CHAPTER 11 LITIGATION UPDATE: HIGHLIGHTS OF 2017 LITIGATION RELATED TO AIR QUALITY REGULATIONS AND ENFORCEMENT IMPACTING THE OIL, GAS, AND MINING SECTORS

• Jurisdiction: United States

Air Quality Issues Affecting Oil, Gas, and Mining Development and Operations (Feb 2018)
CHAPTER 11
LITIGATION UPDATE: HIGHLIGHTS OF 2017 LITIGATION RELATED TO AIR QUALITY REGULATIONS AND ENFORCEMENT IMPACTING THE OIL, GAS, AND MINING SECTORS
Olivia D. Lucas
Counsel, Faegre Baker Daniels LLP
Denver, CO
Jill Van Noord
Of Counsel, Holland & Hart LLP
Denver, CO

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OLIVIA LUCAS helps businesses solve environmental regulatory and compliance challenges. As Counsel in the Denver, Colorado office of Faegre Baker Daniels, Olivia represents industrial, oil and gas, and other energy clients in state and federal Clean Air Act permitting, enforcement and rulemaking matters. She also counsels clients on Clean Water Act and CERCLA issues, and represents clients in administrative appeals and environmental litigation before state and federal agencies and courts. Olivia graduated cum laude from Harvard University. A few years later, she moved to Colorado to attend the University of Colorado School of Law. A Texas native, Olivia briefly returned to the South after graduating from CU Law to serve as a clerk for the Honorable Rhesa H. Barksdale on the Fifth Circuit Court of Appeals in Jackson, MS, before officially making Colorado her home.

JILL VAN NOORD is Of Counsel in the Denver, CO office of Holland & Hart LLP, where she is a member of the Environment, Energy, and Natural Resources Practice Group. Her clients include mining, manufacturing, oil and gas, and electric generation companies. With a special emphasis on air quality-related matters, Jill counsels clients on complex litigation, permitting, and regulatory compliance. Her expertise also includes CERCLA litigation, solid and hazardous waste, workplace safety, and due diligence. In addition, Jill regularly represents clients in enforcement actions before state agencies and the Environmental Protection Agency. Jill earned her M.P.H from Emory University and J.D. from the University of Colorado. She has served for three years as a Vice-Chair on the American Bar Association's Climate Change, Sustainable Development, and Ecosystems Committee. Jill is currently serving her second of a four-year term on the Colorado Mined Land Reclamation Board.

I. Regulatory Challenges

A. Ozone

Murray Energy Corporation v. Environmental Protection Agency

• Case Citation: Case No. 15-1385, Consolidated with 15-1392, 15-1490, 15-1491, and 15-1494 (D.C. Cir. 2015)

• Factual and Procedural Background: Murray Energy and others petitioned the D.C. Circuit for review of EPA's 2015 ozone standard that lowered the ozone NAAQS from 75 ppb to 70 ppb. ¹ Briefing was completed in late 2016 and oral argument set. In April 2017, EPA petitioned to postpone oral argument based on the change of administration. ² Although plaintiffs objected to this postponement, the court agreed to it and on April 11 the court removed the challenges from the oral argument docket and ordered the case in abeyance, requiring EPA to submit status reports on the agency's review of the regulations in light of the President's March 2017 Executive Order. ³

• Current Status: While the legal challenge to the 2015 ozone standard remains in abeyance, implementation of the standard proceeds. Environmental groups have issued a letter of Notice of Intent to Sue regarding EPA's implementation of the 2015 ozone standard, alleging EPA has failed to promulgate NAAQS designations for the 2015 ozone standard. ⁴ The earliest a suit could be brought was December 2017.

B. NSPS Subpart OOOOa

Clean Air Council v. Pruitt

• Case Citation: 862 F.3d 1 (D.C. Cir. 2017)

• Factual and Procedural Background: NSPS Subpart OOOOa was promulgated on June 3, 2016, ⁵ effective August 2, 2016, to regulate methane and VOCs from sources in the oil

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and gas sector for which construction, modification or reconstruction commenced after September 18, 2015. Highlights of the new regulation included "green completions" at well heads and fugitive emission controls for methane. The regulations required regulated entities to perform an "initial monitoring survey" by June 3, 2017 in order to identify leaks. ⁶

In August 2016, the American Petroleum Institute (API) and other organizations requested EPA reconsider portions of OOOOa, including leak detection and repair (LDAR) requirements. ⁷ And, the March 28, 2017 Presidential Executive Order on Promoting Energy Independence and Economic Growth ordered the EPA Administrator to review the NSPS Subpart OOOOa regulations for consistency with the Executive Order's policy to review existing regulations impacting natural gas development and, if appropriate, "suspend, revise, or rescind the guidance or publish for notice and comment proposed rules suspending, revising or rescinding those rules." ⁸ As a result, in an April 18, 2017 letter EPA responded that, pursuant to CAA § 307(d)(7)(B), it would reconsider parts of OOOOa and would issue a 90-day stay of compliance with the fugitives monitoring requirements of NSPS OOOOa. ⁹ The "Notice of reconsideration and partial stay" was published on June 5, 2017, retroactive to June 2, 2017. ¹⁰ On June 16, EPA published a proposed rule extending the stay for two more years, "to look broadly at the entire 2016 rule." ¹¹ Environmental groups filed an "emergency motion to stay, or in the alternative, summary vacatur" with the D.C. Circuit regarding the 90-day stay. ¹² The two-year stay has not yet been finally promulgated.

• Legal Issue: Whether the Court of Appeals has authority to review an order staying a promulgated regulation.

• Legal Arguments: The environmental plaintiffs contended that the stay violates CAA § 307(d)(7)(B) because the issues identified for reconsideration could have been, and were, considered by EPA during the rulemaking. ¹³ EPA and the industry groups claimed that the court lacked jurisdiction to review the agency's decision to reconsider the rule because the reconsideration and stay were not final agency action. ¹⁴

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• Holding: The court agreed that it could not review the agency's decision to reconsider the rule, but held that it did have jurisdiction to review the grant of the stay because this was final agency action: by imposing the stay, EPA concluded that § 307(d)(7)(B) requires reconsideration of the rule; and, imposition of the stay suspends the rule's compliance deadlines and essentially changed the rule's effective date. ¹⁵ (The dissent disagreed, explaining that a stay is not final agency action subject to review because it does not end a matter, but merely pauses it. ¹⁶ ) The majority found that the stay was arbitrary and capricious because it was not impracticable under § 307 for industry groups to have commented on the rule to raise the same issues being reconsidered. ¹⁷ Because CAA § 307(d)(7)(B) did not require reconsideration, it therefore did not authorize a stay. ¹⁸

• Status: The previously-stayed provisions of NSPS OOOOa are (back) in effect. However, EPA may yet finalize its proposed 2-year stay. A public comment period for EPA's November notice of data availability closed in December 2017.

Also, on June 29, 2017, 15 states notified EPA of their intent to sue regarding the agency's perceived delay in regulating methane emissions from existing oil and gas operations, because Section 111(d) requires the agency to establish regulations for existing sources as well as new sources. ¹⁹ However, EPA had withdrawn the Final Methane Information Collection Request that would have gathered information on which to base the methane rules. The notice period for this suit is 180 days. ²⁰

C. BLM Venting and Flaring Rule

i. State of Wyoming v. U.S. Department of the Interior; Western Energy Alliance v. Jewell

• Case Numbers: 16-285; 16-280, U.S. District Court for the District of Wyoming

• Factual and Procedural Background: The Bureau of Land Management (BLM) issued regulations for "Waste Prevention, Production Subject to Royalties, and Resource Conservation," also known as the "Venting and Flaring Rule" on November 18, 2016. ²¹ The Venting and Flaring Rule, among other things, seeks to "reduce waste of natural gas

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from venting, flaring, and leaks during oil and natural gas production activities on onshore Federal and Indian . . . leases." ²² The rule became effective on January 17, 2017. ²³

Three western states (Wyoming, Montana, and North Dakota) and industry groups (Western Energy Alliance and the Independent Petroleum Association of America) sought a preliminary injunction of the rule in late 2016, but Judge Skavdahl denied the motions. ²⁴ After an extension of the briefing schedule, the petitioners and intervenor-petitioners filed their opening briefs on October 2, 2017. ²⁵ The BLM filed a Motion to Dismiss or a Stay of Proceedings on December 11, 2017 requesting that the court either dismiss or stay the case while the BLM develops a proposed "Revision Rule." ²⁶

On December 8, 2017, The BLM has published a final rule suspending or delaying many of the provisions of the Venting and Flaring Rule until January 17, 2019. ²⁷

• Legal Issues: The main issues raised in the litigation include:

o The scope of BLM's statutory authority to issue the Rule.

o Whether the Rule is arbitrary and capricious.

• Status: Stayed while December 8, 2017 "Suspension Rule" is effective.

ii. State of California v. United States Bureau of Land Management; Sierra Club v. Ryan Zinke

• Case Numbers: 17-03804; 17-3885, U.S. District Court for the Northern District of California

• Factual and Procedural Background: On June 15, 2017, BLM issued a notice in the Federal Register that it was postponing the compliance dates for certain sections of the Venting and Flaring Rule (the "Postponement Notice"). ²⁸ BLM relied on Section 705 of the Administrative Procedure Act to postpone the compliance dates. ²⁹

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Plaintiffs (California, New Mexico, conservation and...