This week, the United States Court of Appeals for the District of Columbia Circuit (DC Circuit) vacated the US Environmental Protection Agency’s (EPA) 90-day stay of an Obama-era rule regulating methane emissions from oil and natural gas wells, commonly known as the methane rule. The decision removes a tool from EPA’s toolbox for reducing the burden of Obama-era air regulations.1 It also means that the oil and gas industry remains subject to the rule while EPA finalizes other regulatory action on the rule; but this regulatory action could include a more permanent rescission of the methane rule.
What does the order mean for entities regulated by EPA?
The court’s ruling was narrow and targeted: EPA only has authority to issue a temporary stay of a rule when it must reconsider a rule because (i) it was impracticable to raise an objection during the comment period, and (ii) the objection is of central relevance to the outcome of the rule. EPA attempted to establish it had non-reviewable authority to issue a 90-day stay whenever it grants a petition to reconsider a rule, regardless of whether the reconsideration is necessary. EPA’s interpretation would have allowed it to grant reconsideration petitions and issue short-term stays of rules in perpetuity without needing to survive the scrutiny of a court.
The court denied EPA this powerful tool for providing quick relief from the burdens of Obama-era air rules. While EPA identifies other tools for changing the rules, the Obama-era regulations remain in effect, imposing risks of civil penalties, fines, imprisonment and litigation on regulated entities. EPA can exercise its discretion not to pursue enforcement, but regulated entities remain at risk for citizen suits and the costs of litigation.
What does the order mean for the oil and gas industry?
The DC Circuit’s order has a more limited impact on the oil and gas industry and the methane rule itself. While the court vacated the immediate temporary stay, it concluded by expressly noting that EPA could still pursue rescinding the methane rule or changing the rule’s compliance dates through traditional notice-and-comment rulemaking.
The oil and gas industry thus finds itself in the status quo. For example, regulated entities must have conducted an initial monitoring survey by June 3, 2017—a requirement the now-vacated stay had specifically sought to lift. But notably, the oil and gas industry argues that it has already voluntarily undertaken many of the actions required by the methane rule. Continuing the effectiveness of the rule thus does not change industry behavior, but industry remains subject to EPA and, more significantly, citizen suit enforcement of the rule.
EPA’s new rulemaking could lighten the enforcement risk. On June 16, 2017, EPA issued a Notice of Proposed Rulemaking to delay compliance of the methane rule for two years. EPA is currently receiving comments on the proposal until July 17, 2017. EPA will likely issue the final rule in late 2017 or early 2018. While this rule will likely be challenged in court, it will become the effective law for the foreseeable future, thus lightening the burden on the oil and gas industry.