Regulatory Déjà Vu: Environmental Groups Sue to Require Review of E&P Waste Rules Under RCRA

On May 4, 2016, environmental groups (Plaintiffs) sued EPA, alleging that it has failed to review and revise regulations for the disposal, storage, transportation, and handling of oil and gas (O&G) wastes as required by the Resource Conservation and Recovery Act (RCRA).See Environmental Integrity Project et al. v. EPA, No. 1:16-cv-842 (D.D.C. May 4, 2016). This Legal Alert discusses key issues raised by the lawsuit–namely that: 1) despite Plaintiffs' claims, EPA has consistently reviewed the exploration and production (E&P) waste regulatory regime for many years; 2) state-specific programs can improve the management of E&P wastes in a way that a blanket federal program cannot; and 3) although the regulation of E&P wastes is distinguishable from the regulation of coal ash, the latter appears to motivate the lawsuit. If the lawsuit proves successful in narrowing or eliminating the E&P exemption, impacts to the O&G industry would be disastrous, particularly given current commodity prices.

BACKGROUND

RCRA creates the framework for proper management of hazardous and non-hazardous waste (Subtitles C and D, respectively). Although EPA sets minimum technical standards for how disposal facilities should be designed and operated, states traditionally implement RCRA waste programs.

With respect to E&P wastes, in 1980, Congress required that EPA promulgate regulations under RCRA Subtitle C or determine that such regulation was unwarranted. In 1988, EPA published its Regulatory Determination for Oil and Gas and Geothermal Exploration, Development, and Production Wastes (Regulatory Determination), 53 Fed. Reg. 25,446 (July 6, 1988). The Regulatory Determination concluded that regulation of E&P wastes as hazardous under Subtitle C was unwarranted because, among other things, existing state and federal programs were generally adequate. Id. The Regulatory Determination also included detailed lists of E&P wastes determined to be non-exempt and exempt, the latter including (but not limited to) drilling fluids, drill cuttings, produced water, and well stimulation fluids. Id. at 25453-54. Although E&P wastes are generally of lower toxicity than other RCRA-regulated hazardous wastes, the Regulatory Determination did not conclude that these wastes could never present a hazard to human health and the environment if improperly managed. Rather, EPA determined that the chemical constituents typically present in E&P wastes, combined with where E&P wastes are normally located and how they are managed, does not pose significant risk to human health and the environment warranting full Subtitle C regulation. EPA has issued numerous guidance documents further refining the scope and effect of the E&P waste exemption, always maintaining this core determination.

The Environmental Integrity Project lawsuit challenges this longstanding Regulatory Determination, placing the E&P waste exemption in substantial jeopardy. Specifically, Plaintiffs allege that EPA failed to timely review and revise the Subtitle D regulations for E&P wastes in accordance with Section 2002(b) of RCRA and further allege that EPA has not timely reviewed and revised the guidelines for state solid waste management plans in accordance with Section 4002(b) of RCRA.

PRACTICAL CONSIDERATIONS FOR O&G OPERATORS

Requirements for Review and Revision

Plaintiffs assert that RCRA requires EPA to review and revise the Subtitle D regulations for E&P wastes, as well as state solid waste management guidelines, every three years under Sections 2002(b) and 4002(b) of the Act, and that the last time EPA undertook such review and revision was in 1988 and 1981, respectively. While Section 2002(b) includes a reference to review and revision of regulations, that reference is specific to "each regulation promulgated under [RCRA]," and revision is only required "as necessary." Similarly, Section 4002(b) requires that guidelines for state solid waste management plans be revised "as may be appropriate." Thus, among other things, Plaintiffs must demonstrate the Regulatory Determination is a regulation, and, more importantly, that it is necessary to revise it and that it is appropriate to revise the state plan guidelines. Notably, Plaintiffs appear to be modelling their claims for regulatory revision on Appalachian Voices v. McCarthy, which resulted in a court-ordered deadline for EPA to review its RCRA regulations relating to coal ash disposal following a high-profile release. 989 F. Supp. 2d 30, 55 (D.C. Cir. 2013). In fact, plaintiffs in Appalachian Voices brought their claims under the same RCRA provisions as the Environmental Integrity Project Plaintiffs. Yet, the regulation of coal ash is much different than E&P waste, not only in terms of its history and the applicable regulatory regime, but also from an environmental-risk perspective.

Moreover, EPA has repeatedly reviewed and revised the E&P waste program since 1980. For example, EPA clarified the Regulatory Determination's scope in 1993. 58 Fed. Reg. 15284 (March 22, 1993). In 2002, EPA solidified its interpretation and application of the E&P exemption, publishing an information booklet concerning the same. In March 2014, EPA reviewed the waste-related provisions of state statutes and regulations for O&G waste pits and storage tanks for multiple gas producing states. Further, EPA has tracked state, federal, and voluntary initiatives to develop and update legislation, regulations, and best management practices pertaining to E&P waste management.

State v. Federal Programs

The lawsuit assumes that any state "patchwork" of E&P waste regulations is problematic for the environment, resulting in the ability for O&G operators to "venue shop" for the least stringent regulatory controls. We question whether there is any empirical evidence to support such a claim. Moreover, state regulators have a wealth of knowledge and expertise in addressing state-specific issues that allows for programs tailored to each states' unique geography, climate, ecology, and geology, all of which directly impact O&G drilling and production. Further, EPA is on-record in support of "individual, tailored regulations at the State and local level for the management of [E&P] wastes." 53 Fed. Reg. at 25450 In fact, state implementation is integral to administration of many aspects of the federal RCRA program. For example, EPA generally delegates the primary responsibility of implementing RCRA's waste programs to individual states, a process which promotes national consistency while also providing much-needed flexibility to states in implementing key aspects of the federal program.

CONCLUDING THOUGHTS

Despite EPA's documented history of closely reviewing federal and state E&P waste practices and its support for state-specific implementation of RCRA's requirements, the outcome of the lawsuit is unknown. More stringent regulatory requirements for E&P waste, or removal of the hazardous waste exemption altogether, could cause a severe economic impact on operators of all sizes and could strain or overrun the capacity of existing commercial waste facilities to handle the influx of E&P wastes.

Attorneys at Davis Graham & Stubbs LLP are experienced in the regulation of hazardous and non-hazardous wastes, particularly those associated with O&G exploration and production. Please contact the authors of this Legal Alert with questions on RCRA, E&P waste management, or impacts of the Environmental Integrity Project lawsuit on O&G operations and management.