Takeaway: A new White House climate change rule poses potential risks and delays for Energy infrastructure.

Editor's Note: Below is an excerpt from an institutional research note written by Senior Energy Analyst Joe McMonigle on the Obama Administration’s Council of Environmental Quality (CEQ) rule. For more information about our institutional research contact sales@hedgeye.com.

New Potential Risks For Energy Infrastructure Projects From Obama Administration - z pipe

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.

In a memorandum to agency heads dated August 1, 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 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.

The Federal Energy Regulatory Commission (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 greenhouse gas (GHG) impacts are not reasonably foreseeable and need not be considered in its’ NEPA analysis.

CEQ’s new guidance removed the draft guidance language requiring analysis of upstream and downstream GHG impacts, but it does require FERC and other agencies to now consider direct and indirect “reasonably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

The DC Circuit will hear an upcoming case this fall regarding FERC’s approval of the Freeport LNG project that may introduce a ruling on CEQ’s “reasonably foreseeable” standard (Sierra Club v. DOE).