California v. Bernhardt

Congress enacted the Mineral Leasing Act of 1920 (MLA) to protect federal resources and to encourage the efficient development of federal lands for gas, oil, and minerals. The MLA authorized the Bureau of Land Management (BLM) to protect the interests of the United States and to safeguard the public welfare by enacting rules preventing oil-and-gas lessees from unduly wasting oil or gas developed on the land. The MLA also required lessees to use all reasonable precautions to prevent waste; however, the statute did not specifically define waste. In 2016, the BLM issued a rule (the 2016 rule) to reduce waste of oil or gas on federal land leases. The 2016 rule, which modernized a rule enacted in 1980, would have reduced venting of natural gas by 35 percent and flaring of natural gas by 49 percent, reduced greenhouse gas emissions, and decreased company profits by an average of 0.15 percent per company. In its regulatory impact analysis, the BLM concluded that the 2016 rule’s benefits significantly outweighed its costs. In 2018, the BLM reversed course and issued a new waste-prevention rule (the rescission) effectively repealing the 2016 rule. In support of the rescission, the BLM stated that the 2016 rule had imposed excessive regulatory burdens on oil-and-gas lessees and that its compliance costs would have exceeded the value of the natural gas being conserved. In enacting the rescission, the BLM redefined “waste of oil or gas” to focus on the lessee’s economic situation. Pursuant to the new definition, waste occurred only if a lessee’s compliance costs were less than the monetary value of the resources expected to be conserved. Applying this definition, the BLM asserted that, in enacting the 2016 rule, it had exceeded its statutory authority to regulate the prevention of waste. The State of California (plaintiff) challenged the rescission. Specifically, California argued that the BLM’s new definition of waste was unreasonable.