D.C. Circuit Reaches Different Results on NEPA and GHG Rules

Readers of this column are well familiar with the roller coaster ride that environmental practitioners have been recently experiencing at the intersection of energy, climate, and NEPA, the National Environmental Policy Act. Nowhere is this more evident than in a pair of recent D.C. Circuit rulings on the scope of direct and indirect greenhouse gas emissions that must be analyzed in the context of energy infrastructure projects.

In Center for Biological Diversity v. FERC, the Alaska Gasline Development Corporation received authorization to build a system of natural gas facilities, including an 800-mile pipeline bisecting Alaska from the North Slope to Cook Inlet and new liquefied natural gas facilities for exports. The D.C. Circuit affirmed FERC’s decision, rejecting challenges to its analysis of the GHG-related impacts of the project.

First, the appeals court ruled that FERC was not required to analyze the indirect, downstream GHG emissions associated with the combustion of natural gas in the countries of destination. It reasoned that the Department of Energy, as opposed to FERC, has exclusive jurisdiction over approvals of natural gas exports, and therefore the commission does not have authority over, and therefore need not address the effects of, the anticipated exports. “FERC properly recognized the limits of its delegated statutory authority,” the court reasoned, “and cabined its NEPA analysis accordingly.” Moreover, it explained, an agency need only consider a project’s “reasonably foreseeable” effects, and here the “indirect emissions are not reasonably foreseeable if the commission cannot identify the end users of the gas.”

Second, for the GHG emissions that FERC did account for, the court held it was sufficient to compare anticipated emissions with state and national GHG emissions inventories, and that the commission was under no obligation to apply the Social Cost of Carbon metric to derive a monetary estimate of potential climate change impacts. The court agreed that applying the SCC would lead to confusion rather than clarity, given “the lack of consensus about how to apply the Social Cost of Carbon on a long time horizon,” and the fact that the metric “places a dollar value on carbon emissions but does not measure environmental impacts as such.”

But the story does not end there. Several months later, in Eagle County v. Surface Transportation Board, a different panel of D.C. Circuit judges set aside a decision by the STB to approve a new 80-mile rail line in Utah to connect the Uinta Basin to a national rail network. The new line’s primary purpose would be to transport waxy crude oil to refineries in Houston, Port Arthur, or to the Louisiana Gulf Coast. The court vacated the STB’s order on the grounds, among others, that the environmental impact statement improperly ignored certain upstream and downstream GHG impacts.

The appeals court acknowledged that impacts from upstream energy production and downstream combustion are not always “a reasonably foreseeable effect of a project.” However, in this context, the court rejected the board’s excuses for declining to analyze upstream and downstream combustion emissions—that additional oil development and the ultimate destination of the oil were unknown. While an agency “need not foresee the unforeseeable,” it reasoned, “by the same token neither can it avoid” its obligations under NEPA “simply because describing the environmental effects of and alternatives to particular agency action involves some degree of forecasting.”

The court also rejected the board’s argument that it had no obligation to consider the downstream impacts of oil refining on Gulf Coast communities based on a lack of authority to regulate such impacts. The court found that the STB “has authority to deny an exemption to a railway project on the ground that the railway’s anticipated environmental and other costs outweigh its expected benefits,” so the board’s lack of jurisdiction over refining activity was irrelevant.

Is this pair of cases reconcilable? The second panel thought so. In an attempt to distinguish the cases, the three judges highlighted the numerous uncertainties in FERC’s decision and found “there are no such uncertainties” in STB’s decision. Whether private practitioners and government lawyers will find the D.C. Circuit’s explanation helpful, as they advise their clients moving forward, is another story.

As for the court’s holding that agencies are under no obligation to apply the SCC metric as part of their NEPA analysis? As this column went to press, President Biden issued an announcement that he will henceforth be “directing agencies to consider the [SCC] in environmental reviews conducted pursuant to [NEPA] as appropriate.” How the government grapples with these distinctions will be closely watched.

How the government grapples with these two decisions will be closely watched.