Noah Perch-Ahern

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Trump Methane Rollbacks May Spark Litigation, Hinder Greenhouse Gas Regulation

Originally published on Bloomberg Law

The Trump administration’s new final rules governing methane emissions in the oil and gas industry culminate a multi-year process to roll back limitations promulgated toward the end of the Obama administration. Though the rules address new sources, the changes may directly affect EPA regulation of existing sources and other greenhouse gases (GHGs).

The new rules rescind methane-specific emissions limits for the “production and processing” segments of the oil and gas industry, and remove the natural gas “transmission and storage” segment from regulation under the 2012 and 2016 New Source Performance Standards (NSPS) for the Oil and Natural Gas Industry.

The EPA asserts that the Obama regulations failed to make a formal “significant contribution finding” prior to setting performance standards for methane or the transmission and storage “source category.” It said this threshold finding is required prior to regulating any air pollutant that was not considered when the agency first listed or regulated an industry category.

Higher Bar to Future GHG Regulation

Section 111(b) of the Clean Air Act (CAA) directs the EPA to promulgate NSPS for new, modified, and reconstructed sources that significantly contribute to air pollution that may be reasonably anticipated to endanger public health or welfare. Once NSPS are established for new and modified sources in a given source category, Section 111(d) requires the EPA to set standards for existing sources in that same category.

By asserting that the EPA is required to make a formal “significant contribution finding” for a specific pollutant (e.g. methane) before regulating it in a particular source category, regulating GHGs going forward may become more difficult.

Critics note that in the past, the EPA revised NSPS for coal plants and added emissions standards for SO2, NOx, and CO without making individualized findings. Now, however, the EPA may be required to evaluate the specific pollutants from each source category in an industry and then find that each one separately makes a significant contribution to dangerous air pollution.

Failure to make this threshold finding could preclude regulation under the NSPS for new and modified sources, which would then eliminate the regulatory trigger requiring the EPA to establish emissions limits for existing sources.

Expect Additional Lawsuits

In 2017, following an executive order by President Trump, the EPA tried to delay implementation of the initial rules by imposing a 90-day stay followed by a two-year extension. The D.C. Circuit ruled against the administration, finding the delay “arbitrary and capricious” and unlawful.

In July, multiple state attorneys general filed suit to compel development of existing source rules for methane. Now that the limits have been scrapped for new sources, the EPA has moved to dismiss the lawsuit as moot.

As with other efforts to reverse Obama-era regulations (see, e.g., changes to the Clean Power Plan, automobile emissions standards, and the Dakota Pipeline), attempts at repealing and replacing the existing requirements have been met with allegations of inadequate scientific justification, violations of rulemaking procedures, and failure to fulfill statutory obligations.

Various environmental groups have pledged to challenge the latest rules in court. In addition to important administrative law implications, these lawsuits may involve judicial interpretation of necessary EPA findings required to regulate GHGs under the CAA.

Political Ping Pong and Regulatory Uncertainty

Unfortunately for industry, there may not be regulatory certainty for some time. For example, if Trump is re-elected, the new rules will likely be subject to continued litigation. If Democratic nominee Joe Biden is elected, the rollbacks may be rescinded under the Congressional Review Act or other procedures.

But if past is prologue, such rescissions could also face legal opposition and become mired in years-long litigation.

Amid the political ping pong, industry is left to deal with a patchwork of state methane regulations. Notably, several of the biggest industry players—including Exxon, Shell, and BP—have urged preservation of the Obama-era restrictions, concerned that lax emissions standards will damage European exports and undermine green marketing efforts promoting natural gas as a cleaner bridge fuel.

Many larger entities have already adopted voluntary standards or invested in new technology to detect and fix leaks. While this private industry response may reduce the practical impacts of the continuing fight over methane rules, as stated above, there are potential larger legal issues at stake, including the requisite triggers for CAA regulation of GHG sources.

If the past few years are any indication, the battle may be far from over.