Trump’s EPA checked by Obama methane rule

Published in the Chicago Daily Law Bulletin 8/31/2017

Lawyers' Forum

By Christopher C. Kendall

On June 3, 2016, the EPA promulgated the “methane rule.” The rule required oil and gas drillers to conduct an “initial monitoring survey” by June 3, 2017, to identify methane leaks and repair them within 30 days thereafter.

Because the rule was promulgated pursuant to notice and comment rulemaking, it carries the force of law.

With expected annual compliance costs in the hundreds of millions of dollars, the American Petroleum Institute, the Texas Oil and Gas Association and others filed administrative petitions with the EPA for reconsideration of the methane rule. Though the Clean Air Act allows such petitions to raise objections to new rules, reconsideration is required only in instances where (1) it was impracticable to raise such objection within the notice and comment period, and (2) if such objection is of central relevance to the outcome of the rule.

While industry was seeking reconsideration before the EPA, the attorneys general in 14 states (including Oklahoma’s then-Attorney General Scott Pruitt) filed suit to challenge the methane rule.

Both the petitions to reconsider as well as the lawsuit were still pending on Election Day. But elections, of course, have consequences.

On March 28, President Trump issued an executive order attacking much of the Obama administration’s efforts to combat global climate change. The executive order included a command that Scott Pruitt — now in his role as EPA administrator — “review the final [methane] rule” and “if appropriate, shall, as soon as practicable, suspend, revise, or rescind the guidance, or publish for notice and comment proposed rules suspending, revising, or rescinding those rules.”

In Congress, the Republicans dusted off the Congressional Review Act, which had been used successfully only one time since its passage in 1996. The current Congress was able to use the CRA to strike down 14 separate sets of Obama-era regulations. It sought to also use the CRA to overturn the methane rule but fell short after three Republicans in the Senate voted against the resolution on May 10.

In his position as EPA administrator, Pruitt announced that the EPA would reconsider the regulations pursuant to the industry-filed petitions to reconsider, and in conjunction with that he unilaterally stayed the June 3 compliance date for identifying methane leaks (though the EPA did not publish notice of that decision until June 5). Pruitt also declared a 90-day stay of the June 3 compliance date. On June 16, the EPA announced that the stay would be extended to two years.

In response, six environmental groups — the Clean Air Council, Environmental Defense Fund, Natural Resources Defense Council, Environmental Integrity Project, Earthworks and the Sierra Club — filed suit against Pruitt and the EPA.

The plaintiffs argued there was no legal basis for the stay because all of the issues that Pruitt had identified as justifying reconsideration “could have been, and actually were, raised (and extensively deliberated) during the comment period.” (Emphasis in original.)

Since the EPA’s authority to issue a stay of a compliance date was dependent upon there being a pending petition to reconsider, if there was no basis to reconsider the rule, then there was no basis for a stay. The plaintiffs filed an emergency motion to stay the EPA’s stay, or in the alternative to summarily vacate the EPA’s stay.

To “undo” an existing legislative regulation (i.e., one carrying the force of law), the agency must engage in notice and comment rulemaking, which can be a lengthy process, and in the case of the methane rule would not have been completed by June 3.

The EPA challenged the motion, arguing the court lacked jurisdiction to review the two-year stay, and that even if the court had jurisdiction, the stay was lawful.

On July 3, the U.S. Court of Appeals for the D.C. Circuit rejected the EPA’s arguments and granted the plaintiffs’ motion.

The court found that the EPA did not have the authority to grant a 90-day (much less a two-year) stay and to do so was arbitrary and capricious.

The court rejected the EPA’s arguments that the issues raised on the petition to reconsider had not been considered during the notice and comment period. The court pointed to specific parts of the administrative record where the EPA had considered the very points that the Trump EPA now claimed the Obama EPA had not considered.

The court also rejected the EPA’s argument that at least for the period during which it considered the petition for reconsideration, it had the “inherent authority” to “issue a brief stay.” The court explained that administrative agencies simply do not have “inherent authority.”

Rather, the court stated, “as we have made clear, it is ‘axiomatic’ that ‘administrative agencies may act only pursuant to authority delegated to them by Congress.’” Thus, the agency was limited to its statutory powers to grant stays.

Dissenting, then-D.C. Circuit judge Janice Rogers Brown felt the decision to stay enforcement of the methane rule was not justiciable, noting that the EPA’s action “may be annoying, disappointing, ill-advised, even unlawful, but that does not transform a stay to facilitate reconsideration into ‘final agency action.’” Under the APA, only “final agency action” is reviewable. That requires two findings: (1) that there has been a “consummation of the agency’s decision-making process,” and (2) that “the consequences have a ‘legal force or practical effect’ beyond ‘the disruptions that accompany’ the agency making a decision to ‘initiate proceedings.’” The dissent argued that neither of these requirements were met.

The court, however, held that “because the stay relieves regulated parties of any obligation to meet the June 3 deadline — indeed EPA has proposed to extend the stay for years … the ‘order is sufficiently final to warrant review.’”

The court also referenced that a stay that delays a rule’s effective date is “tantamount to amending or revoking a rule.” The court explained, “Failure to comply with [the regulations] could have subjected oil and gas companies to civil penalties, citizens’ suits, fines, and imprisonment.” Thus, the court rejected the notion that the EPA’s two-year stay of a rule was non-reviewable.

In sum, the court found that the EPA’s action in staying the June 3 compliance date was arbitrary and capricious and in excess of statutory authority. On Aug. 10, the D.C. Circuit denied the motion to reconsider en banc that was filed by intervening industry members and several states.

To say that “elections have consequences” recognizes that a new administration has the power to implement its policies and vision when carrying out the law. In doing so, however, the discretion executive agencies exercise is still limited by existing law, both statutory as well as regulatory. The Trump Administration came to power with an existing “methane rule” promulgated by the Obama administration’s EPA. The court’s opinion is a reminder that because the methane rule was promulgated through notice-and-comment rulemaking it carries the force of law.