American Oil and Gas Reporter - May 2019 - 33

State Legislative Report

Washington State Limits Crude By Rail
OLYMPIA, WA.-The Washington
State Legislature has approved legislation
that could severely restrict, if not totally
block, rail transport of Bakken crude oil
to refineries in the state, despite threats
of a lawsuit from North Dakota.
On April 22, the Washington Senate
concurred with amendments approved
April 12 by the state House of Representatives and sent HB 5579 to Governor
Jay Inslee. The legislation prohibits any
facility "from unloading or loading crude
oil into or from a rail tank car unless the
oil has a vapor pressure of less than 9.0
pounds per square inch."
The restriction applies immediately
to facilities constructed or permitted after
Jan. 1, 2019. For existing facilities, it
would apply "beginning two years after
the volume of crude oil transported to
the facility in a calendar year has increased
by more than 10% above the volume re-

ported for calendar year 2018."
HB 5579 also requires facilities to provide the Washington Department of Ecology
with advance notice of the type and vapor
pressure of crude oil they receive by rail.
Published reports say that as introduced,
HB 5579 would have applied the 9.0
vapor pressure standard immediately, but
it was amended to provide the two-year
grace period for existing facilities, thus
effectively capping their imports of Bakken
crude at 2018 levels.
However, North Dakota Petroleum
Council Vice President Kari Cutting says
that does not make the bill any more palatable to the state or its oil and gas producers.
"It is the same bill; just a few different
amounts," she complains. "The state of
North Dakota still plans to litigate this bill
as a violation of interstate commerce law."
Washington produces no crude oil,
but is the fifth largest refiner in the United

States with a capacity of 638,000 barrels
a day, according to published reports.
Last year, reports say, Washington imported 184,000 bbl/d of crude by rail, of
which 90 percent came from North Dakota.
The state imported another 262,000 bbl/d
by vessel and 81,000 through the Trans
Mountain Pipeline from Canada.
Cutting warns the new vapor pressure
standards will hamper Washington refineries' ability to manage their feedstocks. "If
docks or a pipeline have maintenance-
scheduled or not-the refinery cannot bring
in additional volumes by rail to make up
the shortfall even in the short term, without
potentially triggering a vapor pressure restriction in two years," she points out.
Washington's new vapor pressure limit
of 9.0 psi is well below a 13.7 psi limit
the state established in 2015 and the national standard for rail shipments of 14.7
psi, published reports note.
❒

Courts Rule On Two Public Land Regs
Two federal court rulings regarding Obama-era public land regulations went opposite
directions from industry's perspective.
On March 29, the U.S. District Court
for the Northern District of California
overturned the Trump administration's
August 2017 repeal of the Office of
Natural Resources Revenue's Consolidated
Federal Oil & Gas Federal and Indian
Coal Valuation Reform Rule adopted in
June 2016 under President Obama.
But on April 9, the U.S. Court of
Appeals for the 10th Circuit in Denver
upheld a stay of the U.S. Bureau of Land
Management's 2016 Waste Prevention,
Production Subject to Royalties and Resource Conservation Rule (i.e., venting
and flaring regulation), which required
producers to reduce by half methane flared
from wells on public and tribal lands.
The lawsuit filed by California Attorney
General Xavier Becerra and New Mexico
Attorney General Hector Balderas challenging President Trump's repeal of the
Obama ONRR's royalty valuation rule focused primarily on how it impacted coal
royalties. Nevertheless, the rule had been
criticized by oil and gas industry representatives because it allowed ONRR to substitute
a "default valuation" for oil and gas sold
under an arm's-length contract if the agency
believed the royalty calculation was too
low (AOGR, August 2016, pg. 111).

The attorneys general, who contend
the district court ruling will earn taxpayers
$71 million a year more in federal royalties,
filed four summary judgment motions, of
which the court granted one. Judge Saundra
Brown found ONRR's August 2017 repeal
violated the Administrative Procedure Act
by failing to provide a reasoned rationale
for repeal as well as by failing to consider
alternatives to a complete repeal.
"ONRR's . . . final repeal fails to satisfy
its obligation to explain the inconsistencies
between its prior findings in enacting the
valuation rule and its decision to repeal
such rule," Brown wrote, adding later:
"The notice required by the APA . . . must
disclose in detail the thinking that has animated the form of a proposed rule and
the data on which that rule is based. That
level of detail is lacking in the proposed
repeal, which merely recites conclusions."
In a statement following the ruling,
Becerra and Balderas assert, "The biggest
winners are the American taxpayers who
now will receive their fair share of royalties
from private companies that profit from
oil, coal and natural gas extracted from
federal lands."
Venting And Flaring Rule
Under President Obama, BLM released
its final venting and flaring regulations
in November 2016. Those were challenged

immediately by the Western Energy Alliance and the Independent Petroleum
Association of America (AOGR, December
2016, pg. 32).
In June 2017, the Trump administration
attempted to postpone compliance with
the Obama regulations, utilizing Section
705 of the APA, but the U.S. District
Court for the Northern District of California invalidated that effort in October
2017 (AOGR, November 2017, pg. 30).
That same month, BLM initiated a proposed rule making to postpone or delay
implementing the Obama rule, which it
finalized in December 2017 (AOGR, January 2018, pg. 24). Then in February
2018, BLM released a proposed rewrite
of the venting and flaring regulation.
Also in February, the Northern California District Court granted a preliminary injunction to the states of California
and New Mexico along with a group of
environmental organizations against
BLM's December rule that postponed
the Obama regulation.
But in April 2018, Judge Scott Skavdahl
in the U.S. District Court for the District
of Wyoming, ruling on IPAA's and the
Western Alliance's original challenge,
stayed enforcement of the Obama regulation to "provide certainty and stability
SEE COURTS PAGE 97
MAY 2019 33



American Oil and Gas Reporter - May 2019

Table of Contents for the Digital Edition of American Oil and Gas Reporter - May 2019

Contents
American Oil and Gas Reporter - May 2019 - Intro
American Oil and Gas Reporter - May 2019 - 1
American Oil and Gas Reporter - May 2019 - 2
American Oil and Gas Reporter - May 2019 - Contents
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