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Advocates Reject Industry Claims NEPA Rulings Curtail CEQ's Climate Guide

July 26, 2016

Environmentalists are rejecting claims by industry lawyers that recent appellate rulings backing regulators narrow review of the greenhouse gas impacts of liquefied natural gas (LNG) projects under the National Environmental Policy Act (NEPA) could also undercut long-pending White House guidance for how agencies should conduct such reviews.

Advocates say the industry lawyers ignore a key portion of the appellate ruling that held that the Energy Department (DOE), not the Federal Energy Regulatory Commission (FERC), is still responsible for assessing the upstream and downstream climate impacts of LNG projects.

“CEQ guidance applies to every agency that is analyzing potential climate impacts of its actions, including DOE,” says one environmentalist attorney that is involved in challenging LNG projects over their potential climate impacts.

Environmentalists were responding to a July 6 paper, “D.C. Circuit Upholds FERC's Limited Impacts Analysis in NEPA Documents Addressing Greenhouse Gases,” by attorneys with Sidley Austin.

The paper found that the two related rulings from the U.S. Court of Appeals for the District of Columbia Circuit, both called Sierra Club v. FERC, take a narrower view of the scope of NEPA reviews than what CEQ had included in draft climate guidance issued in 2014.

Specifically, in its June 28 rulings, the D.C. Circuit upheld FERC's limited treatment of indirect GHGs under NEPA when it approved construction of LNG export terminals in Texas and Louisiana, finding that it is DOE's responsibility to conduct such an assessment.

“These cases provide direct insight into the treatment of GHG emissions in NEPA analysis and are arguably more limited than Revised Draft Guidance issued in 2014 by” CEQ, the Sidley Austin paper says.

At issue is whether agencies must review the LNG projects' climate impacts stemming from upstream and downstream emissions of methane from induced production. Environmentalists have long sought to require such assessments, hoping it will raise the bar for federal approval of the projects.

But so far FERC has resisted their calls.

Many environmentalists have been hoping that CEQ will finalize draft guidance before the end of the year. The document generally recommends that agencies consider potential upstream and downstream GHG impacts when reviewing proposed projects.

“Emissions from activities that have a reasonably close causal relationship to the federal action, such as those that may occur as a predicate for the agency action (often referred to as upstream emissions) and as a consequence of the agency action (often referred to as downstream emissions) should be accounted for in the NEPA analysis,” CEQ's draft says.

However, last May a top official hinted that CEQ could drop the draft advice. CEQ managing director Christy Goldfuss said in May 2015 testimony to the House Natural Resources Committee that the council had heard more concerns about that recommendation than any other, and that it is CEQ's intent to focus on major NEPA tenets addressing direct, indirect and cumulative impacts, and “not be speculative . . . we don't want to add confusion to what exists already."

CEQ Uncertainty

Since then, CEQ has been virtually silent on the fate of its guide. For example, CEQ associate NEPA director Ted Boling attended a June 15 workshop on the topic at the Sabin Center for Climate Law at Columbia University Law School but could not say when the final document would be released.

Days later, the D.C. Circuit decided the first two LNG cases, rulings which the Sidley paper says shows how the draft CEQ guide “would conceivably expand the scope of NEPA analyses of GHG emissions beyond what is permitted by NEPA . . . In particular, CEQ's arguably broad inclusion of upstream and downstream emissions associated with the extraction and ultimate combustion of fossil fuel is inconsistent with CEQ's regulations and with well-established judicial precedent.”

The paper adds that in contrast to the CEQ draft, the D.C. Circuit rulings are “consistent with prior case law and provide further reason for CEQ to issue final guidance that clarifies the limits on an agency's ability to evaluate upstream and downstream emissions when conducting a NEPA analysis.”

That is because the court “rejected claims by the Sierra Club that NEPA obligated FERC to study the alleged impacts of extracting and processing additional gas that might be produced to satisfy additional international demand arising from greater export capacity. Also, the court rejected Sierra Club's assertion that FERC should have included, as part of its cumulative effects analysis, a nationwide study of existing or proposed [LNG] export terminals. These rulings are important because they provide a further delineation for when so-called upstream and downstream effects can be excluded.”

The paper cites four important takeaways from the rulings, including that they are relevant because of the clear manner they apply a 2004 Supreme Court NEPA ruling, Department of Transportation v. Public Citizen, that allowed Mexican trucks to drive on U.S. roads, to NEPA reviews for energy projects.

It also shows that courts may be inclined to defer to agency findings of any kind of impact if the record supports causal connections. This means applicants should provide evidence “in support of the appropriate scope of and limits on climate change impacts.”

Third, the paper says the court rejected efforts to adopt a 2003 ruling by the 8th Circuit, Mid States Coalition for Progress v. Surface Transportation Board, that invalidated a NEPA review for a coal-hauling railroad line expansion for failing to address indirect impacts including the air emissions when the coal is burned.

Last, the paper says the decisions “may make it more difficult for CEQ to demand that future [NEPA reviews] include upstream and downstream impacts as part of the discussion of indirect and cumulative impacts” because the rulings “suggest that NEPA indirect and cumulative effects need not be read as broadly as proposed by CEQ.”

However, supporters of broad NEPA reviews point out that the paper completely ignores another important point of the ruling is that while the court rejected the claim in the FERC NEPA review context, it explicitly said “those objections should be raised in the pending challenge” to DOE's order authorizing Freeport to export natural gas.

Challenges to DOE's export approval are making their way through the courts, though none has yet been argued. Environmentalists have noted that the court did not reject their upstream/downstream GHG claims outright, but said that they were filed against the wrong agency.

Dual Jurisdiction

The environmentalist attorney involved in the LNG challenges says there is no connection between these rulings and the CEQ guide. “What I can say is that, because jurisdiction over LNG terminals is split between FERC and DOE under the Natural Gas Act, the agency that causes the upstream/downstream impacts (DOE) is responsible for the NEPA analysis of those impacts,” the source says.

“When FERC is analyzing impacts of projects that are not subject to the dual jurisdiction created for LNG terminals (e.g., pipelines), and its action causes upstream/downstream climate impacts, it should be following CEQ guidance,” the source adds.

One NEPA expert concurs, and says the Sidley article “may be overstating the extent to which these [legal] decisions are consistent with the draft suggestion to look upstream and downstream” because the rulings are “based on a unique set of LNG export approvals” where there is a division of authority between FERC and DOE.

The expert adds that the court rulings were initially alarming to environmentalists but then they clearly stated that it is DOE's “responsibility to consider the indirect impacts of the exports” rather than FERC.

So the rulings do not conflict with CEQ guidance because “there are plenty of other types of federal approvals . . . where you don't have that division of authority” and in those context agencies have recognized it to be appropriate to look at downstream impacts, the source says, citing the example of the Department of the Interior considering the impacts of coal emissions in coal leasing decisions.

If there is any impact from the court rulings on LNG for CEQ, they will not become apparent until there are rulings in the DOE challenges, the source says.

However, the source acknowledges that those suits will have to address the fact that DOE effectively adopted FERC's NEPA review and says the language in the rulings “glosses over the fact that FERC prepared and DOE adopted” the environmental review, with some supplementation.

A recent legal paper also asserts that the “proper scope” of a NEPA review includes upstream and downstream GHGs. The March paper, by the Sabin Center, says such consideration would improve the quality of federal decisionmaking, possibly shield agencies from litigation and provide much-needed information about the indirect and cumulative effects of fossil fuel development on climate change. -- Dawn Reeves (