Pursuant to the National Environmental Policy Act (NEPA),[1] and the corresponding NEPA regulations issued by the Council on Environmental Quality (CEQ)[2] and the respective reviewing agencies, federal agencies are required to consider the environmental impacts of proposed federal actions—i.e., proposed activities and projects that require federal approval or authorization to carry out—before making a final decision on such action. Examples of proposed federal actions include open pit mining, hydroelectric dam projects, natural gas pipelines, liquefied natural gas terminals, airports, forest management, etc. In general, an agency's environmental review (NEPA review) consists of a comprehensive analysis of the proposed action's impacts on the air, land, waterbodies, vegetation and the animal and human populations. While industry representatives and project developers believe that NEPA reviews constitute a rigorous examination of a proposed action's impacts, environmental advocates assert that the NEPA reviews are deficient because they do not go far enough to capture all related environmental impacts, especially those involving greenhouse gas emissions.

In response to calls from environmental advocates to increase the level of scrutiny of greenhouse gas emissions, the CEQ, on December 18, 2014, issued draft guidance concerning how federal agencies should consider greenhouse gas emissions and climate change in their NEPA reviews.[3] Although the draft guidance has been made available for public comment, it is not a rulemaking and does not constitute new NEPA regulations; therefore, no new legal obligations arise from this guidance. Nevertheless, the two main principles conveyed by the draft guidance are that an agency's NEPA review should consider: (1) the potential effects of a proposed action on climate change as indicated by its greenhouse gas emissions and (2) the implications of climate change for the environmental effects of a proposed action.

With respect to the first principle, the draft guidance explains that agencies should use projected greenhouse gas emissions amounts (including amounts of carbon sequestration and storage) when assessing the proposed action's effect on climate change. The CEQ explains that, in its view, proposed actions lead to incremental, or project-by-project, climate change impacts, which have not been afforded the appropriate level of attention and analysis in prior NEPA reviews. The CEQ advises that agencies should perform a degree or level of analysis of the proposed action's greenhouse gas emissions and their effect on climate change that is proportional to the quantity of those emissions. The draft guidance also sets forth a quantitative analysis baseline whereby proposed actions with annual emissions greater than or equal to 25,000 metric tons of CO2 equivalent would need to include a detailed quantitative emissions analysis in the NEPA review.

One noteworthy aspect of the draft guidance involves the temporal and spatial proximity or relationship between the proposed action and the environmental impact. While both direct and indirect climate change effects of the proposed action have to be accounted for in the analysis, the CEQ also recommends an examination of certain "connected" actions, and other activities that have a reasonably close causal relationship to the proposed action. Under this recommendation, a NEPA review should consider emissions from activities occurring prior to or "upstream" of the proposed action, as well as follow-on or "downstream" activities. In addition, the standard consideration of direct, indirect and cumulative effects, as directed by the CEQ regulations, has to be conducted and included in the NEPA review. The draft guidance provides an example of what the CEQ believes is necessary to include in the NEPA analysis. For example, in a proposed open pit mining project, NEPA review would require an analysis of land clearing, access road construction, transportation of the mined resource, resource refining and processing and use of the resource. Furthermore, NEPA analyses may include a review of the applicable environmental laws and regulations, such as emissions targets, specific to the proposed action to give context and a frame of reference to the impacts discussed therein.

With respect to the second principle, the agency performing the NEPA review should analyze the effects that climate change may have on the environmental impacts of a proposed action. The draft guidelines recommend that agencies examine and compare the current state of the environment to the condition of the environment post-action, using a timeframe concurrent with the project's anticipated lifespan. Such analysis would involve and focus on environmental impacts that are affected by both the proposed action and the effects of climate change. Examples provided in the draft guidelines include an analysis of the construction, operation and maintenance of projects located near coastlines or in locations vulnerable to the effects of sea level rise or storm surge, or projects dependent on the availability of inland water supplies.

The draft regulations have received mixed reviews, with industry advocates opposing and environmental proponents praising the guidelines. Although these draft guidelines closely resemble arguments made by environmental advocacy groups before agencies such as the Federal Energy Regulatory Commission (FERC) in natural gas pipeline and LNG terminal proceedings, it is unknown at this time when or what will be adopted as final guidance, or what the actual effect will be given that these guidelines will not be incorporated with the CEQ's regulations. Coinciding with the draft guidance is one case pending in the Court of Appeals for the District of Columbia Circuit that has the potential to determine to what extent under NEPA agencies are required to consider the impacts of natural gas production—which would include air emissions impacts—even if that production is not part of the proposed project. Additional clarity should result from the resolution of the draft guidance and related court proceeding; however, until then, it might be useful for industry personnel and project developers to be prepared to consider these questions in the future.