United States: D.C. Circuit Vacates U.S. EPA's Decision To Stay Implementation Of Methane Rules

Last Updated: September 12 2017
Article by Shimshon Balanson

On July 3, 2017 in a tightly contested 2–1 decision, the United States Court of Appeals for the D.C. Circuit held that EPA lacked authority under the CAA to unilaterally stay portions of a final rule establishing methane regulations for new oil and gas infrastructure. See Clean Air Council, et al. v. Administrator of EPA, et al., No. 17-1145. 

In June 2016, EPA promulgated a final rule to establish "new source performance standards" for fugitive emissions of methane and other pollutants by the oil and natural gas industry. The rule took effect in August 2016. Several industry groups then petitioned EPA to reconsider the rule, arguing reconsideration was mandatory because the final rule included provisions not set forth in the proposed rule. Finding the petitions raised at least one objection warranting reconsideration, EPA Administrator Scott Pruitt announced that EPA would issue a 90-day stay of compliance under Section 307 of the CAA. Two months later, EPA published a notice of reconsideration and partial stay that, among other things, granted reconsideration on four elements of the rule. 

Six environmental groups challenged EPA's efforts to stay the methane rule. They argued that all of the issues identified by Administrator Pruitt and the industry groups could have been and actually were raised and deliberated during the comment period. EPA and a group of intervening oil and gas associations opposed the challenge, arguing that the D.C. Circuit lacked jurisdiction to review the stay, and that, in any event, the challenge failed on the merits.  

With respect to jurisdiction, the panel held that although an agency's decision to grant a petition to reconsider a regulation is not reviewable, EPA's suspension of the rule's compliance deadlines was tantamount to amending or revoking the rule, which is a reviewable final agency action. The court also noted that, by staying the rule's effective date and compliance duties, EPA had affected rights and obligations of regulated parties, likewise rendering the stay reviewable.  

On the merits, the panel concluded that Section 307 did not authorize EPA's 90-day stay, and the stay was therefore arbitrary, capricious, and in excess of statutory authority. The court rejected EPA's argument that it had "inherent authority" to issue a stay. Because agencies may act only pursuant to authority delegated by Congress, the court explained, EPA must point to something in the CAA or Administrative Procedures Act conferring such authority. EPA relied solely on Section 307(d)(7)(B) of the CAA, authorizing an agency to grant a stay only if reconsideration was mandatory. The court thus addressed whether a stay was mandatory because the industry groups seeking a stay had presented an objection of "central importance" that was "impracticable to raise during the public comment period." And as to each objection, the panel found that the record demonstrated that the industry groups had ample opportunity to raise their objections during the comment period. As a result, the court granted the environmental groups' motion to vacate the stay. 

In dissent, Judge Brown took the position that the D.C. Circuit lacked jurisdiction to hear the petition, because EPA's issuance of a stay was not a final agency action. According to Judge Brown, the 90-day stay neither consummated the agency's decision-making process nor created obvious consequences for regulated parties. Instead, the stay was an interim step that allowed EPA to devote resources to reconsidering the rule rather than enforcing it and industry to avoid implementing changes that reconsideration may later obviate.  

The D.C. Circuit issued its mandate concurrent with its opinion. EPA moved the court to recall the mandate, arguing that the mandate required EPA to comply immediately with the decision, contrary to the usual practice of giving regulated parties a minimum of 52 days to comply. On July 13, 2017, the panel recalled the mandate, but for only 14 days, noting that a longer delay "would hand the agency, in all practical effect, the very delay in implementation this panel determined to be 'arbitrary, capricious, [and] ... in excess of [EPA's] statutory ... authority.'"

On July 27 and July 28, 2017, intervening oil and gas associations and several intervening states petitioned the D.C. Circuit for rehearing en banc. In those petitions, the intervenors asked that the court further delay issuing the mandate until after disposition of their en banc petitions. The court rejected that request and, on July 31, 2017, ordered that the clerk issue the mandate. Shortly thereafter, on August 10, 2017, the court denied the petitions for rehearing en banc. 

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Shimshon Balanson
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