Sidley Shale and Hydraulic Fracturing Report

Vol. 6, No. 27

Topics discussed in this week’s Report include:

  • Court vacated EPA stay of methane rule.
  • Suits challenged stay of BLM waste prevention rule compliance dates.
  • Department of Interior must issue oil and gas permits within 30 days.
  • Courts stayed sage grouse litigation pending Interior action.
  • D.C. Circuit ordered Nashville to move on pipeline application.
  • Environmental groups sued to block Wyoming oil and gas leases.
  • Environmental groups protested Utah lease sale, citing sage grouse.
  • Earthworks taking optical gas imaging cameras on tour.
  • Ohio EPA took actions against Rover Pipeline, LLC over alleged environmental violations.

Court vacates EPA stay of methane rule. The D.C. Circuit, in a 2-1 decision, granted an emergency motion by several environmental groups and states to vacate a three-month stay of the Environmental Protection Agency’s (EPA) June 2016 New Source Performance Standards for emissions from certain new and reconstructed sources in the oil and gas sector, known as the Quad Oa rule. The rule was scheduled to go into effect on June 3; however, EPA imposed a three-month stay on June 5 pending reconsideration of several aspects of the final rule that EPA determined were not adequately disclosed in the proposed rulemaking. The court found EPA had no basis to reconsider the rule under the criteria described in the Clean Air Act, and thus, no grounds to stay the rule’s effective date. Specifically, the court agreed with the petitioners that the provisions of the final rule on which EPA based its reconsideration were raised in the proposed rulemaking and discussed in public comments. The dissent argued that, since a stay pending reconsideration is not a final agency action, the court lacked jurisdiction to hear the case at all. After the decision, the court granted EPA’s motion to recall the mandate which the court had issued immediately with the decision, providing the agency 14 days to consider a petition for rehearing or a cert petition to the Supreme Court.  Prior to the D.C. Circuit decision, EPA issued two proposed rulemakings to delay the Quad Oa rule’s effective date by an additional two years and then another three months after that. EPA issued a statement that these proposed rulemakings are not affected by the decision.

Suits challenge stay of BLM waste prevention rule compliance dates. Attorneys General for California and New Mexico and several environmental and tribal groups filed two suits in the Northern District of California claiming that the U.S. Bureau of Land Management (BLM) illegally stayed compliance dates for its November 2016 rule regulating methane emissions on public lands. Known as the Waste Prevention Rule, it set out provisions to penalize companies operating on public lands that lose methane through venting, flaring or fugitive emissions in the course of producing oil and natural gas. The rule went into effect in January 2017, although the earliest compliance dates are not until January 2018. A BLM notice had stayed the January 2018 compliance dates pending the outcome of earlier litigation challenging the rule. The new lawsuits, however, claim that BLM has no authority to stay compliance dates, as opposed to effective dates, and that the stay violates the requirements of the Administrative Procedure Act. Specifically, the complaints allege that any administrative stay must meet the requirements courts use to issue a preliminary injunction and noting that the court hearing the pending legal challenges to the rule already rejected a motion for a preliminary injunction to enjoin the rule. The plaintiffs want the court to reinstate the rule.

Department of Interior must issue oil and gas permits within 30 days. Secretary of the Interior Ryan Zinke signed Secretarial Order 3354 requiring Department officials to approve Applications for Permit to Drill (APD) for onshore oil and gas drilling within 30 days. Studies found that on average Interior took 257 days to issue new APDs in 2016. The order also directed the Department to hold quarterly lease sales. BLM had cancelled 11 lease sales in 2016, often due to environmental group protests. Both measures are aimed at increasing fossil fuel development on federal lands by reducing uncertainty, cutting into a backlog of applications and fighting what industry perceived as bureaucratic opposition within BLM to oil and gas development. As of January 2017, 2,800 APDs were pending with BLM. Under the order, once a company submits a complete application and all requirements under the National Environmental Policy Act (NEPA) are satisfied, the Department would have 30 days to issue a permit. Secretary Zinke, however, said that Interior needs to explore how it can improve the current review process before Interior is capable of meeting the 30-day deadlines. The order charges the Assistant Secretary for Land and Minerals Management and the BLM Director to provide options for improving the process by late August. The Department noted that, while oil and gas development rose sharply on private lands since 2010, development on federal lands stagnated or declined during the same period resulting in reduced federal royalty revenues.

Courts stay sage grouse litigation pending Interior action. After the Department of Interior announced that it was re-examining the federal plan to conserve greater sage grouse habitat, three district courts hearing challenges to that plan stayed the litigation. Secretary Zinke issued a June 7 order to review the sage grouse protections that impose limitations on millions of acres of lands across 15 states, and he required amendments to 98 federal land management plans. Idaho, Nevada, Utah and Wyoming are the most heavily affected. The move was undertaken to avoid listing the greater sage grouse as threatened under the Endangered Species Act but drew legal challenges by trade associations for the oil and gas, mining and livestock industries. They argued that the Department failed to coordinate with affected states, as required under the Federal Land Policy and Management Act, before imposing a two-year “segregation” blocking new development with a subsequent option for another 20-year prohibition.

D.C. Circuit orders Nashville to move on pipeline application. Nashville, Tennessee’s Public Health Department illegally delayed granting or denying an air permit for a pipeline expansion project, according to the D.C. Circuit. In January 2015, Tennessee Gas Pipeline Company submitted a Clean Air Act permit application for its $400 million Broad Run Expansion Project that will run natural gas from West Virginia to points in Mississippi and Louisiana. Nashville had contended the Clean Air Act’s 18-month deadline to grant or deny a permit did not begin until the company submitted a “completed” application and claimed that various elements were missing from the January 2015 application package. The court, however, found that the company’s application met requirements listed in the city’s regulations and that, if Nashville required additional information, it could request that after the 18-month deadline began to run. The parties will now brief how long Nashville should have to act on the company’s permit application upon remand.

Environmental groups sue to block Wyoming oil and gas leases. WildEarth Guardians and Physicians for Social Responsibility sued BLM to void oil and gas leases in Wyoming until it reviews potential climate change impacts from development under NEPA. The leases were sold in 2015 and 2016; however, the groups argued that the change in administrations now warrants additional NEPA scrutiny of greenhouse gases. The groups claim that the suit is part of a broader strategy to force government agencies to perform detailed reviews of greenhouse gas emissions and climate change impacts from oil and gas development.

Environmental groups protest Utah lease sale citing sage grouse. Several environmental groups filed protests with BLM to block a planned oil and gas lease sale in central Utah, claiming that using hydraulic fracturing in the area to develop oil and gas resources would drive the local greater sage grouse population to extinction. The groups claim that the area sage grouse population declined 40 percent in the past four years, requiring monitoring and adaptive management under the 2015 federal sage grouse conservation plan, and that BLM failed to properly examine the sales under NEPA. The area is designated as the Sheeprock Mountain Sage-grouse Management Area and deemed a “priority habitat management area” under the conservation plan. BLM stated that it could move forward with the sale because it would require habitat restoration efforts to accommodate the grouse population and that BLM would conduct further NEPA review before authorizing drilling or production.

Earthworks taking optical gas imaging cameras on tour. Environmental group Earthworks is using optical gas imaging cameras that capture forward-looking infrared (FLIR) images of hydrocarbons to take videos of compressors and other oil and gas infrastructure around the country. Earthworks claims that the colorful images reveal oil and gas development as far more environmentally damaging than portrayed by industry. As part of its Community Empowerment Project, Earthworks is taking images of oil and gas facilities in six states in order to file enforcement complaints and drum up opposition to hydraulic fracturing, midstream facilities and pipelines among local government officials. Although Earthworks has been taking FLIR images of oil and gas facilities since 2014, it is devoting more efforts to the Community Empowerment Project with both EPA and BLM seeking to revise regulations for oil and gas emissions. Industry representatives note that the cameras can also detect water vapor and that Earthworks fails to distinguish between water vapor and hydrocarbons when putting on its road show for local officials. They also argue that any emissions shown are covered by permits, which Earthworks fails to account for in its presentations.

Ohio EPA takes actions against Rover Pipeline, LLC over alleged environmental violations. The Ohio Environmental Protection Agency (Ohio EPA) issued a Director’s Findings and Orders obligating Rover Pipeline, LLC (Rover) to take certain steps to ameliorate alleged spills, stormwater discharges and other environmental concerns that have arisen during the pipeline’s construction and horizontal drilling activities.  The Ohio EPA separately sent a letter to the state Attorney General urging his office to sue Rover for penalties over the alleged violations and notifying the Attorney General that Ohio EPA will in the future ask his office to seek an injunction if it determines that Rover is not complying with the Findings and Orders. The Rover Pipeline is designed to run over 700 miles upon completion later this year, transporting approximately 3.25 billion cubic feet per day of natural gas from processing plants in West Virginia, Ohio and Pennsylvania to various pipeline interconnects.