The U.S. Court of Appeals for the District of Columbia recently denied the Environmental Protection Agency’s (EPA) proposed delay of an Obama-era rule that limits methane emissions from new oil and gas equipment, sending oil and gas companies scrambling to immediately ensure compliance with the rule to avoid any enforcement actions.

The Trump EPA has repeatedly sought to stay ongoing regulatory action and litigation with some success, as we have previously posted, but this development marks a considerable setback to that approach. This ruling involved regulations which created methane new source performance standards (NSPS) for new, not existing, oil and gas equipment and represents the first limit to methane emissions from the oil and gas industry. The regulations also require these companies to efficiently find and repair methane leaks.

Multiple environmental groups have challenged the Trump EPA’s administrative stay of these regulations in the D.C. Circuit. In its ruling, the court held that EPA did not have authority under the Clean Air Act to stay certain provisions while the agency reconsiders the rule. However, EPA can continue with its proposed rulemaking that would stay many of the rule’s requirements for two years. The proposed rulemaking is subject to notice and comment, and thus allows public participation in the process rather than a unilateral stay by EPA. The decision indicates that EPA will likely not be able to merely hit pause while it reconsiders Obama-era rules. Instead, EPA may be required to use the more laborious rulemaking process to halt implementation of Obama-era rules.

While EPA has sought additional time to consider an appeal, in the meantime, oil and gas companies are in an uncertain position. Because the administrative stay was vacated, oil and gas companies need to begin complying with the rule immediately – at least until EPA is able to finalize a stay through the rulemaking process. Companies’ failure to comply could result in enforcement actions both by government regulators as well as by environmental groups like those that challenged the stay.