition, on June 16, EPA published a notice of proposed rulemaking announcing its intention to extend the stay for two years and to look more broadly at the entire 2016 rule.

After EPA suspended implementation of the methane rule, a group of six environmental groups, including the Natural Resources Defense Council and the Environmental Defense Fund, filed a petition asking the Court to stay or vacate EPA’s delay of the rule.  The petitioners argued that the stay violated section 307(d)(7)(B) of the Clean Air Act because all of the issues to be reconsidered had already been properly raised and deliberated during the comment period. 

In considering the environmental group’s petition, the Court first determined that it had jurisdiction to review EPA’s stay of the rule because the stay constituted a final agency action reviewable in federal court.  In finding the stay constituted a final agency action, the Court reasoned that the stay was “essentially an order delaying the rule’s effective date” and that such an order was “tantamount to amending or revoking a rule.”  The Court specifically noted that the stay relieved the regulated entities from complying with the June 3 deadline to submit emission surveys and that the agency had also proposed to extend the stay for several years.  Thus, the Court found the order was “sufficiently final to warrant review.”   

Next, the Court found that the stay was unauthorized by the Clean Air Act and was therefore arbitrary and capricious and in excess of statutory authority. The Court noted that the case turned on whether it was “impracticable” for the industry groups to raise their objections before the final rule was issued pursuant to section 307(d)(7)(B) of the Clean Air Act.  In effect, the Court had to determine whether the final rule was a “logical outgrowth” of the proposed rule so that the industry groups had the opportunity to raise their objections during the notice and comment period.  The Court found that the administrative record made clear that the industry groups had “ample opportunity” to comment on all four issues on which EPA granted reconsideration and that, in several instances, the agency even incorporated some of the comments directly into the final rule.  Thus, the Court found that it was not “impracticable” for the industry groups to raise their objections during the notice and comment period and section 307(d)(7)(B) did not require reconsideration or authorize the stay.  

Finally, while the Court noted that while the 90-day stay is vacated, it made clear that EPA is not limited from reconsidering the final rule by its June 16 notice of proposed rulemaking, which announced its intention to stay the rule for two years. Comments on that notice of proposed rulemaking are due July 17, or if any party requests a hearing, by August 9.  If and until such a stay is issued, the methane rule remains in effect for the regulated industry.