On October 4, 2017, in a consolidated decision for Sierra Club, et al. v. Zinke, et al., No. 17-cv-03885, and State of California, et al. v. United States Bureau of Land Management, et al., No. 17-cv-03804, a Magistrate Judge in the U.S. District Court for the Northern District of California vacated BLM’s postponement of its 2016 final rule entitled “Waste Prevention, Production Subject to Royalties, and Resource Conservation” (the “Waste Prevention Rule” or “Rule”). The Waste Prevention Rule imposes additional emission control requirements relating to venting, flaring, and leaking of natural gas from oil and gas production operations on public lands in an effort to reduce methane emissions. The Rule required operators to submit “waste minimization” plans by January 2017 and includes other compliance deadlines, beginning in January 2018. On October 5, 2017, BLM published a proposed rule that would extend the January 2018 compliance deadlines to January 2019. The comment period for this proposed rule is currently open through November 6, 2017.
Oil and gas companies should make themselves familiar with the requirements of BLM’s Waste Prevention Rule and should be aware of 1) the uncertainty regarding the Rule’s approaching January 2018 compliance deadlines, and 2) BLM’s October 5 proposed rule, which would postpone the Rule’s January 2018 compliance deadlines until January 2019 and is currently open for public comment.
Background on the Rule and the Postponement Notice
On November 18, 2016, BLM finalized its Waste Prevention Rule, which adopts many of the same leak detection and recovery (“LDAR”) and emission reduction requirements as EPA’s new source performance standards (“NSPS”) for oil and gas facilities as codified in Subparts OOOO and OOOOa to 40 CFR Part 60. Like EPA’s NSPS regulations, BLM’s Waste Prevention Rule covers natural gas emissions from venting or flaring of associated gas from producing oil wells; gas leaks from equipment and facilities located at the well site, as well as from compressors located on the lease; operation of high-bleed pneumatic controllers and certain pneumatic pumps; gas emissions from storage vessels; well maintenance and liquids unloading; and well drilling and completions. The Waste Prevention Rule required operators to submit “waste minimization” plans by January 2017, while the Rule’s LDAR, emission reduction, and reporting requirements go into effect on January 17, 2018.
On June 15, 2017, in response to the President’s Executive Order on Promoting Energy Independence and Economic Growth and invoking authority under Section 705 of the Administrative Procedure Act (“Section 705”), BLM published a notice postponing (the “Postponement Notice”) sections of the Waste Prevention Rule containing January 17, 2018 compliance deadlines pending a decision in Western Energy Alliance et al. v. Secretary of the U.S. Dep’t of the Interior et al., Case No. 16-cv-00280 in the U.S. District Court for the District of North Dakota, in which several industry groups and states have challenged the finalized Waste Prevention Rule’s legal validity. On June 16, 2017, the district court in Western Energy Alliance denied a preliminary injunction sought by the States of Wyoming and Montana and other plaintiffs seeking to prevent the Waste Prevention Rule from going into effect. On July 6, 2017, the district court stayed litigation in Western Energy Alliance for ninety days ending October 6, 2017 to consider the effect of BLM’s postponement on the parties’ disputes.
Legal Challenges to the Postponement Notice
On July 5, 2017, California and New Mexico filed suit to challenge the validity of BLM’s Postponement Notice in the U.S. District Court for the Northern District of California. Two days later, several environmental non-governmental organizations (“ENGOs”) filed a separate suit similarly challenging the validity of BLM’s Postponement Notice, also in the U.S. District Court for the Northern District of California. In response to an unopposed motion, the district court agreed to consolidate the States’ and ENGOs’ cases (State of California, et al. v. United States Bureau of Land Management, et al., No. 17-cv-03804, and Sierra Club, et al. v. Zinke, et al., No. 17-cv-03885, respectively).
In the October 4 decision in the consolidated proceedings, the district court invalidated the postponement, holding that BLM’s postponement did not comply with Section 705 of the Administrative Procedure Act, which provides that “[w]hen an agency finds that justice so requires, it may postpone the effective date of action taken by it, pending judicial review.” The court struck down the postponement because BLM considered only the costs and not the benefits of the compliance deadlines in the Rule, and, in the words of the court, “if the words ‘justice so requires’ are to mean anything, they must satisfy the fundamental understanding of justice: that it requires an impartial look at the balance struck between the two sides of the scale.” Consequently, the Waste Prevention Rule — including the January 2018 compliance deadlines — remains in effect.
Prior to BLM’s issuance of the Postponement Notice in June 2017, BLM’s Waste Prevention Rule was the subject of a joint resolution to overturn the Rule pursuant to Congressional Review Act (“CRA”) authority in May 2017. The CRA joint resolution passed the House of Representatives but failed to pass the Senate after a 49-51 vote.
More recently, on September 15, 2017, the House of Representatives passed appropriations bill HR 3354, which has been placed on the Senate Legislative Calendar. If passed by the Senate and signed by the President, HR 3354 would prohibit funds from being used to enforce BLM’s Waste Prevention Rule.
BLM’s Waste Prevention Rule is currently in effect and has several compliance deadlines approaching in January 2018. On October 5, 2017, BLM published a proposed rule that would extend the January 2018 deadlines in the Rule to January 2019. The comment period for the proposed rule is open through November 6, 2017. Assuming BLM does not extend the comment period, this still provides BLM with limited time to finalize its proposed rule delaying implementation of the Waste Prevention Rule before the January 2018 deadlines. It remains to be seen whether the appropriations bill that passed the House will be signed into law and potentially prohibit funding to enforce the Waste Prevention Rule. It also remains to be seen whether the district court in Western Energy Alliance will consider the legal validity of the Rule now that it is in effect. Oil and gas companies should make themselves familiar with the requirements of the Waste Prevention Rule and be aware of the uncertainty surrounding the Rule’s approaching deadlines.