Compliance Strategies – Like an Uncharted Race to a Finish Line

Even during relatively calm times, U.S. environmental policy is constantly evolving as new regulations are continually proposed, possibly held up in litigation, and eventually finalized, revised, or withdrawn.

These days, especially, a state of flux exists within environmental regulations as the current presidential administration charts a new course from that of previous leadership. Although this type of political shift is not novel, we are in a time where proposed changes appear more drastic and stakeholders are faced with moving regulatory targets and unsettled compliance obligations. For some, this is leading to ambiguity and, dare I say, a bit of angst.

We might be well served to pause, step back, and try to put things into perspective. I’d like to suggest that the shifting path of environmental regulations might be analogous to a marathon race that trails along an ever-changing route. It’s a long journey that requires preparation and determination to successfully get to the end.

I recently attended the Rocky Mountain Mineral Law Foundation’s program, Air Quality Issues Affecting Oil, Gas, and Mining Development and Operations (Rocky Mt. Min. L. Fdn. 2018) on Feb. 6 and 7, in Denver, Colorado. Conference attendees included private sector attorneys and their corporate clients, as well as public-sector regulators. The program focused on Clean Air Act requirements, providing a complete picture of what regulated entities in the oil and gas industry need to consider regarding federal, regional, and state requirements.
Throughout the two-day conference, it became evident that companies faced with pivoting federal regulations need to be prepared to adjust and distinguish between regulatory provisions that are currently in effect and those that have been, or may be, postponed. This distinction can be nuanced, and companies may not know how to react or plan. It’s a changing course.

One example mentioned at the conference was the Bureau of Land Management (BLM) rule regarding methane and waste prevention for the oil and gas industry, known as the Waste Prevention Rule (Waste Prevention, Production Subject to Royalties, and Resource Conservation, 81 Fed. Reg. 83,008 (Nov. 18, 2016) (codified at 43 C.F.R. pts. 3100, 3160, 3170)).

When I attended the Denver conference in early February, BLM had finalized a rule postponing the January 2018 compliance dates for some provisions and suspending other provisions that were effective as of January 2017, known as the Suspension Rule (Waste Prevention, Production Subject to Royalties, and Resource Conservation; Delay and Suspension of Certain Requirements, 82 Fed. Reg. 58,050 (Dec. 8, 2017) (codified at 43 C.F.R. pts. 3160, 3170)). Conference faculty noted the importance of understanding the status of individual provisions of this rule.

Shortly thereafter, on Feb. 22, the United States District Court for the Northern District of California issued an order granting a preliminary injunction against the Suspension Rule (California v. Bureau of Land Management, No. 17-cv-07186 (N.D. Cal. Feb. 22, 2018); Sierra Club v. Zinke, No. 17-cv-07187 (N.D. Cal. Feb. 22, 2018) (order denying motion to transfer venue and granting preliminary injunction)). This order essentially reinstated the original BLM rule, its compliance dates, and its effective dates. This means that both the January 2017 and the January 2018 dates apply to companies subject to the rule (see: https://www.blm.gov/programs/energy-and-minerals/oil-and-gas/operations-and-production/methane-and-waste-prevention-rule.)

It should also be noted that BLM proposed a new rule to further modify the Waste Prevention Rule on the same day as the court order (Waste Prevention, Production Subject to Royalties, and Resource Conservation; Rescission or Revision of Certain Requirements, 83 Fed. Reg. 7924 (proposed Feb 22. 2018) (to be codified at 43 C.F.R. pts. 3160, 3170)).

Coming back to the running analogy, this is the equivalent of finding out that parts of the marathon route ahead of you are temporarily blocked, then after circling back to go a different direction, you realize that the road ahead has re-opened and you need to run down the original route in to finish the race.

Yet another example is the possible two-year stay of provisions of the New Source Performance Standards (NSPS) for the Oil and Gas Industry (Quad Oa), 40 C.F.R. pt. 60, Subpart OOOOa, (Oil and Natural Gas Sector: Emission Standards for New, Reconstructed, and Modified Sources: Stay of Certain Requirements, 82 Fed. Reg. 27,645 (proposed June 16, 2017) (to be codified at 40 C.F.R. pt. 60) (see: https://www.epa.gov/controlling-air-pollution-oil-and-natural-gas-industry)). Conference faculty noted that companies must be aware that the NSPS are still applicable, despite the possible stay.

As of Mar. 12, 2018, however, some of the NSPS provisions were, in-fact, modified by a new final rule (Oil and Natural Gas Sector: Emission Standards for New, Reconstructed, and Modified Sources; Amendments, 83 Fed. Reg. 10,628 (Mar. 12, 2018) (codified at 40 C.F.R. pt. 60)) and companies must now distinguish between those provisions that were modified/amended, those still subject to the possible stay, and those that are unaffected by both the amendments and the stay. Companies must also stay tuned for additional rulemakings reconsidering the NSPS (see: https://www.epa.gov/controlling-air-pollution-oil-and-natural-gas-industry/amendments-new-source-performance-standards.)

Think of the possible stay as akin to discovering at Mile 5 of your marathon that the expected mountainous routes at Miles 10 and 11 may, in fact, appear later in the race at Miles 25 and 26. However, you still need to prepare for an uphill run on Miles 10 and 11, just in case the course remains unaltered. You need to prepare for those hills, you just don’t know when to expect them.
On further reflection, conference attendees had one thing in common – all wanted to know what the future would bring so they could prepare. Sadly, there is no crystal ball for compliance and the future can be unpredictable. Perhaps the best advice provided at the conference was to think long-term and prepare a compliance strategy that goes the distance. In my mind, developing a compliance strategy should be like preparing to run a marathon. Here are some tips to help you stay the course:

  • Know your route ahead of time – understand what regulations apply to you.
  • Be prepared for the unexpected – know the current status of regulations.
  • Prepare for the most difficult scenario – unless a regulation is actually withdrawn or delayed, plan as if it is or will be effective on schedule.
  • Be flexible – adjust your course as necessary, but keep in mind that things are always changing and you may need to loop back to your previous plan.
  • Pay attention to the smallest of details – individual regulatory provisions may be effective, even when others are not.
  • When in doubt, consult a coach – get experts in the field to help you understand your obligations.
  • And, finally…

  • Take it one mile at a time – be in the present but keep the long view in mind.

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