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Energy and Environment Monitor

D.C. Circuit Temporarily Recalls Its Mandate in Seesaw Battle Arising Out of EPA’s Efforts to Roll Back Obama-Administration Methane Gas Rules.

July 20, 2017

By: Kevin M. McGuire

On July 13, 2017, the U.S. Court of Appeals for the D.C. Circuit temporarily recalled its mandate previously issued contemporaneously with the entry of its July 3rd opinion rejecting EPA Administrator Scott Pruitt’s stay of portions of Obama-era “New Source Performance Standards” for the oil and gas sector.  In rejecting Administrator Pruitt’s request for a longer extension of time to comply with its July 3rd opinion, the Court highlighted the limited scope of the recall:

This order recalls the mandate for a limited period … to give EPA time to “determine whether to seek panel rehearing, rehearing en banc, or pursue other relief.”  To stay issuance of the mandate for longer 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."

The new rules, now effective July 27, 2017, include a deadline of June 3, 2017 for regulated entities to conduct an initial monitoring survey to identify leaks from equipment.

When the new rules were adopted in June 2016, several industry groups, including the American Petroleum Institute, petitioned EPA to reconsider four aspects of the rules under Section 307(d)(7)(B) of the Clean Air Act, authorizing an administrative stay pending reconsideration under certain circumstances. The industry groups argued that the four objectionable provisions of the new rules were not included in the proposed rule, which was published for public comment, and requested that they be stayed pending reconsideration.

EPA Administrator Pruitt agreed with the merits of the petition and, on June 5, 2017, published notice of a 90-day partial stay of the new rules pending EPA’s reconsideration of the four objectionable provisions. Pruitt’s stay was made effective June 2, 2017, one day before the June 3, 2017 deadline for regulated entities to conduct monitoring to identify leaks from equipment.  The administrative stay was subsequently extended for two years when EPA published notice of its intention to reconsider the entire 2016 rule.

Environmental groups, including the Natural Resources Defense Council, filed an emergency petition with the Court claiming EPA’s administrative stay was unauthorized under Section 307(d)(7)(B). Petitioners argued that the issues to be reconsidered had already been the subject of deliberation during the comment period.  EPA and industry groups disagreed and further argued that the Court did not have jurisdiction to hear the petition because the stay was not a final agency action.

The Court disagreed and found that it had jurisdiction to hear the environment groups’ petition. The Court reasoned that the stay, although not the “consummation of the agency’s decision-making process,” nevertheless constituted final agency action because delay of the rule’s effective date was “tantamount to amending or revoking a rule.”  With respect to its jurisdiction, the Court concluded “because the stay relieves regulated parties of any obligation to meet the June 3 deadline …, the order is sufficiently final to warrant review.”

The Court began its substantive analysis noting that environmental petitioners sought either a “judicial stay” of EPA’s administrative stay, or “summary disposition” on the merits and “vacatur” of EPA’s stay as “clearly unlawful.” Finding that the 90-day stay was unauthorized by section 307(d)(7)(B), the Court saw no need to apply the four-factor standard for a judicial stay pending judicial review.  Instead, as discussed below, the Court found that since EPA’s stay was based solely on a “premise as to the applicable rule of law” and the “facts [were] established or of no controlling relevance,” the Court could resolve the merits.  The Court then vacated the stay as “arbitrary, capricious, and in excess of statutory authority.”

Explaining its rationale, the Court framed the determinative issue as whether it was “impractical” for the industry groups to raise their objections before the rule was made final. For each of the four provisions, the Court reviewed the administrative record for whether the final rule was a “logical outgrowth” of the proposed rule thereby permitting industry to raise its objections during the comment period.  Based on its review, the Court found that industry had ample opportunity to raise and comment on the issues that they now sought to raise for further review.  In sum, the Court concluded it was not “impracticable” for industry to have raised the objections during the comment period and a stay was therefore not authorized under Section 307(d)(7)(B).  Although the stay was lifted, the Court noted that EPA’s reconsideration of the final rule, pursuant to its June 16, 2017 notice of proposed rule-making, could continue. 

In reaching its result, the Court relied heavily on prior precedent that “an agency issuing a legislative rule is itself bound by the rule until the rule is amended or revoked” and “may not alter [such a rule] without notice and comment.” EPA argued that it had “inherent authority” to issue a brief stay of a final rule, or , as the Court put it, “authority to not enforce a lawfully issued final rule while it reconsiders it.”

The Court found two fundamental flaws in the argument. First, there was no support for such authority since it is “axiomatic” that administrative agencies may act only pursuant to authority delegated to them by Congress.  The Court noted that EPA relied on section 307(d)(7)(B), which clearly delineates when stays are authorized.  EPA may stay a final rule if a petitioner demonstrates “impracticability” to comment on an issue of “central relevance.”

Second, the Court found that, in granting reconsideration and staying the rule, EPA did not rely on “its so-called inherent authority.” Instead, it found that EPA expressly acted pursuant to section 307(d)(7)(B), authorizing the agency to grant a stay during “such reconsideration,” a term that “quite obviously” refers back to the reconsideration that EPA “shall” undertake when someone presents an objection of “central relevance” that was “impracticable” to raise during the period for public comment.  As such, the Court looked for whether the industry groups met the two requirements for mandatory reconsideration.

The Court bypassed the issue of what standard of review to apply (“arbitrary and capricious” or “limited deference”) because it found EPA’s decision to stay the methane rule was arbitrary and capricious, thus unlawful even under the more deferential standard. In the final analysis, the Court concluded that “industry groups had ample opportunity to comment on all four issues on which EPA granted reconsideration” … and … in “several instances the agency [had] incorporated those comments directly into the final rule.”  Because it was thus not “impracticable” for industry groups to have raised such objections during the notice and comment period, section 307(d)(7)(B) did not require reconsideration and did not authorize the stay. 

While perhaps dashing the hopes of industry and the new administration for immediate relief from the burdens of the prior administration’s regulatory overreaches, the Court foreshadowed where the future battles will be fought:

We emphasize, however, that nothing in this opinion in any way limits EPA’s authority to reconsider the final rule…. [EPA] is free to [reconsider the methane rule] as long as “the new policy is permissible under the statute …, there are good reasons for it, and …the agency believes it to be better.”

This article was authored by Kevin M. McGuire, Jackson Kelly PLLC.


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