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Judge Rules Against BLM, Orders NatGas Venting/Flaring Rule Back Into Effect

In a potential whiplash for the oil and gas industry, a federal judge in San Francisco ruled Wednesday night that the Trump administration broke the law when it tried to indefinitely postpone an Obama-era rule governing associated natural gas flaring and venting on public and tribal lands.

The ruling by the U.S. District Court for the Northern District of California came just hours after the Department of Interior's (DOI) Bureau of Land Management (BLM) outlined plans to temporarily suspend or delay parts of the Waste Prevention, Production Subject to Royalties, and Resource Conservation Rule -- aka the venting and flaring rule -- until January 2019.

But those plans were thrown into turmoil after U.S. Magistrate Judge Elizabeth Laporteruled that the Trump administration violated the Administrative Procedure Act (APA) last June, when the BLM first proposed delaying the compliance dates for the rule due to pending litigation filed by industry groups and several states in Wyoming. Laporte vacated the BLM's postponement notice and ordered the bureau to immediately reinstate the rule.

With Laporte's ruling, operators now face a Jan. 17, 2018 deadline to comply with several provisions of the rule that the BLM had hoped to delay or eventually rescind -- specifically, new requirements that operators capture a certain percentage of the gas they produce; measure flared volumes; upgrade or replace pneumatic equipment; capture or combust storage tank vapors; and implement leak detection and repair programs.

"Given the time-intensive steps required to move a draft rule forward to final publication and the additional period of 30 days before it comes effective, any such rule revising or rescinding the rule is unlikely to go into effect for a number of months," Laporte wrote. "In the end, there is no certainty that either proposed rulemaking will survive potential legal challenge, given the litigation history of this rule."

Last July, attorneys general (AG) for California and New Mexico filed a lawsuit against the BLM over the stay. Days later, a coalition of 17 environmental and tribal groups did likewise, and the two cases -- State of California et al v. United States Bureau of Land Management et al [No. 3:17-cv-3804] and Sierra Club et al v. Zinke et al [No. 3:17-cv-3885] -- were merged that month.

Court records show that the defendants in the case had argued that operators would need to spend approximately $114 million dollars to achieve compliance with the rule.

"No one is above the law," California AG Xavier Becerra said Wednesday. "As a result of this rule's implementation, oil and gas operators on federal and Indian lands will be compelled to prevent the waste of natural gas. Natural gas emissions threaten the health of nearby residents and contribute to climate change."

Sierra Club spokeswoman Kelly Martin said "once again, the Trump administration has overstepped in its attempts to roll back critical, common sense environmental protections...We will continue to fight back against Donald Trump's reckless and unlawful attacks on our air and water -- and we will continue winning."

Industry Reaction

Despite the ruling, Western Energy Alliance (WEA) President Kathleen Sgamma told NGI’s Shale Daily she was optimistic that the oil and gas industry won't need to worry about the rule.

"With the publication today of the proposed rule to suspend BLM's methane rule for a year while the full process is underway to rewrite the rule, we remain confident that companies will not have to comply with this rule by the January [17] deadline," Sgamma said Thursday.

Dan Naatz, senior vice president for government relations and political affairs at the Independent Petroleum Association of America (IPAA), also voiced optimism.

"We were obviously disappointed with the court's ruling, but we do feel that our case on the merits before [U.S. District Court] Judge [Scott] Skavdahl in Wyoming have sound arguments," Naatz said. "So, we're going to wait and see what happens there. [Wednesday's ruling] does certainly provide some uncertainty, but if BLM moves forward with the outline of the year delay, we'll work with our members and hopefully we can get this addressed.

"Obviously, this is important to our members. They want to make sure that they comply, and we want to make sure they have enough time to understand all the rules of the road going forward. We hope the administration and the courts will listen to our arguments and we can find a resolution."

The IPAA and WEA filed a lawsuit against the rule in Wyoming district court last November. Montana and Wyoming filed a separate lawsuit, and North Dakota and Texas subsequently joined as petitioners. The two lawsuits were combined at the end of November.

Wednesday's ruling was the latest in a series of setbacks to Trump administration plans for rolling back Obama-era environmental regulations.

A three-judge panel at the U.S. Court of Appeals for the District of Columbia removed a stay of Environmental Protection Agency rules governing new sources of methane emissions in July. The next month, the full court denied a motion to rehear the case.

In a twist, Laporte ruled last month that the Trump administration also ran afoul of the APA when the DOI's Office of Natural Resources Revenue issued a stay of the Consolidated Federal Oil & Gas and Federal & Indian Coal Valuation Reform Final Rule, also known as the 2017 Valuation Rule. But Laporte declined to put that rule back into effect.

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