On December 18, 2014, the White House Council on Environmental Quality (CEQ) proposed revised guidance (“Guidance”) directing how federal agencies should consider greenhouse gas (GHG) emissions and climate change when conducting environmental reviews under the National Environmental Policy Act (NEPA). [1] This guidance revises and supersedes the CEQ’s earlier draft guidance issued in 2010. [2] Of particular concern to businesses in the energy and transportation sectors are the breadth and seemingly contradictory statements in the Guidance. Although the CEQ asserts that the Guidance creates no new or additional regulatory requirements, the Guidance potentially expands the scope of environmental review suggested for projects deemed to pose sufficient environmental threats to merit either an Environmental Assessment or Environmental Impact Statement.

The key points from the draft guidance are described below:

1. GHG emissions should be used as a proxy for environmental impacts, and the proportion of a project’s emissions compared to global impacts should not prevent review of those emissions.

As it did in the 2010 draft guidance, CEQ recommends that agencies use an action’s expected volume of GHG emissions as a proxy for the environmental impacts caused by such emissions.  However, the revised draft Guidance expressly cautions agencies against discounting review of GHG emissions based on the fact that the proposed action represents a “small fraction of global emissions.” CEQ emphasizes that small individual emission sources represent the cause of climate change itself: these diverse small sources collectively have a “huge impact” by contributing to the global aggregation of GHGs. Consequently, CEQ warns agencies to avoid “boilerplate” statements comparing project-level emissions to global GHG levels without also documenting the rationale, because this is “not an appropriate method for characterizing the potential impacts associated with a proposed action and its alternatives and mitigations.”

CEQ also justifies using GHG emissions as a proxy for actual impacts, because this approach provides sufficient information to make “a reasoned choice between the no-action and proposed alternatives and mitigations, and ensure the professional and scientific integrity of the discussion and analysis.”

2. The scope of the impacts that must be considered now includes both “upstream” and “downstream” effects causally related to the proposed action.

Although NEPA has always required consideration of “connected” actions and cumulative impacts, CEQ’s Guidance takes these concepts a step further by recommending that agencies should consider emissions from activities that are causally “upstream” or “downstream” of the proposed action. This approach could increase the scope of a GHG emissions analysis significantly by requiring agencies to consider not only the emissions of the proposed project, but also emissions associated with activities necessary to undertake the proposed action and activities that would occur as a result of the proposed activity. By way of example, CEQ explains in the Guidance that the GHG analysis for a proposed open-pit mine would include not only emissions associated with the mining itself, but also emissions associated with clearing the land and constructing access roads for the mine and emissions associated with refining or processing the extracted resource and using the resource. Thus, the GHG analysis for a mine located in West Virginia could include regional, national, or even global emission sources, depending on the resource.

3. A GHG impact analysis now requires enhanced consideration of relevant mitigation measures.

In addition to considering the range of reasonable alternatives that would further the purpose and need of the proposed action, federal agencies must now also consider, where possible, alternatives that would mitigate GHG emissions via “enhanced energy efficiency, lower GHG-emitting technology (e.g., using renewable energy), carbon capture, carbon sequestration (e.g., forest and coastal habitat restoration), sustainable land management practices, and capturing or beneficially using fugitive GHG emissions such as methane.”

The guidance also suggests that agencies use mitigation monitoring to ensure that mitigation is carried out as promised.

4. CEQ opens the door to use the social cost of carbon (SCC) as a basis to monetize the cost-benefit/climate-related impacts of an individual project.

CEQ recommends that agencies consider the federal SCC metric as a basis to evaluate impacts when the agency determines it appropriate to use a monetary cost/benefit analysis. Although developed by other federal agencies in a different context, CEQ describes the SCC as a “harmonized, interagency metric that can provide decision-makers and the public with some context for meaningful NEPA review.” Use of this metric could have implications for projects seeking to construct new energy or transportation facilities because of the variation and uncertainty associated with SCC calculations.

In summary, CEQ’s new draft Guidance expands a reviewing agency’s role in considering GHG emissions as part of an environmental review under NEPA. In addition, the draft Guidance would require an assessment of actions beyond those under the control or responsibility of the agency. CEQ tempers its focus on “potential effects of GHG emissions” and “implications of climate change” with a restatement about how agencies exercise their NEPA authority: “Agencies continue to have substantial discretion in how they tailor their NEPA processes to accommodate the concerns raised in this guidance, consistent with the CEQ Regulations and their respective implementing regulations and policies, so long as they provide the public and decision-makers with explanations of the bases for their determinations.” However, if the previous 2010 draft guidance provides any indication, agencies are likely to look to this Guidance to inform how they conduct their environmental reviews.

It is unclear when—if at all—CEQ will finalize its draft Guidance (the Guidance is open to public review and comment through March 25, 2015). However, even if the Guidance never becomes final, federal and state agencies may rely on its recommendations when conducting environmental reviews, as they have on the previous 2010 draft guidance.

Notes:
[1] The 2014 Guidance can be viewed here: http://www.whitehouse.gov/sites/default/files/docs/nepa_revised_draft_ghg_guidance_searchable.pdf

[2] The 2010 guidance is available here: http://www.whitehouse.gov/sites/default/files/microsites/ceq/20100218-nepa-consideration-effects-ghg-draft-guidance.pdf