Climate change will receive more attention in the analysis of environmental impacts under the National Environmental Policy Act (NEPA), according to a Draft Guidance issued on Feb. 18 by the White House Council on Environmental Quality (CEQ). Charged with advising federal agencies on the implementation of NEPA, CEQ proposes that the environmental analysis of major projects consider the effect on climate change of greenhouse gases (GHGs) that would be emitted by the proposed project, as well as the potential impact of climate change on the project itself.

Although some courts have come to the conclusion that NEPA requires such analysis, this is the first time that CEQ has spoken out on the issue, sparking a debate over the role that climate change should play when the federal government makes major decisions affecting the environment. Because those decisions include a vast array of essential permits and other approvals, the stakes for private developers of major projects are potentially high. CEQ is receiving public comment on the Draft Guidance for 90 days after its publication in the Federal Register, which should occur shortly.

About NEPA

To promote informed decision-making, NEPA requires federal agencies to conduct a thorough analysis of a project’s potential impact on the environment before taking a major action or issuing a permit. Where a federal permit is required, a typical project might raise issues regarding its potential effect on air quality, water quality, endangered species, energy use, noise or traffic.

If the agency determines that the action will not significantly impact the environment, it may issue an Environmental Assessment, accompanied by a Finding of No Significant Impact. If, however, the agency determines that the action may significantly affect the environment, a full Environmental Impact Statement (EIS) is required. Among other things, an EIS must include a detailed statement regarding the adverse impact of the proposed action, any mitigation measures the project proponent should adopt to avoid or lessen those impacts, any adverse impacts that could not be avoided, alternatives to the proposed action, and any irreversible commitment of resources resulting from the proposed action.

A typical EIS takes several years to complete, including many studies and extensive opportunity for public comment. Although the process can be arduous, NEPA is a purely procedural statute. Even if the analysis reveals very significant negative environmental impacts, the agency may go forward, so long as it fully discloses the negative effects.

The Draft Guidance

As early as 2003, federal courts have held that under some circumstances NEPA requires analysis of the environmental impacts of GHG emissions. See Mid-States Coalition for Progress v. Surface Transportation Board, 345 F. 3d 520 (8th Cir. 2003). CEQ’s Draft Guidance goes further, offering guidance on when and how that analysis should be performed.

Analyzing the effect of the proposed project on climate change

In terms of the effect of the proposed project on climate change, the Draft Guidance proposes annual emissions of 25,000 tons of CO2-equivalent as an indicator that an assessment of GHGs emissions may be meaningful to the agency decision maker and the public, and therefore warrants some description in the NEPA analysis. (Twenty-five thousand tons is roughly equal to the annual emissions from a large industrial or commercial facility; EPA provides a GHG calculator on its Web site.)

At or above that level, CEQ specifically recommends that agencies: (1) quantify cumulative emissions over the life of the project; (2) discuss measures to reduce GHG emissions, including consideration of reasonable alternatives; and (3) qualitatively discuss the link between such GHG emissions and climate change.

CEQ notes that 25,000 tons of CO2-equivalent is the level that triggers an obligation to report GHG emissions under Clean Air Act regulations recently adopted by EPA (please see Davis Wright Tremaine’s prior advisory on the new GHG reporting rule). It stops short, however, of proposing that 25,000 tons be the threshold for concluding that a project has a significant affect on the environment, thereby necessitating an EIS. As a practical matter, most projects with that level of GHG emissions already require NEPA review due to other environmental impacts.

Where a federal agency is evaluating proposed mitigation of GHGs, CEQ cautions that the quality of that mitigation—including its permanence, verifiability, enforceability and additionality—should be “carefully evaluated.” Draft Guidance at 6. As potential mitigation strategies, CEQ mentions enhanced energy efficiency, lower GHG-emitting technology, renewable energy, planning for carbon capture and sequestration, and capturing or beneficially using fugitive methane emissions. Interestingly, it does not mention the purchase of carbon offsets as a potential mitigation strategy.

Analyzing the effect of climate change on the proposed project

Turning to the potential effect of climate change on the proposed project, CEQ notes that climate change can affect a proposed project in a variety of ways, including exposing it to a greater risk of floods, storm surges or higher temperatures. It offers as an example an industrial facility that draws water from a water body that is dwindling because of decreased snowpack in the mountains or that is warming due to increasing atmospheric temperatures. According to CEQ, 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 (such as increasing sea level or ecological change) within the project’s timeframe.” Draft Guidance at 7.

In analyzing the effects of climate change on a proposed project, CEQ cautions that agencies “need not undertake exorbitant research or analysis of projected climate change impacts in the project area or on the project itself, but may instead summarize and incorporate by reference the relevant scientific literature.” Draft Guidance at 8. It also urges agencies to consider and disclose the uncertainties associated with long-term projections based on climate change models.

Issues left wide open

On several important issues, CEQ seeks public comment without setting forth proposed guidance. Most critically, it requests comment as to what level of GHG emissions should be considered to have cumulative effects. This is one of the thorniest issues surrounding the effective use of NEPA as a tool for analyzing climate change impacts, and will almost certainly draw a large volume of public comment. CEQ also solicits comment as to whether it should provide guidance to agencies on how to determine whether GHG emissions are “significant” for NEPA purposes, thus requiring an EIS.

The remaining requests for comment focus on federal land and resource management policies. Should CEQ provide guidance on how to assess the effect of land management practices on carbon release and sequestration? How should NEPA analysis be tailored to address the beneficial effects of land and resource management actions? What specific guidance should be provided to the federal land management agencies? Given the emphasis on forest carbon sequestration and avoided deforestation at the recent Copenhagen conference, it appears that CEQ is wrestling with the role that federal public lands management policy may play in the U.S. response to climate change.

Conclusion

This proposed Guidance is yet another in a series of recent federal administrative agency actions regarding climate change. (Please see Davis Wright Tremaine’s prior alerts on EPA’s GHG Endangerment Finding, and the Securities Exchange Commission’s Guidance on disclosure of climate change risks.)

The Draft Guidance may increase the risk of litigation by groups opposed to federal permitting or funding of certain types of projects, as has been the experience of developers in states that have interpreted their “mini-NEPA laws” to require analysis of climate change impacts. In California, for example, the attorney general and environmental groups have successfully challenged land use plans and housing developments on that basis.

However, this Guidance also represents a rare opportunity for the regulated community to give input into how NEPA should be applied to the analysis of certain types of impacts. Proponents of major projects for which federal permits or funding are required would be wise to consider submitting comments. At the very least, project proponents should analyze the potential climate change effects of their projects and develop mitigation plans.