The Nickel Report

In March of this year, we provided an update regarding how lower courts were applying the Supreme Court’s landmark decision in Kisor v. Wilkie, 139 S. Ct. 2400 (2019), which addressed the question of whether the Court should overrule the Auer doctrine, named after the 1997 Supreme Court case Auer v. Robbins.  The Auer doctrine rests on the premise that agencies are in a better position than courts to interpret their own regulations.  Under the doctrine, courts generally defer to an agency’s reasonable readings of its own “genuinely ambiguous” regulations.  In a 5-4 decision, the Court declined to abandon the Auer doctrine on grounds of stare decisis but seemed to outline restrictions on the scope and applicability of the doctrine, including the rule that deference to an agency’s interpretation of an ambiguous regulation is not appropriate if the interpretation does not reflect the “fair and considered judgment” of the agency.  This means that deference may not be appropriate if the interpretation creates “unfair surprise,” such as when the agency’s interpretation conflicts with a prior interpretation or upends a party’s reliance on established practices.  Kisor, 139 S. Ct. at 2417-18.

On August 11, the US Department of Justice (DOJ) released a new report that promotes constructive recommendations to modernize and improve the Administrative Procedure Act (APA).  In 1946, Congress enacted the APA to establish procedures as a check on administrative power, and to provide the public with some degree of due process in the face of regulatory action.  As it relates to the Clean Water Act, Clean Air Act, Endangered Species Act, and other relevant environmental regulatory programs, the APA provides the framework under which federal agencies develop and promulgate regulations to implement these programs.  Since Congress passed the APA over 70 years ago, the size and scope of federal regulatory authority has ballooned in size, leading at times to inefficiencies in the rulemaking process and a lack of accountability.  To address these shortcomings, DOJ hosted a summit in December 2019 that brought together leading regulatory practitioners, scholars, and policymakers to discuss possible reform.  Although legislative action in the near future is unlikely given the polarized political climate in Congress, the report puts forward a “rich menu of options” for Congress to revise the APA.

Flaring has the attention of RRC, Producers and Stakeholders

Flaring has the attention of the Texas Railroad Commission (RRC), oil and natural gas companies and stakeholders such as royalty owners, investors and environmental groups. Requests for RRC authorization of flaring has been on the increase in the Permian Basin. As a result, a number of interested parties are looking at regulatory changes. Some interested parties voice concern that a valuable resource is being wasted, others state that the definition of natural gas 'waste' is too limited, still others are concerned about methane emissions and some all of the above. Though the interested parties may not always be aligned, there is a general sense that regulatory amendments are needed.

For over 40 years, one of the Clean Water Act’s (CWA’s) key regulatory programs has not functioned as Congress originally intended, producing, over time, significant inefficiencies in the federal permitting process that increase costs and delays for developers and hinder environmental review and protection. Today, renewed efforts at both the state and federal levels seek to achieve the objectives established by Congress in 1977. In particular, the U.S. Environmental Protection Agency (EPA) recently announced that it intends to revise long-standing regulations that have derailed state implementation of the program. EPA’s approach to this rulemaking, and whether it can adequately address critical barriers to state assumption, has the potential to transform the regulatory landscape and produce substantial benefits for states, the public, the regulated community, and the environment.

On July 16, 2020, the Council on Environmental Quality (CEQ) published its highly anticipated final rule to improve its National Environmental Policy Act (NEPA) regulations.  The update, which largely mirrors the proposed rule, is the first comprehensive amendment to the regulations since their original publication in 1978.  The final rule is designed to streamline the NEPA review process, clarify important NEPA concepts, and codify key guidance and case law. 

Company Boards of Directors and senior executives of oil and gas companies should take notice of a May 14, 2020, guidance document issued by the Chemical Safety Board (CSB) entitled, “CSB Best Practice Guidance for Corporate Boards of Directors and Executives in the Offshore Oil and Gas Industry for Major Accident Prevention.,”  And don’t be deceived by its title reference to offshore activities.  Companies also need to pay mind to the guidance for onshore operations.  Why?  If there is an accident, government agencies will likely argue that the principles articulated apply equally as well on dry land.

On June 30, 2020, Democratic members of the House Select Committee on the Climate Crisis unveiled a 538-page report that calls for reaching net-zero greenhouse gas (GHG) emissions economy-wide by 2050. The report, titled “Solving the Climate Crisis: The Congressional Action Plan for a Clean Energy Economy and a Healthy and Just America,” includes over a hundred policy recommendations to meet the 2050 goal.

The Environmental Protection Agency (EPA) will be 50 years old this year.  Over the past half-century, EPA has issued literally tens of thousands of documents explaining its extensive regulatory programs.  These guidance documents come in a wide variety of forms.  Some may be signed by the EPA Administrator. Many more are signed by officials in program offices, in the Regions, or even by technical staff.  Some may provide broad national guidance, while others interpret rules in source-specific factual settings.  Guidance may appear in preambles to rules, in response to “frequently asked questions” (FAQS), in applicability determinations, in Environmental Appeals Board decisions, in General Counsel opinions, and in many other ways.  And of course, as Administrations change, guidance may change to reflect new policies.  Anyone who has had to manage environmental compliance is familiar with the challenges of identifying operative agency guidance.

The Equator Principles (EPs) are a framework for assessing and managing environmental and social risks associated with project financing. The EPs provide a minimum due diligence standard and monitoring protocol supporting responsible risk assessment and decision-making. The EPs apply globally, to all industry sectors, and are focused on risk management for projects financed by the financial institutions that have adopted the EPs. Currently, the EPs have been adopted by 105 financial institutions across 38 countries. The EPs oblige financial institutions to make informed investment decisions and withhold or withdraw financing on projects or assets not conforming to “good international industry practice.” The EPs incorporate IFC’s Environmental and Social Performance Standards (IFC Performance Standards) and World Bank Group Environmental, Health, and Safety Guidelines.

On June 30, 2020, the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit” or “Court”) issued an en banc rehearing order holding that the Natural Gas Act (“NGA”) does not permit the Federal Energy Regulatory Commission (“FERC”) to issue tolling orders for the sole purpose of preventing rehearing requests from being denied by operation of law.  See Allegheny Defense Project, et al. v. FERC, No. 17-1098 (“Allegheny”).  The decision upends a practice that has been used by FERC for decades to delay addressing the merits of requests for rehearing.  Because the NGA and the Federal Power Act (“FPA”) have essentially identical rehearing provisions, Allegheny’s holding is very likely to be extended to rehearing requests under the FPA.