D.C. Circuit Grants Motion to Vacate EPA’s Stay of Final Methane Rule

The Environmental Protection Agency didn’t have the authority under the Clean Air Act to stay implementation of portions of a final rule on methane and other greenhouse gas emissions, the U.S. Court of Appeals for the D.C. Circuit held July 3 (Clean Air Council v. Pruitt, No. 17-1145).

While the court vacated the stay, it explained that the decision didn’t limit EPA’s authority to reconsider the final rule if the agency believes a new policy would be better.

In a per curiam decision, the court determined that EPA’s decision to stay the final rule was arbitrary and capricious. The court held that the industry group intervenors had ample opportunity to comment on certain issues, and because EPA had no basis for reconsideration of those issues, the agency had no basis for the stay.

The methane rule took effect on 8/2/16, and required regulated entities to conduct an initial monitoring survey to identify methane leaks by 6/3/17.

Initial Delay. Oil and natural gas producers were pleased with EPA’s June 13 announcement that it would delay for two years methane emission standards while it considers a proposed rule on fugitive emission requirements for oil and gas production facilities, pneumatic pumps, and compressor stations.[1]

In a Federal Register notice,[2] EPA said it was reconsidering emission standards for the oil and gas sector under the Clean Air Act (CAA). It previously granted reconsideration based on industry objections and called for a 90-day stay of the standards. The notice extended the stay for two years for EPA to look broadly at its 2016 rule and address new source performance standards for greenhouse gas emissions and volatile organic compounds from the oil and gas sector.

The standards in the rule would require companies to capture leaking emissions at production sites and pipeline compressor stations, obtain engineer certifications, and install leak detection devices that EPA previously announced.

Industry groups sought reconsideration of the rule under CAA § 307(d)(7)(B), which provides that if a party raising an objection can demonstrate that it was impracticable to raise the objection during the notice and comment period, the EPA administrator must reconsider the rule. The appellate court noted that the statute also provides that a rule can be stayed for up to three months while the agency is reconsidering it.

The EPA said it was reconsidering the rule for four reasons: (1) the industry groups didn’t have the opportunity to object to the decision to regulate low-production wells; (2) the process for proving compliance with the emissions rule by alternative means was in the final rule but not the notice of proposed rulemaking (NPRM); (3) certification of vent system design was included in the final rule without notice; and (4) there was not adequate notice of the exemption from regulation of pneumatic pumps under certain conditions. Several environmental groups challenged the stay with an emergency motion to stay or for vacatur.

Final Agency Action. On the initial matter of jurisdiction, the court rejected the argument of EPA and the industry groups intervenors that the court didn’t have jurisdiction because the reconsideration was not a final agency action, and held that the stay of the rule constituted an amendment or revocation of the rule. The stay of the rule delayed the rule’s effective date and affects the rights and obligations of the regulated entities, said the court, noting that without the stay the regulated entities would have had to complete required monitoring surveys by June 3.

The court rejected EPA’s argument that the court didn’t have authority to review §307(d)(7)(B) stays, saying the plain language of § 307(d)(7)(B) provides that a stay can be authorized by the administrator or the courts, and thus logically the courts have the power to review stays.

Judicial Stay. On the environmental petitioners’ request for a judicial stay of the administrative stay, the court agreed with the petitioners that the 90-day stay was unreasonable because § 307(d)(7)(B) doesn’t authorize such a stay.

The EPA defended its decision to stay the rule by invoking its discretion to reconsider its own rules, but an agency must have a notice and comment period under the Administrative Procedure Act (APA) to do so, said the court. The EPA doesn’t have the inherent authority to stay a final rule because it failed to cite any section in either the CAA or the APA that provides that authority, said the court. The plain language of §307(d)(7)(B) provides that an agency may grant a stay only when it undertakes a “mandatory” reconsideration because a party objected to something of “central relevance” that was impracticable to raise during the public comment period.

The appellate court explained that the issue turns on whether the industry groups had the opportunity to raise their objections during the comment period following the NPRM, and whether the NPRM provided adequate notice of the final rule.

Low-Production Wells. EPA justified the stay on this issue by saying the final rule’s requirement of subjecting low-production wells to the fugitive emissions requirements was not in the NPRM. The court rejected this argument, finding the NPRM had solicited comments on the issue, the industry responded with concerns, and the final rule explained why low-production wells would not be exempt from the requirements. EPA contended it was impracticable for the industry groups to present these issues, said the court, but the final rule responds directly to the concerns raised by the industry groups.

Alternative Means of Compliance. On the second ground for EPA’s stay – that the alternative means of compliance with emissions regulations was not in the NPRM – the court found that the final rule provided for a streamlined method of compliance that was requested by the industry groups in their comments on the NPRM. The streamlined method in the final rule is a logical outgrowth of the NPRM, said the court.

Vent System Certification. It was practicable for the industry groups to raise their objections to the final rule’s requirement that regulated entities obtain certification by a professional engineer that their closed vent system was properly designed, said the court. The EPA was inaccurate when it claimed the costs of the certification had not been analyzed before the final rule was issued, said the court. The NPRM had a discussion of costs and benefits, said the court, and industry groups submitted many comments about the issue.

Pneumatic Pumps. On the final reason for the stay – that the final rule failed to address the conditions for an exemption for pneumatic pumps – the court determined that in comments one of the industry groups proposed language about the issue that was adopted in the final rule. The technical language defining the scope and parameters of the exemption was proposed by the industry group, which now cannot claim the issue was not covered by the NPRM, because the final rule was the logical outgrowth of the NPRM based on the comments, said the court.

The EPA’s stay of the rule was arbitrary and capricious because none of the four issues that were the basis of the stay were impracticable for the industry groups to raise during the notice and comment period, said the court. The court observed that not only were the issues raised by the industry groups during the comment period, the final rule includes language specifically suggested by the industry groups.

Dissent. Judge Janice Rogers Brown dissented, saying the stay was merely a delay in the rule’s effective date, and did not rise to the level of a reviewable final agency action.

By Denise Ryan DRyan@fosterreport.com

[1]   See, Industry Pleased With Two Year Delay on Methane Emission Rules, FR No. 3153, pp. 1-2.

[2]   82 Fed. Reg. 27,645.

 

This article appears as published in The Foster Report No. 3156, issued July 7, 2017

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