American Oil and Gas Reporter - July 2015 - 27

WASHINGTONWATCH
Without Congress,
Industry Turns To Courts
To Fight Regulations
Despite Republican control of both houses of Congress, gridlock remains. The House of Representatives can push through legislation favored by the Republican majority. However, in the Senate, Republicans lack the 60 votes needed to invoke cloture. If
the Republican majority succeeds in pushing through a bill opposed by the president, it lacks the two-thirds vote needed to override a veto. And many issues don't always fall along party lines.
With Congress unable to approve much beyond must-pass
items, federal agencies have considerable leeway in crafting regulations. When a proposed rule becomes final and is opposed by
affected groups, the only recourse is litigation. That recourse is
now a common event.
The U.S. Environmental Protection Agency and the Department of the Interior are among the more active agencies in proposing rules that impact the oil and natural gas industry. EPA is
implementing the administration's Climate Action Plan, which
focuses on methane emissions from oil and natural gas production.
The coal industry already challenged EPA's Clean Power Plan
and its regulation of carbon dioxide emissions from existing power plants. The U.S. Court of Appeals for the D.C. Circuit rejected this initial lawsuit in early June on the grounds that EPA had
not yet issued a final rule, which is expected this summer (see story page 15). While this litigation may be resurrected once the rule
becomes final, companies cannot wait until then to determine how
to comply.
The U.S. Supreme Court will issue its decision soon on EPA's
regulation of air toxins and mercury. While in theory, industry
does not know the final outcome, the costs of compliance already
are so expensive that a number of coal-fired generation facilities
have closed or are planning to do so.
The oil and gas industry is facing a number of regulatory hurdles from DOI's Bureau of Land Management. BLM has been
developing a drilling regulation for federal onshore lands for more
than four years. These areas are subject already to state regulatory programs that have effectively protected federal lands. In response to pressure from environmental groups, and in spite of a
strong showing from industry on the capability of state oversight,
BLM issued its final hydraulic fracturing rule on May 14. The
following day, the Independent Petroleum Association of America and the Western Energy Alliance filed for a motion that would
enjoin BLM from making the final rule effective on June 24.
Early legal challenges-in fact, all legal challenges-to agency
rules must overcome the high bar of deference that courts generally grant to federal agencies. Given the odds against success,
some may question expending the resources. In the case of BLM's
frac rule, IPAA General Counsel Matthew Kellogg explains, "Litigation has impacts beyond the ultimate decision of the court. IPAA
has improved technical aspects of the BLM's rule makings regulating drilling activities on federal lands over time."
It also is critical for industry to follow through in court, as
groups contending that a final rule doesn't go far enough are likely to pursue litigation of their own. The risk of not having a seat

"It is critical to follow through, as groups

contending that a rule doesn't go far enough

are likely to pursue litigation of their own.

at the table, should the litigation lead to settlement talks, is painfully apparent in the implementation of the Endangered Species Act.
Between 2008 and 2011, a few environmental groups requested that more than 1,230 species be listed, compared with only 20
such requests annually over the prior 12 years.
Such an insurmountable workload leads to missed deadlines,
additional lawsuits from environmentalists, further settlements,
and payment of legal fees to the plaintiffs. This process is repeated
ad nauseam. Industry must make its case with comparable strength.
Some industry groups are endeavoring to meet this challenge.
Another case heading for court involves crude-by-rail regulations from the Department of Transportation. In May, DOT set
new standards for rail cars and a timeline for replacing certain
older cars. Environmental groups allege in their suits that the rules
are too lenient and are pushing for a shorter timeline. Industry
argues in its challenge that the timeline is so aggressive as to not
be feasible.
The environmental groups sued in the U.S. Court of Appeals
for the 9th Circuit in San Francisco, which often is a favorable
venue for environmental causes. The machinations of legislative
appeals already are in play, where DOT has chosen the D.C. Circuit as the proper venue, prompting the consolidation of four challenges in separate circuits.
Litigation is costly and seldom leads to a clear victory in court.
But industry cannot risk having adverse regulation shifted in an
even harsher direction. By litigating and building a strong
record leading up to litigation, industry often can achieve some
margin of success in an agency's direction. Litigation is inevitable,
and industry must be present.
r

SUSAN GINSBERG is vice
president of crude oil and natural gas regulatory affairs for
the Independent Petroleum
Association of America. She
covers legislation and regulation, focusing on the CFTC
and FERC. Her experience in
natural gas regulatory affairs
spans 25 years.

JULY 2015 27

American Oil and Gas Reporter - July 2015

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