On October 4, 2017, the United States District Court for the Northern District of California held that the Bureau of Land Management (“BLM”) cannot postpone implementation of natural gas methane emission rules because such action would violate the Administrative Procedure Act (“APA”).  Plaintiffs – the State of California, the State of New Mexico, and a coalition of seventeen conservation and tribal citizens groups (jointly “Plaintiffs”) – initiated the lawsuit in two separate actions.  Plaintiffs argued that postponing implementation of the BLM’s Waste Prevention, Production Subject to Royalties, and Resource Conservation Rule (“Final Rule”) after its effective date violated Section 705 of the APA.

The Final Rule regulates venting, flaring, and leaks of methane in natural gas and oil production, and its purpose is to reduce emissions of methane into the atmosphere.  Broadly, the Final Rule requires operators to adopt currently available technologies in order to limit the rate of flaring at oil wells, and requires operators to inspect for leaks and replace equipment that vents methane emissions into the air.  These requirements were geared toward meeting the Obama Administration’s goal to cut methane emissions from the oil and gas sector by 40-45% from 2012 levels by 2025.

The Obama-era BLM published the Final Rule on November 18, 2016 and the Final Rule’s effective date was January 17, 2017.  On March 28, 2017, President Trump issued Executive Order No. 13783, which instructed each executive agency to review all agency actions to identify those that “potentially burden the development or use of domestically produced energy resources and appropriately suspend, revise, or rescind those that unduly burden the development of domestic energy resources beyond the degree necessary to protect the public interest or otherwise comply with the law.”  82 Fed. Reg. 16,093.  On June 15, 2017, the BLM issued a notice that it was postponing the compliance dates for certain sections of the Final Rule until January 17, 2018.  82 Fed. Reg. 27,430.  The notice stated that delay was necessary due to the costs of compliance and pending litigation – two cases were filed in the District Court of Wyoming that challenged the legality of the Final Rule in November 2016.

In the Order Granting Plaintiffs’ Motion for Summary Judgment (“Order”), the Judge agreed with Plaintiffs, finding that, because the Final Rule was already promulgated and partially in effect, the BLM cannot retroactively delay or rescind it.  “While Section 705 allows the postponement of the effective date of a broader range of agency actions than a complete rule, such as a part of a rule or a license, and would have allowed the agency lawfully to postpone certain parts of the Rule, rather than its entirety, had it done so before the effective date of January 17, 2017,” an agency cannot postpose an entire rule after its “effective date.”  Order at 16 (emphasis added).  Further, the Court sided with Plaintiffs’ argument that the BLM violated the APA’s notice-and-comment requirements by effectively repealing the Final Rule without obtaining comment from the public.  5 U.S.C. § 553.  The Court held that the “statutory requirement of notice-and-comment is equally applicable to the repeal of regulations as to their adoption.”  Order at 17.  As relief, the court vacated the BLM’s postponement notice (issued June 15, 2017), which means that these sections of the Final Rule will go into effect on January 17, 2018 – the initial effective date for these sections at the time of promulgation of the Final Rule.

Relatedly, on October 5, 2017, the BLM published a notice in the Federal Register stating that it is proposing to temporarily suspend or delay certain requirements contained in the Final Rule until January 17, 2019.  “The BLM is currently reviewing the 2016 final rule and wants to avoid imposing temporary or permanent compliance costs on operators for requirements that may be rescinded or significantly revised in the near future.”  The Judge’s October 4th Order did not – and could not – directly address the October 5th notice, but, based on the legal reasoning in the Order, efforts to suspend or delay the Final Rule as proposed in the October 5th notice would likely violate the APA for the same reasons.  We will continue to monitor legal developments in connection with the Final Rule and report on what the BLM, the plaintiffs, and courts do next.

The two consolidated lawsuits are Sierra Club et al. v. Zinke et al., Case Number 3:17-cv-03885, and State of California et al. v. United States Bureau of Land Management et al., Case Number 3:17-cv-03804.