On February 18, 2010, the Council on Environmental Quality (CEQ)—the agency charged with administering the National Environmental Policy Act (NEPA)—issued its Draft NEPA Guidance on Consideration of the Effects of Climate Change and Greenhouse Gas Emissions (“Draft GHG Guidance”) and appears poised to conclude that, in general, the analyses required by NEPA must consider climate change issues. See 75 Fed. Reg. 8046 (Feb. 23, 2010).

For a substantial percentage of projects that require a permit or funding from a federal agency, the agency must complete a NEPA analysis—in which the agency determines and compares the direct, indirect, and cumulative environmental impacts of the project and alternatives—before issuing the permit or providing the funding. The extent to which consideration of greenhouse gas (GHG) emissions and climate change impacts should be considered in a NEPA analysis has been in doubt for some time.

The Draft GHG Guidance would make clear that discussion of GHG emissions and climate change is not only permissible but, under some circumstances, required. If finalized, this guidance would place additional pressure on GHG emitters to reduce or mitigate their emissions, particularly when combined with the Environmental Protection Agency’s regulations such as the GHG Reporting Rule, proposed motor vehicle GHG emission rule, and proposed Tailoring Rule. How the guidance would be viewed under pending climate change legislation is uncertain. CEQ is accepting public comments on the Draft GHG Guidance through May 24, 2010.

How Did We Get Here? NEPA and Climate Change

NEPA was enacted on January 1, 1970, and requires federal agencies to prepare an environmental impact statement (EIS) for “proposals for legislation and other major federal actions significantly affecting the quality of the human environment.” In this context, “major federal actions” can be either a federal activity or a nonfederal activity that is entirely or partially financed, assisted, authorized, permitted, or otherwise approved by a federal agency. An EIS should consider direct and indirect effects of the project and alternatives; interference with other activities; energy and resource requirements; conservation and reparation potential; preservation of urban, historic, and cultural quality; and mitigation actions. Regarding effects, the EIS must consider cumulative effects; i.e., whether a proposed action is “related to other actions with individually insignificant but cumulatively significant impacts.”

The primary purpose of an EIS is to “serve as an action-forcing device to ensure that the policies and goals defined in NEPA are infused into the ongoing programs and actions of federal government” and “is more than a disclosure document . . . it shall be used by the federal officials in conjunction with other relevant [information] to plan actions and make decisions.” Despite this broad mandate and the fact that CEQ has been attuned to climate change risks since CEQ’s inception in 1970, the appropriate manner in which to treat climate change concerns under NEPA has been unclear. See The First Annual Report of the Environmental Quality Committee, Chapter V: “Man’s Inadvertent Modification of Weather and Climate” (Aug. 1970).

In an apparent effort to provide some clarity, CEQ issued a draft memorandum in 1997 entitled Guidance Regarding Consideration of Global Climatic Change in Environmental Documents Prepared Pursuant to the National Environmental Policy Act. Recognizing serious concerns about climate change, CEQ called on all federal agencies to consider, in the context of NEPA and to “the extent possible given current state of scientific knowledge,” how major federal actions could influence emissions and sinks of GHGs and how climate change could potentially influence major federal actions. The CEQ determined in the memorandum that climate change is a reasonably foreseeable impact from GHG emissions and as a result, climate change should be considered in NEPA documents. However, CEQ also stated that, in most instances, analysis of climate change impacts at a project level would not provide meaningful information. CEQ also took the view that climate change was an uncertain effect requiring little analysis under NEPA. Not satisfied with this approach, the International Center for Technology Assessment and the Natural Resources Defense Council petitioned CEQ in 2008 for revised guidance.

CEQ’s Draft Guidance: “Let’s Talk About Climate Change.”

CEQ’s Draft GHG Guidance would address agencies’ evaluation of climate change in NEPA analyses in two different ways. First, the Draft GHG Guidance would address when discussion of a project’s GHG emissions is warranted.

  • “If a proposed action would be reasonably anticipated to cause direct emissions of 25,000 metric tons or more of [GHGs] on an annual basis,” it is likely that those emissions would be relevant to, and need to be discussed within, NEPA analyses.
  • “For long-term actions that have annual direct emissions of less than 25,000 metric tons of [GHGs], CEQ encourages federal agencies to consider whether the action’s long-term emissions should receive analysis.”  
  • “In the agency’s analysis of direct effects, it would be appropriate to: (1) quantify cumulative emissions over the life of the project; (2) discuss measures to reduce GHG emissions, including consideration or reasonable alternatives; and (3) qualitatively discuss the link between such GHG emissions and climate change.”
  • “CEQ proposes that the agency should also consider mitigation measures and reasonable alternatives to reduce action-related GHG emissions.” “Among alternatives that may be considered . . . are enhanced energy efficiency, lower GHG-emitting technology, renewable energy, planning for carbon capture and sequestration, and capturing or beneficially using fugitive methane emissions.”
  • “To the extent that a federal agency evaluates proposed mitigation of GHG emissions, the quality of that mitigation—including its permanence, verifiability, enforceability, and additionality—should also be carefully evaluated.”  
  • “Analysis of emissions sources should take account of all phases and elements of the proposed action over its expected life, subject to reasonable limits based on feasibility and practicality.”  
  • “Where an agency concludes that a discussion of cumulative effects of GHG emission related to a proposed action is warranted to inform decision-making, CEQ recommends that the agency . . . focus on an assessment of annual and cumulative emission of the proposed action and the difference in emissions associated with alternative actions.”  

Second, the project’s environmental impacts should be considered in light of expected climate change effects. For example, if a project would use a significant amount of water in an area anticipated to become increasingly drought-stricken as a result of climate change, the agency’s NEPA analysis may not ignore the anticipated climate change effect.  

  • “The focus of this analysis should be on the aspects of the environment that are affected by the proposed action and the significance of climate change for those aspects of the affected environment.”
  • “Climate change effects should be considered in the analysis of projects that are designed for long-term utility and located in areas that are considered vulnerable to specific effects of climate change . . . within the project’s timeframe.”
  • “Agencies should consider the specific effects of the proposed action . . . , the nexus of those effects with projected climate change effects on the same aspects of our environment, and the implications for the environment to adapt to the projected effects of climate change.”
  • “Agencies should be clear about the basis for projecting the changes from the existing environment” that are the “reasonably foreseeable” result of climate change.
  • “For example, a proposal for long-term development of transportation infrastructure on a coastal barrier island will likely need to consider whether environmental effects or design parameters may be changed by the projected increase in the rate of sea level rise.”

What Does This Mean? Expense or Opportunity?

There is no question that private entities seeking federal approval of or funding for their projects frequently view NEPA compliance as an expensive and lengthy process. And the more complex the required NEPA analysis, the more expensive and lengthy the process can become. Consequently, the Draft GHG Guidance has the potential to increase the cost and time of project development by more clearly placing an additional layer in the NEPA analysis: the consideration of GHG emissions and climate change impacts. Thus, the Draft GHG Guidance will place additional pressure on GHG emitters to reduce or mitigate their emissions in order to simplify the NEPA process.

However, this pressure to reduce or mitigate emissions may create opportunities for those in the GHG reduction and mitigation business. That is, the Draft GHG Guidance may be a market driver for low-GHG emission technology and GHG emission offsets. Indeed, the Draft GHG Guidance lists “enhanced energy efficiency, lower GHG-emitting technology, renewable energy, planning for carbon capture and sequestration, and capturing or beneficially using fugitive methane emissions” as being “among the alternatives that may be considered for their ability to reduce or mitigate GHG emissions.” As this list is not exclusive, sequestering GHGs through forestry and altered agricultural practices, as well as a myriad of other activities, could also be considered. Moreover, the Draft GHG Guidance does not clearly require GHG mitigation efforts to be co-located with the project being evaluated under NEPA; consequently, it is possible that a project developer could mitigate a project’s GHG emissions—and ease the NEPA process—by simply purchasing GHG emission offset credits.

One certainty is that CEQ’s Draft GHG Guidance is sure to impact different entities uniquely. Consequently, it is advisable to evaluate the impact of the Draft GHG Guidance and consider submitting comments before the comment deadline of May 24, 2010.