On August 1, the White House Council on Environmental Quality (CEQ) issued its final guidance for federal agencies on considering greenhouse gas (GHG) emissions and the effects of climate change in National Environmental Policy Act (NEPA) reviews.1 This final guidance comes after the first draft was released in 2010, and a revised draft was released in 2014. A number of provisions in the final guidance would increase the volume and scope of climate reviews, including removing the proposed numeric emissions threshold for conducting a climate change analysis and advising agencies to consider climate change’s impacts on a project as well as affected communities. Going forward, project sponsors will need to ensure that supporting analysis adequately addresses climate change issues in order to bolster permitting and other federal government actions against third-party environmental challenges.

NEPA Background

Federal actions triggering NEPA review include decisions on permit applications, federal land management actions, federal funding and construction of public infrastructure. NEPA requires federal agencies to evaluate the reasonably foreseeable environmental impacts of these actions and to consider potential alternatives. NEPA does not mandate that an agency choose a particular option; its stated purpose is to ensure that agencies and the public are aware of the environmental impacts of a particular proposed federal action.

NEPA also established CEQ to advise the President on environmental issues. CEQ has authority to issue NEPA guidance and regulations to federal agencies. Under this umbrella, federal agencies also promulgate their own NEPA implementation regulations and guidelines.

Key Provisions in the Guidance

1. Agencies should assess climate change in all NEPA reviews.

The final guidance provides a new standard for assessing GHGs and climate change in NEPA reviews. It explains that agencies should use GHG emissions quantities as a proxy for assessing climate change impacts. The 2014 draft guidance proposed a 25,000 ton/year CO2 emissions threshold for triggering a quantitative analysis. The final guidance does away with this trigger and instead recommends that agencies assess GHG and climate change in all NEPA reviews where tools and data input are reasonably available. When tools for quantification are not reasonably available, the new guidance recommends agencies include a qualitative analysis instead and explain why quantification is not possible.

2. Agencies should use existing information in conducting NEPA reviews.

In quantifying GHG emissions, agencies need not conduct new studies, but should use existing scientific reports, methodologies and other data input to disclose quantifiable direct and indirect GHG emissions in the short and long term. The final guidance cites to CEQ’s 2012 Guidance for Accounting and Reporting GHG Emissions as an acceptable methodology. The final guidance states that a proposed action’s “temporal scale”—such as the length of time for construction and for operation—should also inform an agency’s choices in data input and methodologies.

The NEPA analysis should also reflect whether a proposed action will facilitate meeting an applicable emissions goal under existing GHG emissions reduction laws and policies at local, tribal, state and federal levels. As an example, the final guidance cites to a Bureau of Land Management discussion of how certain proposed actions impact California’s emissions goals.

3. Agencies should identify “connected” actions to quantify direct and indirect GHG emissions in conducting NEPA reviews.

CEQ suggests that agencies should consider actions that are “connected” to the proposed actions—a broad qualification that encompasses actions which would not proceed without one another, or are interdependent parts of a larger action, or that automatically trigger another action requiring an environmental impact statement.2 The final guidance adds that actions that “may occur” as a predicate or consequence of the proposed action should be accounted for in the NEPA analysis. Thus, agencies should consider and disclose reasonably foreseeable direct and indirect GHG emissions—i.e., emissions resulting from “connected” actions—in assessing direct and indirect effects of the proposed action.

The final guidance provides that agencies should also conduct scoping with stakeholders to assess the appropriate level of the NEPA analysis—whether broad, project-based or programmatic-based—and the degree of the climate change impact analysis.

4. Agencies should consider both the effects of the proposed action on climate change and the effects of climate change on the proposed action and affected communities.

The final guidance assumes that a proposed action occurs along with climate change, and thus both the impacts to and impacts of climate change are relevant to the NEPA analysis. For example, where a proposed project would use a water source, agencies should consider whether depletion of that water source through the proposed action and through climate change would require repairs or relocation of the proposed project in the foreseeable future. Such a repair or relocation would be an indirect effect to include in the agency’s NEPA analysis, according to the final guidance.

Agencies should also consider alternatives that would make the action and affected communities “more resilient to the effects of climate change.” The recommended NEPA analysis would thus include a scenario where a proposed project could put local communities and environmental resources at risk due to raised sea levels combined with potential leakage issues from the project.

CEQ states the new guidance should allow greater consistency and clarity in how agencies address climate change. CEQ relies on the “rule of reason” and “principles of proportionality” to guide agencies in determining the extent of their analyses.

Key Issues from the Guidance

“Reasonably Foreseeable” v. “Proximately Caused” Impacts

The final guidance from CEQ recommends that NEPA climate analyses include “reasonably foreseeable” upstream and downstream emission impacts as indirect impacts.  CEQ removed this instruction from the body of the draft guidance, but still includes it in the final guidance within a footnote. The footnote in the final guidance explains by way of example that end-use of the fossil fuel being extracted to support the combustion of coal in support of a federal lease sale of coal for energy production would be considered an indirect effect. If applied, CEQ’s approach could dramatically expand the scope of climate impacts analyses required for critical infrastructure projects, from interstate pipelines and high-voltage electric transmission lines to rail and highway expansion projects.

The “reasonably foreseeable” impacts approach offered by CEQ’s guidance stands in stark contrast to the “proximate cause” test recently applied by the U.S. Court of Appeals for the D.C. Circuit, which explicitly pruned the hazy limits of NEPA climate change analyses in two June 2016 decisions. Both cases involved Sierra Club arguments that the Federal Energy Regulatory Commission (FERC) must address alleged future pollution impacts from natural gas production increases that Sierra Club assumed would be caused by FERC’s approvals of two liquefied natural gas export sites. The D.C. Circuit found this analysis too attenuated. It rejected what it viewed as Sierra Club’s “but-for” causal analysis, and instead relied on the U.S. Supreme Court’s 2004 decision in Dep’t of Transportation v. Public Citizen, 541 U.S. 752 (2004), in holding that the scope of the NEPA analysis should be limited to those impacts proximately caused by the agency action.

Read in light of the D.C. Circuit’s decisions, the scope of “reasonably foreseeable” climate change impacts that must be evaluated under NEPA would seem to be significantly curtailed. But since the court’s decisions were issued before the final guidance was released, they do not address the specific language of CEQ’s guidance. As such, it remains to be seen how federal agencies will incorporate the guidance into their own NEPA implementing regulations.

Assessing Environmental Impacts on a Project

Additionally, the final guidance goes beyond the bounds of NEPA, tasking agencies with analysis not authorized by the act. The guidance stretches NEPA to introduce the new task of assessing climate change impacts on a project, flipping the statute’s mandate to address the project’s impacts on the environment. Agencies are further advised to consider alternatives that would not only reduce the project’s impact on the environment, but that would also make affected communities “more resilient to the effects of climate change.”

Although CEQ has stated that the guidance itself is not legally binding, a number of interest groups have noted that the guidance goes beyond NEPA, and members of Congress have added that it is procedurally defective because the President has not nominated and CEQ does not have a Senate-confirmed chairman. Legal challenges may be asserted to prevent courts from relying on the guidance as persuasive authority in the future.

Pending any such legal challenges, companies seeking federal authorizations should take care to include evidence on the extent and scope of climate change impacts for inclusion in the agency’s record. The D.C. Circuit’s June decisions should also inform agencies and companies in identifying the limits of direct and indirect effects of a proposed action. Companies should pay special attention to quantifying the GHG emissions proximately caused by a proposed action and supporting their proximate cause assessments. Agency decisions are more likely to survive environmental groups’ challenges if the record supports the agency’s identification of direct and indirect impacts and demonstrates the requisite “hard look” under NEPA.

CEQ anticipates releasing its response to comments document in the coming days, which should help shed light on the rationale behind its recommendation on “reasonably foreseeable” impacts. In the meantime, Sutherland will continue to monitor agency action in implementing the guidance, including whether agencies propose revisions to their NEPA review processes.