On August 2, 2016, the White House Council on Environmental Quality (CEQ) issued its final guidance for federal agencies to assess the impact of their decisions on greenhouse gas emissions (GHGs) and also how such decisions may be impacted by a changing climate (e.g., future sea level rise impacts on a long-term infrastructure project proposed for a coastal barrier island) when conducting reviews under the National Environmental Policy Act (NEPA). The final guidance follows CEQ’s issuance of draft guidance in 2010 and revised draft guidance in 2014, incorporating consideration of public comments and feedback on the two drafts. Following this six-year process, CEQ’s guidance is a recommendation to federal agencies versus a formal legal requirement and therefore does not have the same authority as a federal rule or regulation.

The guidance does not establish any particular quantity of GHG emissions as representing a significant burden on the environment – that determination will be left to the discretion of the agencies. However, the guidance does prohibit the so-called “de minimis approach” where an agency would compare a Federal action’s GHG emissions to global GHG emissions, finding that since the action did not represent a meaningful percentage of the global GHG inventory, the action did not significantly affect the environment.

Environmental groups consistently challenge agency approvals related to infrastructure and other major projects on public lands (such as mines, oil and gas extraction and pipelines), claiming that agencies did not adequately evaluate climate change impacts under NEPA. Projects on public lands already require environmental assessments under NEPA, but agencies under the new guidance are directed to quantify the direct and indirect GHG emissions and weigh climate change impacts in considering alternatives and in analyzing mitigation strategies. The added layer of complexity that comes with this new guidance may make obtaining and defending public lands approvals more challenging for project proponents.

Summary of Key Elements of Final Guidance

The final guidance, which applies to all Federal actions subject to NEPA, recommends that agencies assess the impact of their decisions on GHG emissions and how such decisions may be impacted by climate change. Among other things, the new guidance:

  • Recommends that agencies quantify a proposed agency action’s projected direct and indirect GHG emissions, taking into account available data and GHG quantification tools that are suitable for the proposed agency action.
  • Recommends that agencies include a qualitative analysis of climate change impacts where quantification tools, methodologies, and/or data inputs are not reasonably available to quantify GHG emissions.
  • Recognizes the difficulty in attributing specific climate impacts to individual projects, and recommends that agencies use the GHG emissions profile of the proposed action as a proxy for assessing the potential climate change impacts of the proposed action. Encourages agencies to draw on their experience and expertise to determine the appropriate level (broad, programmatic, or project- or site-specific) and the extent of quantitative or qualitative analysis required to comply with NEPA.
  • Counsels agencies to consider alternatives that would make the action and affected communities more resilient to the effects of a changing climate.
  • Recommends consideration of short- and long-term effects and benefits in the alternatives and mitigation analysis

The final guidance contains three significant changes from the revised draft.

Expansion of Recommendation for Quantification of GHG Emissions

First, the final guidance omits a proposal to establish 25,000 annual metric tons of CO2 that the 2010 and 2014 draft guidance had adopted as a “reference point” for when quantitative assessment of emissions is warranted. Instead, the final guidance recommends that agencies “quantify a proposed agency action’s projected direct and indirect GHG emissions,” without reference to a threshold so long as pertinent tools and data are available. According to the final guidance, agencies should consider the “rule of reason” inherent in NEPA and “the concept of proportionality” to determine the extent of analysis, “taking into account available data and GHG quantification tools that are suitable for the proposed agency action.”

While many agencies have included qualitative discussions of GHG emissions in NEPA review, the change in the final guidance means that many more projects will be subject to a quantitative calculation of GHG emissions in NEPA review as quantification tools and methodologies are now widely available.

Use of the Social Cost of Carbon Estimates

Second, the final guidance revised its discussion of the federal Social Cost of Carbon estimates in NEPA review. Following a June 27, 2014 US District Court for the District of Colorado decision invalidating a final Environmental Impact Statement for failure to disclose the costs associated with GHG emissions and ignoring the Social Cost of Carbon estimates,[i] there has been much uncertainty about the use of these estimates in NEPA documents. Like the 2014 draft guidance, the final guidance notes that a cost-benefit analysis is not required by NEPA and its utility depends on whether it is relevant to the choice among alternatives. The 2014 draft guidance affirmatively endorsed the Social Cost of Carbon estimates as a useful metric when agencies include cost-benefit analysis. In contrast, the final guidance only mentions it in a footnote as “example” of a useful method. That same footnote also emphasizes that the appropriate method for doing cost-benefit analysis should be left to the agency’s discretion, taking into account established practices.

This revision suggests less emphasis on the Social Cost of Carbon estimates as a tool in NEPA review. CEQ’s recognition of agency discretion is consistent with a July 15, 2016 D.C. Circuit decision, in which the court deferred to the Federal Energy Regulatory Commission’s (FERC) decision not to apply the Social Cost of Carbon in NEPA analysis for a proposed liquefied natural gas (LNG) expansion project.[ii] FERC had acknowledged the SCC as a potential tool, but declined to apply it based on certain of its limitations. Both the final guidance and the recent D.C. Circuit decision suggest that an agency would be wise to acknowledge and evaluate the Social Cost of Carbon as a potential tool, but that an agency’s reasoned evaluation of whether to use Social Cost of Carbon estimates is something that both the CEQ and the D.C. Circuit recognize as within the agency’s discretion.

Consideration of Upstream and Downstream Emissions

Third, the final guidance omits proposed language in the 2014 revised draft guidance explicitly calling for agencies to consider upstream and downstream emissions impacts, which has become a contentious issue for fossil fuel supply chain projects (e.g., coal mines, LNG terminals). Instead, the final guidance returns to a discussion of “reasonably foreseeable direct and indirect emissions” and adds footnotes that give examples of how agencies should consider such effects. Notably, the examples provided strongly suggest that CEQ believes most fossil fuel supply chain projects have reasonably foreseeable indirect GHG emissions that should be quantified and analyzed: “For actions such as a Federal lease sale of coal for energy production, the impacts associated with the end-use of the fossil fuel being extracted would be reasonably foreseeable combustion of that coal.”

However, the final guidance also recognizes that there may be situations where information for quantification is unavailable and/or the complexity of comparing emissions from various sources would make quantification overly speculative. In such situations, CEQ recommends that agencies quantify what they can, explain what is not quantifiable, and qualitatively analyze unquantifiable GHG emissions. This recognition provides agencies with some degree of flexibility in dealing with upstream and downstream emissions, but project proponents should expect environmental groups to heavily scrutinize agencies’ explanations of why they cannot foresee or quantify indirect emissions.

Next Steps

  • The guidance is expected to be published in the Federal Register on August 5, 2016. CEQ also may issue a response to comments document.
  • CEQ’s guidance and implementation by federal agencies is likely to face legal challenges by both environmentalists seeking to block energy and mining projects on public lands and from industry groups who challenge agencies’ authority to assess climate impacts. While CEQ claims the guidance creates greater regulatory certainty, it may be challenged as an arbitrary hurdle for project proponents (and even more so because CEQ itself notes that the guidance is not legally enforceable).
  • Further, the guidance indicates that GHG impacts should be considered for “all new proposed agency actions” when environmental reviews have been initiated under NEPA, but agencies “should exercise judgment when considering whether to apply this guidance to the extent practicable” for projects or actions already underway. Accordingly, proponents of major projects on public lands or those requiring certain federal approvals should carefully review the guidance and ensure that any ongoing or future NEPA analyses take into account (to the extent necessary) this new guidance.
  • Finally, any future administration may modify the guidance since it is a policy directive, and not a final rule. This could mean that the policy is only in effect for a limited duration, depending on the views of a new administration.