CEQ guidance adds new twist to legal battles

Source: Amanda Reilly, E&E reporter • Posted: Monday, August 8, 2016

The Council on Environmental Quality’s climate change guidance released this week adds a new element to battles that are largely playing out in courts over the scope of federal agencies’ environmental reviews of projects.

At issue is the extent to which agencies must consider greenhouse gas emissions that occur upstream and downstream from energy projects. Environmental advocates argue those emissions fall squarely under the scope of the National Environmental Policy Act.

According to a recent report, more than a dozen lawsuits in the past five years have challenged federal reviews of fossil fuel extraction and infrastructure projects because of failure to consider upstream and downstream emissions (E&ENews PM, April 5).

CEQ’s final guidance document on how agencies should consider climate change in project reviews adds to that debate by formally guiding agencies to consider “indirect” climate effects of major federal actions (Greenwire, Aug. 2).

It specifically cites the expected combustion of coal from a federal lease sale as an example of an indirect effect that is reasonably foreseeable.

“Upstream-downstream boundary drawings are a hot issue, and it’s made even more hot by the virtue of the climate change issue,” said Michael Drysdale, an attorney at Dorsey & Whitney. “The guidance pretty clearly says you need to at least think about that stuff.”

But the CEQ document, while it lays out the White House office’s interpretation of its NEPA regulations, is merely guidance for agencies to follow. It does not carry the same weight in courts as agency regulations.

Still, some observers said this week that federal agencies will likely have to provide an explanation to courts if they choose not to align with the guidelines of CEQ, which is responsible for NEPA implementation regulations.

“A court will give a greater degree of deference to a regulation that has gone through notice-and-comment rulemaking,” said Michael Burger, executive director of Columbia University’s Sabin Center for Climate Change Law. “They’ll defer to [the guidance] to the extent they think it’s a reasonable interpretation. They’ll give it less weight — but they’ll give it some weight.”

The National Environmental Policy Act requires federal agencies to define three types of environmental impacts in analyses of projects: direct effects, indirect effects and cumulative effects.

“The final guidance makes that abundantly clear from the White House’s perspective: Both indirect and direct emissions should be taken into account, and there’s case law that’s very much in line with that position,” said Jayni Hein, policy director at the New York University School of Law’s Institute for Policy Integrity.

It’s “fairly well-established,” Burger of Columbia said, that those indirect effects include downstream greenhouse gas emissions. Courts have ruled as such in several cases involving the extraction of coal, according to a working paper released earlier this year by the Sabin Center.

In 2003, the report details, the 8th U.S. Circuit Court of Appeals found that the Surface Transportation Board failed to consider the combustion of coal that would be transported as a result of rail lines to service coal mines in the Powder River Basin in Wyoming.

In another notable case, the U.S. District Court for the District of Colorado in 2014 faulted environmental impact statements prepared by the Forest Service in conjunction with the Bureau of Land Management for road construction for coal-related activities and adding newly opened lands to existing coal leases.

The court found that the agencies wrongly did not take into account emissions from future mining operations and coal combustion.

“In the coal context, there’s been a lot of argument and litigation about whether federal agencies need to consider the effects of combustion when they’re leasing or permitting a coal operation,” Drysdale said. “Combustion is a classic downstream effect.”

There’s less existing case law around upstream emissions and projects involving transmission lines and oil and gas export facilities, Burger said.

“It’s a trickier type of calculation,” he said. “What we don’t want to have happen, what NEPA doesn’t contemplate, is that every actor along the line, from extraction through combustion, has to look up and down the life cycle and do its own assessments of what its emissions are.”

Drysdale said he expects the CEQ document, now that it’s finalized, to be cited by agencies and parties in comments and litigation over NEPA reviews.

The guidance could be a tool for opponents of fossil fuel projects.

“If a project opponent wants to come forward and say, ‘Look, I recognize that there’s not a tremendous amount of carbon emissions, but it’s something you have to address. See the guidance,’ that’s how it’s going to come into play,” Drysdale said.

“Where an agency could get into trouble,” he said, “is if it does something different than in the guidance without providing a reasoned explanation.”

But critics of expanding the scope of NEPA reviews will have little recourse to challenge CEQ’s guidelines, Drysdale predicted.

“If you have these tools that are developed, but not developed through notice-and-comment rulemaking, that means they have less formal effect,” Drysdale said. “But it also means they are harder to get at in terms of if you want to challenge the agency’s reasoning.”

Impact on LNG cases?

The guidelines in CEQ’s document are similar to arguments that the Sierra Club has been making in federal court cases over approvals for liquefied natural gas terminals, said Nathan Matthews, an attorney at the environmental group.

The group has argued in court cases that the federal government’s environmental impact statements for the projects did not adequately examine emissions from the increased domestic production of natural gas that was likely to occur if LNG were exported from the terminals.

Environmentalists aren’t going to file a bunch of new lawsuits now that the guidance is out, Matthews said. But the guidance “does demonstrate that the interpretation of the regulation that we’ve been putting forward in our litigation is largely shared by CEQ,” Matthews said, “and CEQ is the federal agency that has expertise.”

The Sierra Club, however, has so far suffered a string of losses in its litigation against the Federal Energy Regulatory Commission over LNG terminals, with the U.S. Court of Appeals for the District of Columbia Circuit finding that the environmental group has targeted the wrong agency. The D.C. Circuit has told the Sierra Club that the Department of Energy, not FERC, is the correct foe.

The Sierra Club has four pending lawsuits against DOE approvals of LNG terminals, none of which have yet been argued.

Matthews said that DOE’s environmental impact statements analyzing terminals would not meet the guidelines set forth this week by CEQ.

“The single essential issue that CEQ identified is you have to quantify that tonnage change in greenhouse gases,” Matthews said. “DOE provided a general analysis of how use of LNG provided by the United States compares to other fossil fuels in some export markets, but DOE has never provided any straightforward quantification of how much greenhouse gas emissions will increase in response to a particular export’s approvals.”

A group of industry attorneys at Sidley Austin LLP, however, recently argued that D.C. Circuit rulings against the Sierra Club suggested that courts would not read NEPA to apply as broadly as CEQ states in its guidance.

The Sabin Center, however, countered that the D.C. Circuit said nothing about whether the scope of the environmental impact statements for the LNG terminals would satisfy NEPA — just that FERC was the wrong agency to target.