The Interior Department's Bureau of Land Management (BLM) has a responsibility under the Mineral Leasing Act (MLA) to ensure that private lessees engaged in oil and gas operations on public lands do not waste valuable resources and evade the payment of royalties due to the federal government for the use of publicly owned resources.
In recent years, some oil and gas operators have wasted natural gas and its principal component, methane, by venting and flaring large volumes of methane that are co-produced with more valuable oil deposits. In 2016, BLM finalized a rule that prohibits oil and gas operators from wasting gas by conducting unwarranted venting and flaring of unwanted methane.
The Trump administration has pursued three different methods for nullifying the methane waste prevention rule and allowing oil and gas operators to vent and flare unwanted gas supplies, without regard to their obligation to pay royalties or protect the environment. State attorneys general have successfully challenged the administration's persistent attempts to scuttle the methane waste rule. Litigation is ongoing.
Attempted Repeal by Congress
The Trump administration proposed that Congress nullify the methane waste prevention rule through a Congressional Review Act (CRA) resolution of disapproval. In February 2017, seven attorneys general sent a letter to U.S. Senate leadership urging the Senate to vote against the CRA resolution because it would cost states where the oil and gas development is taking place millions in annual royalties. Additionally, the letter noted that the methane waste prevention rule reduces potent climate change causing methane emissions. The Senate sided with state attorneys general and rejected the CRA resolution in May 2017.
Postponing and Suspending by BLM
Undeterred by the defeat in Congress, in June 2017, BLM published a notice that purported to postpone compliance dates set forth in the methane waste prevention rule. In July 2017, the state attorneys general of California and New Mexico sued the Department of the Interior, alleging that BLM had no authority to put off compliance with the final rule unless it complied with the Administrative Procedure Act (APA) and undertook and completed a full notice-and-comment rulemaking.
Four attorneys general, led by Washington Attorney General Bob Ferguson, filed an amicus brief in support of the complaint brought by California and New Mexico. In the fall (October 2017), the United States District Court for the Northern District of California agreed with the state attorneys general, and voided the administration's postponement of compliance dates set forth under the waste prevention rule.
Subsequently, BLM reframed its suspension of the waste prevention rule's compliance requirements as a proposed rule. The state attorneys general filed comments opposing the proposed rule. Taking no heed, BLM rushed through, and finalized, the suspension rule in December 2017. The state attorneys general of California and New Mexico have returned to court, filing a complaint to overturn the final rule that purports to suspend requirements of the waste prevention rule until January 17, 2019.
In February 2018, a district court blocked the delay of the rule, saying, "The BLM's reasoning behind the suspension rule is untethered to evidence contradicting the reasons for implementing the waste prevention rule, and so plaintiffs are likely to prevail on the merits." With the rule in effect as a result of the February 2018 district court ruling in California, opponents of the rule asked a federal district court in Wyoming, hearing an industry complaint challenging the 2016 rule, to block the rule. California and New Mexico argued in March 2018 that the Wyoming district court should leave the rule in place because any alleged inability on the part of industry to comply with the rule is a result of industry’s own making, as industry should have already been in substantial compliance with rule in January 2017. In April 2018, the Wyoming district court stayed implementation of the rule.
Two days later, the attorneys general of California and New Mexico notified the Wyoming district court that they would be appealing the district court’s stay of the rule to the Tenth Circuit Court of Appeals. In June 2018, a divided Tenth Circuit denied a request by opponents of the methane waste prevention rule to dismiss the appeal by California and New Mexico, but declined to reinstate implementation of the rule during the appeals process.
In April 2019, the Tenth Circuit dismissed the appeal by California and New Mexico as moot because BLM published a final rule in September 2018 (see below) that rescinded critical parts of the 2016 methane waste prevention rule. The court concluded that any decision it might issue would have “no real-world effect” because the rule the district court had stayed implementation of had been eliminated.
In July 2020, the federal district court in Wyoming lifted a stay on the litigation that had been in place pending resolution of litigation in a California federal district court over the September 2018 final rule (below). The following month, BLM filed its reply brief, in the now reinitiated litigation in Wyoming, arguing that the 2016 rule should be vacated as the bureau did not adequately justify the 2016 rule and erred in its interpretation of statutory authority to promulgate the 2016 rule. In August 2020, California and New Mexico, along with environmental organizations, filed their reply brief and noted that the court should dismiss challenges to the methane waste prevention rule as the record before the BLM in 2016 supported issuance of the rule as a lawful exercise of BLM’s statutory authority.
In October 2020, the federal district court in Wyoming issued a ruling that vacated the 2016 methane waste prevention rule. The district court held that BLM had exceeded its statutory authority under the MLA and acted arbitrarily in promulgating the methane waste prevention rule. Following the release of the decision, the California Attorney General released a statement expressing a continued commitment to defending the rule to reduce the wasteful leakage of methane.
Weakening by BLM
BLM published a proposed rule in February 2018 that would rescind or revise critical components of the methane waste prevention rule. In April 2018, California and New Mexico filed comments opposed to the proposed rule as BLM had not advanced a reasoned basis for repealing a rule that it had recently determined was consistent with its statutory obligations. The attorneys general also noted that preserving the methane waste prevention rule would boost royalty receipts and protect the environment.
BLM finalized the proposed rule in September 2018. The final rule eliminates a requirement that oil and gas producers capture an increasing percentage of vented or flared methane emissions. The rule also removes a requirement that oil and natural gas leaseholders conduct regular leak inspections of compressor stations and other pipeline infrastructure, which will likely delay the detection and repair of methane leaks.
The day the new rule was finalized, California and New Mexico filed suit in federal district court in California. The suit challenged the final rule as a violation of the APA as BLM had not supplied a reasoned analysis for reversing its course in rescinding the 2016 rule. Additionally, the complaint noted that the rule violates the MLA’s requirement that BLM require leaseholders prevent waste irrespective of cost considerations.
In June 2019, California and New Mexico filed a motion for summary judgment in the lawsuit challenging the September 2018 rescission rule. The motion requests that the federal district court vacate the rescission rule.
First, BLM violated the APA in promulgating the rule because the Bureau failed to adequately justify rolling back critical provisions in the 2016 rule. BLM improperly claimed that the 2016 methane waste prevention rule exceeded BLM’s authority under the MLA to regulate the prevention of the waste of publicly owned resources. Further, BLM’s regulatory impact analysis for the rescission rule ignored substantial climate change impacts and was contrary to the best available science in employing the “domestic” social cost of methane metric, which dramatically reduced the estimated benefits associated with the 2016 rule’s greenhouse gas emissions reductions.
Second, BLM’s new definition of “waste of oil or gas” under the MLA in the rule is arbitrary and capricious in violation of the APA because it includes an economic limitation that is unsupported by the statutory text and case law. Third, BLM violated the National Environmental Policy Act (NEPA) by failing to consider the environmental impacts of the rescission before promulgating the rescission.
In July 2020, the California federal district court ruled in favor of California and New Mexico in granting the states’ motion for summary judgment. The court found that BLM’s conclusion that the costs of the 2016 rule exceeded its benefits was faulty as its use of the domestic social cost of methane metric in conducting the cost-benefit analysis was arbitrary and capricious in violation of the APA. Further, the court held that the economic limitation in the BLM’s new definition of “waste of oil or gas” under the MLA was arbitrary and capricious. BLM was also found to have failed to fulfill its NEPA obligations in promulgating the 2018 rule. The court vacated the 2018 recission rule and reimplemented the 2016 methane waste prevention rule, but stayed the vacatur and reimplementation for 90 days.
In September 2020, BLM filed a notice of appeal to the Ninth Circuit with the federal district court in California challenging the lower court’s July 2020 ruling. In October 2020, the California federal district court entered final judgment in favor of California and New Mexico, vacating the September 2018 rescission rule.