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Energy Industry on Losing End of Methane Ruling in Appeals Court

A federal appeals court Thursday rejected a request by the oil and gas industry and allies to reconsider a court panel's decision last month to lift a stay of Obama-era rules governing new sources of methane emissions.

The U.S. Court of Appeals for the District of Columbia by an 8-3 voted denied a motion to rehear arguments over the Environmental Protection Agency's (EPA) proposed rules governing fugitive emissions, pneumatic pumps and professional engineer certification requirements as outlined in updates to the agency's New Source Performance Standards (NSPS).

Last May, EPA Administrator Scott Pruitt proposed a 90-day stay over the rules, but a three-judge panel in early July lifted the stay following a 2-1 vote.

Earlier this month, the American Petroleum Institute (API) and other trade associations representing the energy industry filed a reply in support of a petition to rehear the case en banc. They argued that the panel erred when it said the stay constituted a reviewable final agency action. However, the appellate court disagreed.

"Industry intervenor-respondents' and states intervenor-respondents' petitions for rehearing en banc, the response thereto, and the reply were circulated to the full court, and a vote was requested," the court said. "Thereafter, a majority of the judges eligible to participate did not vote in favor of the petitions. Upon consideration of the foregoing, it is ordered that the petitions be denied."

The order said Judges Janice Rogers Brown, Karen LeCraft Henderson and Brett Kavanaugh would have granted the requests for rehearing en banc.

The respondents included API, the GPA Midstream Association, the Interstate Natural Gas Association of America, the Independent Petroleum Association of America and Western Energy Alliance, as well as numerous state organizations representing producers. The states of North Dakota and Texas are amici curiae in the case, Clean Air Council et al. v. EPA [No. 17-1145]. The same groups filed a petition for rehearing on July 27.

It is unclear how long the updated NSPS rules may remain in effect. The EPA accepted public comments on another attempt to block the rule, proposing a two-year stay of the rules through Wednesday. According to Regulations.gov, a website operated by the federal government, the EPA received 125,055 public comments over the agency's proposal.

In a 16-page letter dated July 27, API’s Matthew Todd, senior policy adviser, said the EPA has "multiple sources of legal authority" to extend the compliance deadlines for the NSPS updates, and that the rulemaking authority granted under the Clean Air Act allows for a two-year stay.

"There are significant procedural and substantive flaws with the rule," Todd wrote. "EPA already has announced its intent to undertake a rulemaking to address these issues. Requiring compliance with the rule in the meantime would cause substantial harm to regulated entities. They would incur significant costs in complying with standards that almost certainly will be changed or eliminated. They also would face potential enforcement liability for provisions that are unwarranted and unlawful.

"At the same time, immediate implementation would not produce environmental benefits that are commensurate with the costs and potential legal liabilities…” Also, “EPA's stay is narrowly tailored to the most time-sensitive and burdensome requirements. For these reasons, justice compels EPA to stay the rule."

Alex Mills, president of the Texas Alliance of Energy Producers (TAEP), wrote in a separate letter that a two-year stay was appropriate and would give the agency more time to gather reliable emissions and cost estimates, especially as it pertains to methane leak detection and repair (LDAR).

"The LDAR requirements, as applied to low production wells, is likely to make many of these wells uneconomical," Mills wrote. For many TAEP members, their “entire business consists of low production wells. In many cases, an operator will forgo 'modifying' an existing low production well because of the costs of the LDAR requirements. In the best case scenario, the well is plugged. In the worst case scenario, the company folds and the well may be abandoned.

"This is a negative externality the EPA has failed to evaluate and it has environmental consequences in and of itself. The EPA has failed to quantify in any meaningful way the emissions associated with leaks from low production wells."

As expected, environmental groups and their supporters voiced opposition to the stay.

"I believe EPA has led the world in pollution reduction and prevention," wrote South Texas resident Teresa Carrillo, of Duval County, TX, on behalf of the Sierra Club. "I also believe we have the smartest, most creative, and most solution oriented oil and gas industry in the world, right here in the U.S.A.

"I believe this industry has enough depth and smarts to come up with solutions to reducing and even eliminating methane escapes, excessive flaring, and the discharge of other nasty pollutants. Most oil and gas industry folks I know care about families, children and public health. But it's EPA’s job to hold the oil and gas industry accountable. When that's done effectively, the industry will come up with a cost-effective and safe solution to pollution."

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