Takeaway: New Potential Risks and Delays for Federal Approvals of Energy Infrastructure Projects – Pipelines, LNG, Coal Export Terminals, Transmission

The Obama Administration’s Council of Environmental Quality (CEQ) released late Tuesday new guidance for all federal agencies to consider for the first time impacts of greenhouse gases and climate change into federal decisions on infrastructure projects.

 

CEQ, has been working on the new policy for the last six years. In a memorandum to agency heads dated August 1 (available here), CEQ said its guidance applies to “all Federal actions subject to NEPA (National Environmental Policy Act), including site-specific actions, certain funding of site-specific projects, rulemaking actions, permitting decisions, and land and resource management decisions.”

 

The rule creates new potential risks, costs and delays for federal reviews and approvals of proposed energy infrastructure projects including pipelines, LNG export terminals, transmission projects and coal export facilities.

 

While the rule does not apply retroactively to already approved projects, CEQ’s memorandum said “agencies should apply this guidance to all new proposed agency actions when a NEPA review is initiated” as well as “to the extent practicable” to those projects involved in an “on-going NEPA process.”

 

CEQ said its guidance was issued “to assist federal agencies in their consideration of the effects of greenhouse gas (GHG) emissions and climate change when evaluationing proposed federal actions” in accordance with NEPA.

 

CEQ downplayed the wide reaching consequences of the administration’s new climate action to energy projects by including a footnote in the memorandum that emphasizes it “is not legally enforceable.” But for all practical purposes, federal agencies will treat the guidance as law and give it the highest priority. To that end, CEQ in its guidance “recommends that agencies review their NEPA procedures and propose any updates they deem necessary or appropriate to facilitate their consideration of GHG emissions and climate change.” Moreover, the memorandum adds that “CEQ will review agency proposals for revising their NEPA procedures…in light of this guidance.”

 

In addition, the guidance requires agencies to consider both direct and indirect impacts of the GHG emissions and climate change impacts and provide a quantitative analysis. 

 

 

Upstream & Downstream GHG Impacts vs. “Reasonably Foreseeable” Impacts

 

The most significant difference in the new final guidance from the draft 2014 guidance is the removal of specific language that required consideration of upstream and downstream GHG emissions in NEPA analysis. CEQ’s new guidance instead emphasizes “reasonably foreseeable” impacts on GHG emissions and climate change.

 

The new guidance comes on the heels of a June 28 DC Circuit appellate court decision that rejected Sierra Club claims that FERC should have considered upstream and downstream GHG emissions in its NEPA analysis and approval of LNG projects in Texas and Louisiana. The Sierra Club asserted that FERC should have applied the 2014 draft CEQ guidance.

 

For its part, FERC has repeatedly rebuffed efforts by environment groups to consider climate change impacts in its regulatory approvals. FERC, which is led by an Obama Administration appointed Chairman, has specifically said that GHG impacts are not reasonably foreseeable and need not be considered as either direct or cumulative impacts in NEPA analysis.

 

So while the new guidance removed the draft guidance language requiring analysis of upstream and downstream GHG impacts, it does require FERC and other agencies to now consider direct and indirect “reasonably foreseeable” impacts – something FERC has said it cannot do.

 

The DC Circuit decision did not address the “reasonably foreseeable” standard but suggested that the Sierra Club could raise the issue in the upcoming Freeport LNG case (Sierra Club v. DOE) when oral arguments occur sometime this fall.

 

 

No Current CEQ Chair Raises Concerns About Legality of New Guidance

 

CEQ has been without a chairperson since Nancy Sutley stepped down in 2014, and the Obama Administration has not nominated a replacement. The position of CEQ Chair is Senate-confirmed position, and as a result, there are serious questions raised in Congress regarding the legality of CEQ actions in the absence of a Chair. 

 

Senator Jim Inhofe (R-Oklahoma), Chairman of the Senate Environment and Public Works Committee, sent a letter to the President Obama last year stating that “CEQ is no longer a lawfully functioning government agency and any actions purporting to have been taken on behalf of the Council during this vacancy period are ultra vires." (Senator Inhofe’s letters to President Obama and CEQ are available here.)

 

 

Election Impact

 

The outcome of the November Presidential election will certainly have a major impact on the future of the new CEQ guidance. Donald Trump would likely repeal the CEQ guidance on consideration of GHG and climate impacts in NEPA analysis.  On the other hand, Hillary Clinton will not only uphold the guidance but could potentially issue a stronger policy to burnish her early environmental credentials.