A 2016 rule to tighten methane controls for oil and gas production from federal and Indian lands was an unlawful attempt at air pollution regulation under the guise of preventing mineral waste, a court ruled Oct. 8.
The ruling struck down most of the regulations issued through that rule, while leaving in place a small set of regulations that were not challenged.
The rule provided stricter controls to reduce the venting, flaring, and leaking of natural gas from oil and gas exploration and production operations under authority of the Bureau of Land Management.
The challenged portions of the 2016 Waste Prevention Rule, as it was called, never went into effect, having been stayed while the Trump administration in 2018 developed a replacement rule that rolled back the earlier rule. The rollback was overturned by another federal court in July (OGJ Online, July 17, 2020).
In the latest ruling, Judge Scott Skavdahl of the U.S. District Court for the District of Wyoming ruled that the 2016 regulations from the Bureau of Land Management (BLM) exceeded the agency’s authority by attempting to regulate air emissions under the Mineral Leasing Act of 1920.
Congress through the Clean Air Act assigned air emission regulation to the Environmental Protection Agency (EPA) and the states in a system of “cooperative federalism,” the judge wrote. The 2016 rule disregarded state authority and not only intruded on EPA authority but went beyond what the EPA in applying the regulations to existing wells along with new wells, the judge said.
Pollution control or waste control
“Though the rule contains some arguably waste-specific components, the rule overall is transparently driven by air quality requirements,” the judge wrote.
The rule’s cost-benefit analysis reflected that environmental concern by factoring into its analysis the “social cost” of methane on a global scale and emphasizing the health effects of air pollution.
“Without these ‘indirect’ benefits, the costs of the rule likely more than double the benefits every year,” Skavdahl wrote.
“The ancillary benefits of a rule cannot provide the primary justification for the rule, particularly where those ancillary benefits fall outside the scope of the agency’s statutory authority. Otherwise, there is simply no limit on agency authority,” he concluded.
The ruling said the BLM violated the Administrative Procedure Act in three ways: It failed to adequately assess the rule’s impact on marginal (low volume) wells; it failed to adequately explain and support its gas capture requirements; it arbitrarily relied on a calculation of the global social cost of methane to support the benefits of the rule.
Appeal anticipated
The ruling drew quick applause in statements issued by industry, including by Kathleen Sgamma, president of Western Energy Alliance.
“Hopefully, we can quit playing boomerang between the two courts and get back to sensible regulation within BLM’s purview,” Sgamma said.
She was under no illusion about a complete end to the dispute, however. The July decision that went against the Trump administration has been taken by the administration and industry groups to the U.S. Court of Appeals for the Ninth Circuit, and the decision in the Wyoming court could be appealed to the Tenth Circuit.
“I fully anticipate the environmental groups to appeal,” Sgamma told the Oil & Gas Journal.
“It’s possible that both circuits overturn both rulings, and another round of seesawing were to commence, but I think other scenarios are more likely,” she said.
The Interior Department issued a statement saying the 2016 rule “was illegal, another job-crushing regulation targeted at small businesses and more government overreach.”
The reference to small businesses presumably related to the court’s opinion that the Obama administration’s rule failed to give adequate consideration to the economics of marginal wells, which commonly are operated by small businesses less able to afford the requirements of tougher regulations.
The costs of semi-annual surveys with infrared cameras for leak detection especially concerned industry critics of the 2016 rule.
Two cases were consolidated in the Wyoming court, the lead case being Wyoming v. Interior, with Wyoming and Montana as plaintiffs, supported by North Dakota and Texas. Defenders of the rule include California, New Mexico, and environmental groups led by Wyoming Outdoor Council. The other case was Western Energy Alliance v. Jewell, with the Independent Petroleum Association of America joining in as a plaintiff.