## Facts

- The U.S. Department of the Interior’s Bureau of Land Management (BLM) regulates oil-and-gas development on federal and Indian lands under, among other statutes, the Mineral Leasing Act (MLA).
- BLM issued a final rule addressing the waste of natural gas from oil-and-gas production sites caused by venting, flaring, and equipment leaks.
- The rule imposed operational and monitoring requirements intended to reduce avoidable losses of produced gas.
- In the rule’s cost-benefit analysis, BLM estimated annual benefits of approximately $209–$403 million and annual costs of approximately $110–$279 million.
- BLM justified the rule’s costs by citing benefits tied both to (i) preventing waste of natural gas (including recovery and sale of gas that would otherwise be lost) and (ii) air-quality and related environmental benefits.
- A significant portion of the estimated benefits came from monetized environmental effects associated with reduced methane emissions, including figures derived from the federal “social cost of methane,” while a smaller portion reflected market value and cost savings from capturing gas.
- The State of Wyoming sued, asserting that BLM was using a “waste” rule as a means to regulate air pollution beyond BLM’s statutory authority.
- Wyoming argued that Congress assigned primary authority over air pollution to the Environmental Protection Agency (EPA) and the states under the Clean Air Act (CAA), and that BLM’s rule unlawfully intruded into that scheme.

## Issues

1. Whether BLM had statutory authority under the MLA to issue regulations aimed at reducing waste of natural gas from venting, flaring, and leaks at oil-and-gas production sites.
2. Whether the rule was unlawful because, in Wyoming’s view, it functioned as air-pollution regulation that Congress committed to EPA and the states under the CAA.
3. Whether BLM’s justification of the rule’s costs—particularly its reliance on air-quality benefits and methane-emissions valuations such as the social cost of methane—rendered the rule invalid under the Administrative Procedure Act.

## Decision

- The court concluded that BLM had statutory authority under the MLA to regulate natural-gas production to reduce waste from venting, flaring, and leaks.
- The court rejected Wyoming’s characterization of the rule as an unauthorized air-pollution program, holding that BLM could act to address waste of federally owned minerals even if the rule also identified air-quality benefits.
- The court did not accept the argument that referencing air-quality and methane-related benefits in the rule’s analysis, by itself, placed the rule outside BLM’s MLA authority or automatically conflicted with the CAA’s allocation of air-pollution responsibilities.

## Legal Principles

- Under the MLA, BLM may regulate federal oil-and-gas operations to reduce waste of produced minerals, including avoidable losses of natural gas from venting, flaring, and leaks.
- A rule directed at mineral-waste reduction does not become ultra vires solely because the agency’s analysis also identifies air-quality or environmental benefits associated with reducing emissions.
- Challenges to an agency rule under the APA must show that the agency acted outside statutory limits or acted arbitrarily and capriciously in explaining and supporting its decision, including in its treatment of costs and benefits.
- The existence of a separate federal statute addressing air pollution (the CAA) does not automatically strip BLM of authority to regulate operational practices on federal leases when the regulation is grounded in mineral management and waste reduction under the MLA.

## Conclusion

State of Wyoming v. United States Department of the Interior held that BLM possessed MLA authority to regulate venting, flaring, and leaks to reduce waste of natural gas from federal and Indian oil-and-gas operations, and the court rejected Wyoming’s claim that the rule was invalid merely because BLM cited air-quality benefits and methane-related valuations in defending the rule’s overall justification.


State of Wyoming v. United States Department of the Interior, 2017 WL 161428 (2017)