EPA Announces Major Changes In Oil and Gas Regulations

With the election looming, EPA has finalized a three-year effort to revise, amend, or repeal the 2012 and 2016 new source performance standards regulating volatile organic compound and methane emissions from the oil and gas production, processing, and transmission and storage segments. EPA has issued two rules that make sweeping changes to these Obama-era regulations.
The 2012 rule established NSPS for VOC emissions from these three segments of the oil and natural gas industry. The 2016 rule established NSPS for the three segments for greenhouse gases in the form of limitations on methane. In the 2012 and 2016 rules, EPA interpreted the source category to also include the natural gas transmission and storage segment. Prior to that, it only had included the production and processing segments.
In the current rules, EPA takes aim at the expansion of regulation to the natural gas transmission and storage segment, the regulation of methane from all three segments, and numerous VOC requirements in the oil and gas production and processing segments. To accomplish this, EPA issued two rules. The Policy Rule addresses the regulation of the natural gas transmission and storage segment and the regulation of methane from all three segments. The Technical Rule addresses VOC requirements in the oil and gas production and processing segments.
The Policy Rule contains three main parts. First, it finalizes a proposed rule that the source category includes only the production and processing segments of the industry. EPA reviewed the original scope of the source category published in 1979 and found that it did not include this segment. Instead, the natural gas transmission and storage segment is its own source category. EPA explained that, under CAA Section 111, it can only list a source category for regulation by making a cause-or-contribute-significantly and endangerment finding, which EPA has never done. As a result, EPA rescinded the standards (VOC and methane) applicable to the transmission and storage segment of the industry.
Second, EPA rescinded the methane requirements of the NSPS applicable to sources in the production and processing segments. EPA concluded that the methane requirements are redundant with the existing NSPS for VOC and, thus, establish no additional health protections. EPA stated that rescinding the methane requirements while leaving the VOC emission requirements in place will not affect the amount of methane emission reductions.
Third, EPA included an interpretation of CAA Section 111 which requires thatEPA must make a finding that emissions of an air pollutant from the source category cause or contribute significantly to air pollution which may endanger public health or welfare prior to newly regulating any air pollutant that the EPA did not consider when initially regulating the source category. While seemingly innocuous, this interpretation would seemingly require a finding that methane would ‘cause or contribute’ prior to re-regulating methane from the transmission and storage segment, an unlikely finding under the current administration.
The Technical Rule is somewhat more straightforward and applies to existing requirements applicable in the oil and gas production and processing segments. In general, they address a range of technical and implementation issues in response to administrative petitions for reconsideration and other issues brought to EPA’s attention, including fugitive emissions requirements, provisions to apply for the use of an alternative means of emission limitation, pneumatic pump standards, storage vessel standard applicability determinations, and engineer certifications.
The Policy Rule is effective when published in the Federal Register and the Technical Rule is effective sixty days after publication. With the election pending, the provisions of the Congressional Review Act may play a role in the survival of the two rules. In general terms, the Act allows Congress to vote to disapprove of the regulation (thus preventing it from going into effect) within 60 days after Congress receives the rule.
Taken together, the two rules free the transmission and storage segment from NSPS regulation, establish a framework for regulating new source categories, and substantially revise existing regulations in the production and processing segments. However, it remains to be seen whether these rules will survive a change in administration.

Oil and Gas Pipelines are Clogged, at Least for Now

A recent ruling by a single federal district judge in Montana has sent a shockwave through the oil and gas industry. By vacating the U.S. Army Corps of Engineers’ (USACE’s) Nationwide Permit (NWP) 12 and then issuing a nationwide injunction against its use for constructing oil and gas pipelines, the judge has effectively halted new construction of those pipelines and sparked a renewed discussion about the propriety of issuing such injunctions.

The ruling arises out of litigation related to the Keystone XL pipeline, an 882-mile pipeline running from Canada to Nebraska. The construction has been mired in controversy from its inception, mainly due to the need for a “presidential permit” to construct a transnational pipeline and criticisms of the sufficiency of the environmental impact statement. The plaintiffs claimed that, in reissuing NWP 12 in 2017, the USACE did not engage in “formal programmatic consultation” with other agencies, as required under the Endangered Species Act (ESA). As a result, any approval of the Keystone XL pipeline under NWP 12 was in violation of law and must be set aside.

General permits, such as NWP 12, are issued by the USACE to streamline the permitting process. NWP 12 applies to the “construction, maintenance, repair, and removal of utility lines and associated facilities” and defines “utility line” broadly to include oil and gas pipelines. Versions of NWP 12 have been in effect since 1977. The USACE specifically consulted with the appropriate federal agencies prior to the reissuance of NWP 12 in 2007 and 2012, but did not in 2017 based on its position that the ESA did not require such consultation because issuing the permit itself has no effect on listed species or critical habitat. Additionally, the permit requires a pre-construction notice from the applicant of any activity that “might affect” a listed species or critical habitat, which prompts an activity-specific determination by the USACE.

In April, the federal judge ruled that the plaintiffs had provided “resounding evidence” that the USACE’s reissuance of NWP 12 may affect listed species and their habitats, and the pre-construction notice essentially delegated the USACE’s duties under the ESA to prospective permittees. Surprisingly, as no party had yet asked for such broad relief, the judge also vacated NWP 12 in its entirety and enjoined the USACE from authorizing any further activities under NWP 12. The judge then modified his initial ruling, limiting it to the construction of new oil and gas pipelines, but allowing nonpipeline construction activities such as electrical utility lines. Several major oil and gas pipeline projects were to be permitted under NWP 12.

The USACE appealed the ruling to the 9th U.S. Circuit Court of Appeals and asked for a stay, which was denied. The USACE has requested a stay from the Supreme Court. If granted, the appeal may proceed, and the USACE may continue to authorize activities under NWP 12. If denied, the use of NWP 12 for authorization of oil and gas pipelines will be prohibited until the appeal is resolved.

Federal judges have issued similar nationwide injunctions in other cases, a practice which has been questioned by several Supreme Court justices in the past few years. The sweeping injunction issued in this case is questionable at best and the modification more so, as exempting nonpipeline activities from the injunction is somewhat illogical if both pipeline and nonpipeline activities may impact listed species and critical habitats. Regardless, until there is a ruling on the stay or a decision on the appeal, the authorization of oil and gas pipelines under NWP 12 is on hold.

A Sea of Uncertainty in Navigable Waters

Three recent actions have roiled the otherwise calm “navigable waters of the United States,” creating a sea of uncertainty for regulated entities and administrative agencies. Charting an appropriate course to address these actions will likely prove difficult.

The Navigable Water Protection Rule was issued, which substantially narrows the scope of jurisdiction over navigable waters. A court vacated the Corps of Engineers’ Nationwide Permit No. 12, which is widely used for pipelines and transmission lines. The Supreme Court ruled that a permit is required in certain circumstances for discharges to navigable waters that travel through groundwater. Continue reading “A Sea of Uncertainty in Navigable Waters”

UPDATE 2 – Regulatory Relief in the Environmental Arena Lags Behind

LDEQ issued an amended Declaration of Emergency and Administrative Order on March 27, 2020. In terms of regulatory relief, it offers little more than prior orders.

LDEQ extended the deadline for submitting Title V Semiannual Monitoring and Deviation reports and Annual Compliance Certifications, which are ordinarily required to be submitted on March 31. They must be submitted no later than May 1, 2020. LDEQ did state that it maintains the capability to physically receive reports to the extent that the reports can be submitted to the Department by the March 31st deadline. Continue reading “UPDATE 2 – Regulatory Relief in the Environmental Arena Lags Behind”

UPDATE – Regulatory Relief in the Environmental Arena Lags Behind

After several national trade organizations, such as the American Petroleum Institute, petitioned EPA for regulatory relief during the COVID-19 crisis, EPA provided some relief on March 26, 2020. Susan Bodine, EPA’s Assistant Administrator for Enforcement and Compliance Assurance, issued a memorandum to “all governmental and private sector partners” announcing that EPA “will exercise [its] enforcement discretion … if regulated entities take the steps applicable to their situations, as set forth in this policy.” For noncompliance that occurs during the time the policy is in place, the policy announced in the memorandum “will apply to such noncompliance in lieu of an otherwise applicable EPA enforcement response policy.”

Importantly, the policy is retroactive to March 13, 2020. EPA will apply the policy to actions, inactions, or omissions that occur while the policy is in effect even after the policy terminates.

Although the policy announces that EPA will utilize its enforcement discretion, it placed numerous conditions on the application of that discretion. A failure to meet the necessary conditions will likely result in an enforcement action by EPA. If you need help and assistance regarding compliance obligations during the COVID-19 crisis, please contact us or seek other legal assistance. Continue reading “UPDATE – Regulatory Relief in the Environmental Arena Lags Behind”

Regulatory Relief in the Environmental Arena Lags Behind

At this time, the primary environmental regulatory agencies have done very little to assist regulated entities address the impacts of COVID-19 on personnel and compliance. While the governors urge or mandate that people stay at home, EPA, the Louisiana Department of Environmental Quality (LDEQ), and Texas Commission of Environmental Quality (TCEQ) have, for the most part, not relaxed monitoring and reporting requirements. However, the American Petroleum Institute (API) has petitioned EPA for regulatory relief.

In Texas, Governor Abbott has urged people to stay at home but, as of this writing, has not issued an order. In Louisiana, though, Governor Edwards did issue an order on March 22, 2020. Proclamation No. 33 JBE 2020. It states that “all individuals … are under a general stay-at-home order and are directed to stay home unless performing an essential activity.” To determine what is an essential activity, the Governor adopted the Department of Homeland Security’s guidance issued through the Cybersecurity & Infrastructure Security Agency (CISA). See www.cisa.gov/identifying-critical-infrastructure-during-covid-19. Continue reading “Regulatory Relief in the Environmental Arena Lags Behind”

Are SEPs On Their Way Out?

The US Department of Justice announced it will no longer include environmental projects in settlements of environmental cases in which civil penalties are sought. This decision casts great doubt on the future of Supplemental Environmental Projects, or SEPs. Over the years, SEPs have been popular with EPA and industry, proven valuable in settling cases, and directed resources in a manner that benefits the environment.

In its 2015 Update of its SEP Policy, EPA defined a SEP as “an environmentally beneficial project or activity that is not required by law, but that a defendant agrees to undertake as part of the settlement of an enforcement action.” The project goes beyond what could legally be required in order for the defendant to return to compliance and secures environmental and/or public health benefits in addition to those achieved by compliance with applicable laws. Continue reading “Are SEPs On Their Way Out?”

The Scope of Jurisdictional Waters Has Been Narrowed

Image result for water clipartNearly three years after issuing an executive order on the subject, the Trump Administration has finalized the Navigable Waters Protection Rule to narrow the scope of waters subject to federal regulation under the Clean Water Act.

In 2015, the Obama Administration finalized the Clean Waters Rule which generally expanded the jurisdiction of EPA and the Corps of Engineers over “waters of the United States.” The rule was challenged in district and appellate courts throughout the country. After various court rulings, including one by the Supreme Court, the Clean Waters Rule became effective in only about half the states, creating a patchwork of regulation. Upon assuming office, President Trump issued an executive order in which he directed that a new rule be considered which mirrored the more limited jurisdictional view announced by Justice Antonin Scalia in prior rulings. Not surprisingly, the Navigable Waters Protection Rule adopts the narrower view.

Continue reading “The Scope of Jurisdictional Waters Has Been Narrowed”

EPA Rescinds Major Provisions in Obama-Era RMP Rule

The Trump administration has rescinded and modified several major provisions in the Risk Management Program (RMP) rule that was added in the closing days of the Obama administration.

The Obama administration initiated the amendments to the RMP rule in the wake of the April 2013 West Fertilizer Co. explosion in West, Texas. President Obama issued Executive Order 13650, which called for enhanced information collection and sharing and modernization of rules and regulations. Following the issuance of the Executive Order, the EPA proposed amendments to the RMP rule in March 2016. After the proposal, the Bureau of Alcohol, Tobacco, Firearms, and Explosives concluded the West Fertilizer Co. explosion was not an accident but caused by arson. Nevertheless, the EPA moved forward, finalizing the amendments in January 2017.

Continue reading “EPA Rescinds Major Provisions in Obama-Era RMP Rule”

New York’s Case Against Exxon Fails Miserably

In a ruling that will likely have implications for climate change litigation across the United States, a state judge in New York has dismissed the New York Attorney General’s suit against ExxonMobil Corporation. The 55-page opinion issued by Jude Barry Ostrager is a scathing rebuke of the AG’s case.

Over the three and one-half years of investigation and legal proceedings, Exxon produced millions of pages of documents and dozens of people were deposed or interviewed. The AG made several claims against Exxon in the original petition, which Judge Ostrager called “hyperbolic.” At trial, the AG claimed that Exxon committed equitable and common law fraud and otherwise violated certain state laws, including the Martin Act which generally relates to misrepresentations associated with the sale or distribution of stocks or securities. The trial lasted twelve days and eighteen witnesses testified. Continue reading “New York’s Case Against Exxon Fails Miserably”