The Rescission Rule: Profit over Environment

By Woenho Chung*

The Trump administration completed its long-fought endeavor to rollback an Obama-era regulation, allowing the energy sector corporations more freedom to release methane into the atmosphere. On September 18, 2018, the U.S. Department of Interior’s Bureau of Land Management (“BLM”) released a final rule (the “Rescission Rule”) that essentially repealed a restriction on the intentional venting and flaring of methane from drilling operations.[i] Among numerous rollbacks of regulations, abandoning the requirement for corporations to maintain a certain capture target for wasted natural gas may be the best example of the philosophy of the administration toward the environment. The new position taken by the administration in removing the requirement to establish a capture target also raises an interesting question regarding the role of environmental regulations in the current administration.

Methane, in the context of climate change and greenhouse gases, is not as widely discussed as carbon dioxide. Methane only makes up about ten percent of greenhouse gases, but it is anywhere from 25 to 84 times stronger than carbon dioxide in trapping heat in the atmosphere.[ii] About one-third of methane pollution is estimated to come from oil and gas operations.[iii]

Oil wells release methane waste in the form of natural gas through venting, flaring or leaks. One way the Waste Prevention Rule of 2016 sought to minimize wasted gas through venting or flaring was by establishing a capture target, which forced corporations to capture a certain percentage of the wasted gas.[iv] One major change that the Rescission Rule brought about was the repeal of this capture percentage requirement. Instead, the wasted gas from venting or flaring was now regulated by any applicable state regulation. If no such regulations existed, the Rescission Rule required the operators to comply with the Notice to Lessees and Operators of Onshore Federal and Indian Oil and Gas Leases, Royalty or Compensation for Oil and Gas Lost (NTL-4A).[v] Two important facts should be emphasized regarding these regulations that are now supposed to control methane release. First, there are currently no states that have a comprehensive set of requirements addressing flaring, venting and leaks.[vi] The Waste Prevention Rule of 2016 had addressed all three avenues – flaring and venting through the capture percentage rule and leaks through other, now repealed, regulations. Second, the NTL-4A was established in 1979 and in 2018, it is without a doubt outdated.[vii] Technologies and practices in the areas of oil and gas production have changed and advanced since 1979.

BLM justified the repeal of the capture target requirement by claiming that the Waste Prevention Rule had exceeded BLM’s statutory authority. BLM claimed that there existed a longstanding practice of interpreting the regulation of waste within the boundaries of the economics of capturing and marketing the captured gas as perceived by an individual operator.[viii] In other words, BLM expected companies to regulate waste of oil or gas “where compliance costs [were] not greater than the monetary value of the resources they [were] expected to conserve.”[ix] BLM’s new definition of waste focused exclusively on whether a private operator was making a profit.

The most recent definition of waste that takes into consideration this profitability of private operators is vastly different from that given in BLM’s previous statement. In 2016, BLM stated that regulation of waste had to consider the interests of the public and state.[x] The previous administration’s Waste Prevention Rule emphasized environmental and public health at the sacrifice of private operators and potentially the economy. In contrast, the current administration places more importance in the economy and the profitability of corporations over public health and issues regarding climate change.

BLM also claimed that the Waste Prevention Rule had created unnecessary regulatory overlap with EPA and state regulations.[xi] Uniform federal standards were unnecessary because existing EPA and state regulations were sufficient to prevent waste. This comes across as a weak excuse since BLM in 2016 concluded that such “wholesale delegation to the states [wa]s impermissible,” because state regulations did not cover the whole industry.[xii]

The current BLM is not shy to admit that the current administration stresses economy over environment. In an interview, Katharine MacGregor, a deputy assistant to Secretary of Interior said the following; “Do you want to pay and install a lot of new equipment on these wells, or is it more economically viable for them — and a choice they would have to make — to shut that production in?”[xiii]

This issue of economy versus environment has become a partisan one with both sides interpreting forecasts of economic costs and benefits to back up their side of the argument. A study in 2010 by the Economic Policy Institute claimed that the dollar value of benefits from implementing the 2016 Waste Prevention Rule would vastly outweigh the costs, without even considering the environmental or health issues.[xiv] On the other hand, pro-repeal media outlets have claimed that the burden was too costly and would lead to job losses.[xv] Republican Senator from Wyoming, John Barrasso, also supported this notion that “this regulation w[ould] only discourage energy production, job creation, and economic opportunity.”[xvi] These outlets also cited the EPA that showed a yearly decrease in methane release from the energy sector companies, concluding that the industry should be trusted to regulate itself.[xvii] With both sides arguing about the number of jobs lost versus that of new jobs created and expensive upfront cost versus long-term benefits from incentives and from recaptured natural gas, it is unclear how the economy would fare. This takes us back to weighing profit versus environment and the question of which of the two should be prioritized by environmental regulations. But are we even sure who the repeal would profit? Workers in the energy sector?

One winner of the recent change is quite clear. Industry groups praised the changes. Kathleen Sgamma, president of the Western Energy Alliance, an association of independent oil and gas companies that is based in Denver, said that the Obama-era methane rule “was the definition of red tape. It was a record-keeping nightmare that was technically impossible to execute in the field.”[xviii] Ms. Sgamma in the same quote praised the Trump administration for turning the oil companies’ requests into policy. “It all depends on who you trust,” she said. “That administration trusted environmentalists. This one trusts industry.”[xix]

Then, who are the losers? Perhaps everyone.

*Woenho Chung is a Junior Editor on MJEAL. He can be reached via email at whchung@umich.edu.


The views and opinions expressed in this blog are those of the authors only and do not reflect the official policy or position of the Michigan Journal of Environmental and Administrative Law or the University of Michigan.

[i] EELP Staff, BLM Methane Waste Prevention Rule, HLS: Environmental & Energy Law Program, http://environment.law.harvard.edu/2017/09/methane-waste-prevention-rule/ (last visited Nov. 19, 2018).

[ii] Greenhouse Gas Emissions, United States Environmental Protection Agency, https://www.epa.gov/ghgemissions/overview-greenhouse-gases (last visited Nov. 19, 2018).

[iii] Methane: The other important greenhouse gas, Environmental Defense Fund https://www.edf.org/climate/methane-other-important-greenhouse-gas (last visited Nov. 19, 2018).

[iv] Complaint for Injunctive Relief, Sierra Club et al., v. Zinke. No. 3:17-CV-03885 (N.D. Cal. 2018), https://www.doi.gov/sites/doi.gov/files/agreements-settlements/document/denver-624921-v1-vf-revision-rule-environmental-group-complaint.pdf.

[v] EELP Staff, BLM Methane Waste Prevention Rule, HLS: Environmental & Energy Law Program http://environment.law.harvard.edu/2017/09/methane-waste-prevention-rule/ (last visited Nov. 19, 2018).

[vi] Id.

[vii] Id.

[viii] Complaint for Injunctive Relief, supra note 4.

[ix] Id.

[x] Id.

[xi] Complaint for Declaratory and Injunctive Relief, California and New Mexico v. BLM, 3:17-cv-07186 (N.D. Cal 2018), https://oag.ca.gov/system/files/attachments/press-docs/18-05712-california-v-zinke-complaint.pdf.

[xii] Id.

[xiii] Gregory Wallace, Trump Administration rewrites Obama-era rule for potent greenhouse gas, CNN (Sept. 18, 2018), https://www.cnn.com/2018/09/18/politics/blm-methane-rule/index.html.

[xiv] Isaac Shapiro, Combined effect of the Obama EPA rules, Economic Policy Institute (Sept. 19, 2011), https://www.epi.org/publication/combined-effect-obama-epa-rules/.

[xv] Barry Russell, Good riddance to Obama’s gas flaring rule, Wash. Examiner (Oct. 1, 2018), https://www.washingtonexaminer.com/opinion/op-eds/good-riddance-to-obamas-gas-flaring-rule.

[xvi] Juliet Eilperin, Chelsea Harvey, Senate unexpectedly rejects bid to repeal a key Obama-era environmental regulation, Wash. Post (May 10, 2017), https://www.washingtonpost.com/news/energy-environment/wp/2017/05/10/senates-poised-to-repeal-a-final-obama-era-rule-as-soon-as-wednesday/?utm_term=.5de477f6687b

[xvii] Russell, supra note 15.

[xviii] Coral Davenport, Trump Administration Wants to Make It Easier to Release Methane Into Air, N.Y. Times (Sept. 10, 2018), https://www.nytimes.com/2018/09/10/climate/methane-emissions-epa.html.

[xix] Id.

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