The Bureau of Land Management (BLM) released a draft environmental assessment (EA) evaluating the potential environmental impacts of lifting the federal coal leasing moratorium. Publication of the draft EA opens a 15-day comment period that ends on June 6, 2019. This review was necessitated by the April 19 decision of the US District Court for Montana in Citizens for Clean Energy, et al v. Department of the Interior, et al. The court held that BLM’s actions in lifting the moratorium via a March 2017 secretarial order (Zinke Order) were arbitrary and capricious and in violation of National Environmental Policy Act (NEPA) because it was a major federal action for which there was no such review. The court did not immediately reinstate the coal leasing moratorium or require a specific environmental review, but instead stated that BLM had an obligation to study the environmental impacts of lifting the coal leasing moratorium and required the parties to submit additional briefing on the remedy. Continue Reading BLM Releases Draft Environmental Assessment for Lifting Coal Leasing Moratorium

On May 15, 2019, EPA released its draft Study of Oil and Gas Extraction Wastewater Management under the Clean Water Act (Draft Study). The Draft Study addresses the results of an extensive review initiated last year to evaluate the management of oil and gas wastewaters generated at onshore facilities and to assess the need for additional discharge options for onshore oil and gas wastewater under the Clean Water Act (CWA).[1] Although EPA has not yet adopted any recommendations for regulatory action, it is evident that EPA is continuing to take a hard look at the merits of authorizing broader discharges of produced water to surface waters than those currently allowed for onshore discharges under the CWA effluent guidelines (and generally referred to as the zero discharge standard).[2] See 40 CFR Part 435, Subpart C. EPA is now requesting additional public comment on the Draft Study by July 1 of this year with the goal of finalizing it and determining next steps this summer. Continue Reading Expanded Produced Water Discharge Options – On the Horizon?

On March 15, 2019, the House Subcommittee on Environment and Climate Change held a hearing titled, “Protecting Americans at Risk of PFAS Contamination & Exposure.” The hearing examined approaches to eliminate or reduce environmental and health risks to workers and the public from per- and polyfluoroalkyl substances (PFAS). Continue Reading House Conducts PFAS Hearing

The US Environmental Protection Agency (EPA) has recently determined that no revisions to existing RCRA Subtitle D regulations for the management of oil and gas wastes are necessary. This conclusion follows EPA’s completion of an extensive review to fulfill the requirements of a Consent Decree entered by the US District Court for the District of Columbia that settled litigation filed by certain environmental organizations over EPA’s alleged failure to update its rules for management of oil and gas wastes. EPA’s findings, released on April 23, 2019, are set forth in a report titled, Management of Oil and Gas Exploration, Development and Production Wastes: Factors Informing a Decision on the Need for Regulatory Action (Report). This means that, at least for now, EPA’s longstanding position on regulation of oil and gas wastes remains unchanged. Continue Reading EPA Determines Revisions to Federal Regulation of E&P Wastes Unwarranted

On April 12, 2019, the US District Court for the Northern District of California entered an order vacating the Department of the Interior’s (DOI) repeal of the 2016 Valuation Rule due to violations of the Administrative Procedures Act (APA). The 2016 Valuation Rule made changes to the government’s methods for valuing oil, gas and coal produced on Federal and Indian lands. The court’s ruling on the APA claims may impact the Trump administration’s repeal and replace rulemakings that are scheduled to be finalized in the near future. Continue Reading Decision Vacating DOI Valuation Rule May Impact Future Rulemakings

In a lawsuit recently filed in the Southern District of New York, a group of environmental plaintiffs allege that, for nearly 30 years, the federal Environmental Protection Agency (EPA) has failed to develop worst-case hazardous substance discharge, or spill, regulations under Section 311(j)(5) of the Clean Water Act (CWA). This suit comes on the heels of EPA’s June 2018 proposal not to develop a general hazardous substance spill program under CWA § 311(j)(1) (a provision related to the Spill Prevention, Control and Countermeasure (SPCC) Rule well known to industrial facilities storing oil) because of the many other programs EPA believes already regulate the prevention and containment of hazardous substance spills. That proposal is expected to be finalized in August 2019 under a 2016 consent decree in which EPA agreed to evaluate the need for general rules governing the prevention and containment of hazardous substance spills. The new lawsuit narrowly focuses on worst-case hazardous substance spills and the need for corresponding facility response plans. Continue Reading Environmental Groups Sue EPA to Develop Worst-Case Hazardous Substance Spill Rules

The Department of Treasury and Internal Revenue Service have released Notice 2019-32 seeking comment on key issues to be interpreted in the Section 45Q carbon oxide sequestration tax credit. Congress significantly enhanced the Section 45Q tax credit in the Bipartisan Budget Act of 2018, increasing the credit from $10/ton for CO2 used as a tertiary injectant (i.e., to produce oil or gas) to $35/ton; and increasing the credit for CO2 geologically stored but not used as a tertiary injectant from $20/ton to $50/ton. See our previous blog post here for additional details on the applicable credit amounts for projects before and after enactment of the Bipartisan Budget Act and other credit amount details. Continue Reading IRS to Seek Comment on Key Issues to be Interpreted in Section 45Q Tax Credit

In Michigan v. EPA, 135 S. Ct. 2699 (2015), the Supreme Court held that the cost of regulation is an essential factor that EPA must consider when deciding whether to regulate.  Id. at 2707.  According to the Court, “[a]gencies have long treated cost as a centrally relevant factor when deciding whether to regulate.”

In subsequent regulatory proceedings, however, EPA has offered different views as to what Michigan’s cost mandate means.  At the end of the Obama Administration, EPA said Michigan only means that it need determine whether the costs of a regulatory action are “affordable” or can be “absorbed” by the regulated industry.  81 Fed. Reg. 24,421.  More recently, EPA has said that its earlier statement “does not meet the statute’s requirements to fully consider costs,” and that the Supreme Court’s decision in Michigan requires that it “meaningfully consider cost within the context of a regulation’s benefits.”  84 Fed. Reg. at 2675.

EPA’s more recent view is consistent with, if not compelled by, Michigan.  In that case, the Court did not simply direct EPA to consider cost in the abstract:  its underlying concern was that EPA had “refused to consider whether the costs of its decision outweighed the benefits” in any way.  Id. at 2706.  While the Court did not mandate a specific type of cost-benefit analysis, see id. at 2711, it nonetheless repeatedly stressed that EPA must undertake some analysis that weighs the benefits against the costs of regulation.  See, e.g., id. at 2707 (explaining “reasonable regulation ordinarily requires paying attention to the advantages and the disadvantages of agency decisions”).  As the Court succinctly put it, “[n]o regulation is ‘appropriate’ if it does significantly more harm than good.”  Id.

In Michigan, the Court faulted EPA’s refusal to “consider whether the costs of its decision outweighed the benefits.”  Id. at 2706.  According to the Court, “[o]ne would not say that it is even rational, never mind ‘appropriate,’ to impose billions of dollars in economic costs in return for a few dollars in health or environmental benefits,” id. at 2707, and  that the fundamental aim of considering cost is to “ensure that the costs are not disproportionate to the benefits.”  See id. at 2710.  Even the dissent in Michigan acknowledged that an agency “acts unreasonably” in ignoring costs and benefits because “such a process would ‘threaten[] to impose massive costs far in excess of any benefit.’”  See id. at 2716-17 (Kagan, J., dissenting) (quoting Entergy Corp. v. Riverkeeper, Inc., 556 U.S. 208, 234 (2009) (Breyer, J., concurring in part and dissenting in part)).

The Court’s emphasis on evaluating the costs of regulation in relation to their benefits is not novel:  comparing costs and benefits is an “established administrative practice” that has long been recognized as an essential feature of rational agency decision-making.  Id. at 2707-08.  A standard “is neither ‘reasonably necessary’ nor ‘feasible’ … if it calls for expenditures wholly disproportionate to the expected health and safety benefits.”  Id. at 667 (Powell, J., concurring in part and concurring in the judgment).  More recently, Justice Breyer observed that “every real choice requires a decisionmaker to weigh advantages against disadvantages,” Entergy Corp., 556 U.S. at 232 (Breyer, J., concurring in part and dissenting in part).  And as the Supreme Court said in AFL-CIO, a program of “pervasive regulation limited only by the constraint of feasibility” would reflect “unprecedented power over American industry.”  448 U.S. at 645.

This principle has broad importance for agency rulemaking.  While ATA v. Whitman, 531 U.S. 457 (2001), has been read by some to stand for the proposition that costs are irrelevant to agency decision-making absent an explicit direction from Congress, this is not correct.  Michigan confirms that meaningful consideration of the costs and benefits of regulatory action is required unless specifically precluded by Congress (as it was in the statutory provision at issue in ATA).

As noted in previous blog posts, Assembly Bill 617’s (AB 617) Community Air Protection Program (CAPP) is limited in effect to specific, named communities included in it. Thus, stationary sources not located in a CAPP included community are not regulated by CAPP. However, AB 617’s new requirements are not limited to CAPP. AB 617 also requires the California Air Resources Board (CARB) to develop new regulations for criteria pollutant and toxics emissions reporting. The new regulation, titled “Regulation for the Reporting of Criteria Air Pollutants and Toxic Air Contaminants” (CTR Regulation) is not yet finalized, but the current draft will apply to stationary sources throughout California, regardless of whether they are located in a CAPP community. Continue Reading California’s New Criteria Pollutant and Toxics Emissions Reporting Regulation

Last week, the Fifth Circuit found that Lloyd’s syndicates may not subrogate against an additional insured and may not force that additional insured to arbitration. Lloyd’s Syndicate 457 v. FloaTEC, LLC, No. 17-20550 (5th Cir. Apr. 17, 2019).

The case arose out of an oil platform in the Gulf of Mexico called Big Foot, owned and operated by Chevron. Chevron contracted with FloaTEC to engineer steel tendons to moor Big Foot to the ocean floor. The contract between Chevron and FloaTEC contained an arbitration provision.

 

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