On February 12, 2018, the Bureau of Land Management (“BLM”) released a pre-publication version of a proposed rule (the “Proposed Rule”) to modify the 2016 Waste Prevention Rule (the “Waste Prevention Rule”). The proposed modifications to the Waste Prevention Rule include the elimination of provisions aimed at reducing methane emissions from oil and gas facilities on federal lands. Compliance with these provisions of the Waste Prevention Rule has already been postponed until January 2019 pursuant to a final rule (the “Postponement”) promulgated by BLM on December 8, 2017, though the Postponement remains subject to pending judicial review.
The Proposed Rule
BLM’s Waste Prevention Rule, initially promulgated in November 2016, covers a number of methane emissions sources associated with oil and gas production activities on federal lands, including natural gas emissions from venting or flaring, gas leaks from equipment and facilities located at the well site, and well drilling and completions. The Proposed Rule would eliminate many of the requirements aimed at reducing these emissions, and modify several others to reflect an approach similar to that in effect prior to the promulgation of the Waste Prevention Rule. For example, the Proposed Rule would eliminate the requirement that operators prepare “Waste Minimization Plans” when submitting an Application for Permit to Drill, as well as operational and equipment-related requirements applicable to well drilling operations, well completions, pneumatic controllers, pneumatic diaphragm pumps, storage vessels, and leak detection and repair. Pursuant to the Proposed Rule, the Waste Prevention Rule’s requirements related to gas capture, downhole well maintenance, liquids unloading, and measuring/reporting volumes of gas vented and flared would be “modified and/or replaced” to reflect the policies set forth in BLM’s NTL-4A, which governed venting and flaring from BLM-administered leases prior to the promulgation of the Waste Prevention Rule.
BLM’s Justification for the Proposed Rule
In addition to the substantive changes BLM has proposed, the justifications it has offered in support of the Proposed Rule are also notable. For example, the Proposed Rule asserts that the emissions-related provisions of the Waste Prevention Rule “overlap” with the Environmental Protection Agency’s (“EPA”) New Source Performance Standards (“NSPS”) applicable to new, reconstructed, and modified pneumatic controllers, storage tanks, and gas wells completed using hydraulic fracturing (Subpart OOOO), and pneumatic pumps, fugitive emissions from well sites and compressor stations (Subpart OOOOa), respectively. BLM asserts that the effect of the Proposed Rule would be to focus the Waste Prevention Rule on “BLM’s authority to prevent waste,” while leaving the regulation of “emissions from sources and operations” to EPA’s Clean Air Act authority. Yet, as the Proposed Rule acknowledges, EPA has proposed a temporary stay of some of the OOOOa NSPS requirements, and is currently “undertaking a reconsideration of these requirements.” It remains to be seen whether BLM’s reliance on overlap with NSPS requirements as a justification for the Proposed Rule will have any effect on EPA’s ongoing reconsideration of its NSPS requirements.
BLM also revised the regulatory impact analysis (“RIA”) associated with the Waste Prevention Rule, concluding that the 2016 RIA overstated the benefits of the rule. Unlike the 2016 RIA, which relied on the “social cost of carbon,” the revised RIA uses a new estimated carbon cost, applies a higher discount rate, and considers only domestic — rather than global — impacts of climate change. Using this methodology, BLM concluded that “the benefits of many of the emissions-targeting provisions do not outweigh their costs.” For example, the revised RIA concludes that the Waste Prevention Rule’s leak detection and repair requirements would generate $550 to $688 million in costs over 10 years to recover only $116 to $148 million in product. That the benefits of these provisions would not outweigh their costs was also key to BLM’s view of its statutory authority to address methane emissions under the Mineral Leasing Act, which authorizes BLM to promulgate rules “for the prevention of undue waste”: “because the value of the conserved gas would not outweigh the costs, the BLM is not confident that its legal authority to prescribe rules ‘for the prevention of undue waste’ would cover many of the emissions-targeting provisions in the 2016 final rule.” BLM has specifically solicited comment on “whether the 2016 final rule was consistent with its statutory authority.”
Meanwhile, the Postponement remains in effect, though it is subject to a pending judicial challenge brought by the states of California and New Mexico (California et al. v. BLM et al., Case No. 17-cv-07186) and several environmental groups (Sierra Club et al. v. Zinke et al., Case No. 17-cv-07187) in the United States District Court for the Northern District of California. Both the states and the environmental groups have filed motions for a preliminary injunction that would reinstate the Waste Prevention Rule’s original January 2018 compliance deadlines. The court heard oral arguments on these motions on February 14, 2018. A separate legal challenge to the validity of the 2016 Waste Prevention Rule brought by several industry groups and states also remains pending 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 United States District Court for the District of Wyoming. In that case, the court granted a motion to stay the case pending BLM’s rulemaking to rescind or revise the Waste Prevention Rule, and BLM continues to file status updates with the court in accordance with the court’s order granting the stay.
The Proposed Rule is the latest step in BLM’s efforts to avoid imposing temporary or permanent compliance costs on operators in connection with the Obama-era Waste Prevention Rule. The Proposed Rule will remain open for public comment for a 60-day period following its publication in the Federal Register. BLM has stated that it intends to conclude this rulemaking effort within the period during which compliance with the Waste Prevention Rule has been suspended pursuant to the Postponement. Nonetheless, the pending motions seeking preliminary injunctions in the litigation challenging the Postponement create continued uncertainty for operators on federal lands, raising the prospect that the Waste Prevention Rule’s original January 2018 compliance deadlines could be reinstated — at least temporarily while BLM finalizes the Proposed Rule — by court order.