Will Oil and Gas Get Any Relief from Obama-era Rules?

The Trump administration has made it no secret that it seeks to unleash the potential of American-produced energy. To further that goal, Executive Order (EO) No. 13783 was issued March 28, which required all agencies to review existing regulations that potentially burden the development of domestically produced energy resources. Although agencies such as EPA have taken steps to begin the mandated reviews and provided some relief in the form of stays, at least one court so far has not been as accommodating.

EO 13783 specifically targeted the 2016 Oil and Gas Methane Rule, published June 3, 2016, and effective Aug. 2, 2016, for review. The 2016 rule followed up on EPA’s 2012 New Source Performance Standard (NSPS) Rule, which required, among other things, reduced emission completions for hydraulically fractured natural gas wells. The 2016 rule expanded the scope of the 2012 rule to additional equipment and locations, such as hydraulically fractured oil wells.

EPA wasted no time using its authority under the Clean Air Act to begin its review of the 2016 rule. Section 307 allows EPA to reconsider portions of a final rule if it was impracticable to raise an objection to the rule during the comment period and the objection is of central relevance to the outcome of the rule. Additionally, EPA may stay the effectiveness of the rule for up to three months during the reconsideration.

EPA initially announced that it was using Section 307 to reconsider portions of the rule relating to fugitive emissions from low production well sites and the process for approval for the use of an alternative means of emission limitations. It also announced it would propose a stay of 90 days. In formally granting the stay, EPA added two other portions of the 2016 rule to the reconsideration: the requirement for certification of closed vent system by a professional engineer and the well site pneumatic pump standards. EPA stayed the effectiveness of these requirements for 90 days and then proposed that they all be stayed for two years.

Immediately, the 90-day stay was challenged. The D.C. Circuit vacated the stay July 3. While the court noted that agencies may reconsider any rule using appropriate notice and comment procedures, EPA must meet the terms of Section 307 if it seeks to stay a rule using that provision. In this case, the court found that Section 307 was not met because, in its view, the 2016 rule’s administrative record made clear that the public had ample opportunity to comment on all four issues on which EPA granted reconsideration. As a result, there is no longer a 90-day stay in effect.

However, the proposal to stay those provisions for two years is still open for public comment. EPA could issue a final rule after the close of the public comment period in September. Environmentalists have already vowed to seek judicial review of a decision granting such a two-year stay.

In the meantime, though, the entire 2016 rule is in effect. At least one compliance date — the date for the initial monitoring survey of fugitive emissions — has come and gone during the time the 90-day stay was in effect. To the extent that compliance is required under the 2016 rule, any failure to comply would subject a noncompliant facility to enforcement. If EPA does not enforce the provisions of the 2016 rule, then the facility may be subject to a citizen suit.

As a result, reliance on short-term stays to avoid the requirements of a rule may not be the best strategy. The courts may strike down a stay, leaving the regulated entity noncompliant and exposed to costly enforcement. In short, it may be a while before the oil and gas sector gets any real relief from these rules.

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