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April 15, 2021

Key NEPA-GHG Issues for the Biden-Harris Administration: Focus on FERC Chairman Glick and Incoming CEQ Chair Mallory

Advisory

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In the coming weeks, the Council on Environmental Quality (CEQ) will reveal its plan for revising the National Environmental Policy Act (NEPA) regulations and guidance for analyzing greenhouse gas (GHG) emissions. Indeed, this will be one of the highest priority items for incoming CEQ Chair, Brenda Mallory, who was just confirmed by the Senate in a 53 to 45 vote on April 14, 2021.

In the meantime, under the leadership of new Chair Richard Glick, the Federal Energy Regulatory Commission (FERC) is wasting no time in charting its own course on the GHG emissions impacts of natural gas transportation facilities. It already has issued a Notice of Inquiry (NOI) on the Certification of New Interstate Natural Gas Facilities seeking input on the key NEPA/GHG issues that CEQ must address.1 And in a recent order approving the Northern Natural Gas Company's (Northern) South Sioux City to Sioux Falls A-line Replacement project, it established new precedent for how it will assess the significance of a project's GHG emissions impacts.2

In the NOI, FERC posed a list of questions relating to how it should determine whether a proposed natural gas project meets the public convenience and necessity test under Section 7 of the Natural Gas Act. Among other topics, notably including how to consider impacts on environmental justice communities, FERC raises fundamental questions about the evaluation of GHG emissions impacts and alternatives under NEPA. For example, FERC seeks feedback on the:

  • Scope of GHG emissions impact assessment (e.g., whether and how to consider upstream and downstream impacts);
  • Calculation of a project's carbon footprint (e.g., whether and how to determine if a project's GHG emissions may be offset by reduced GHG emissions from the project's operations, such as displacing more carbon-intensive fuel sources);
  • Assessment of the "significance" of a project's carbon footprint;
  • Appropriate use of the social cost of carbon (SCC) in NEPA analysis; and
  • Whether FERC has authority to impose mitigation for GHG emissions and if so, which GHG emissions should be mitigated and how.

CEQ will likely need to grapple with many of these same questions in the NEPA GHG emissions guidance that will apply government-wide. Will FERC's process get ahead of CEQ and potentially create precedent for other agencies? Or Will FERC's answers to these thorny questions be understood as specific to FERC's unique circumstances and statutory scheme? Will CEQ be able to craft government-wide guidance that answers these and other questions for agencies with diverse missions and authorities? Or will agencies follow FERC's lead and establish agency-specific guidance/rules? Time will tell.

Two of the more important questions that FERC will be addressing, which have national implications, are (1) how should the "significance" of GHG emissions be measured; and (2) what is the appropriate use of the SCC metric in NEPA reviews? We provide key insights into these two issues below.

How Should the "Significance" of GHG Emissions be Measured in NEPA Reviews?

  • Why it's important: "Significance" is a key NEPA concept because it determines the type of documentation required to support a project, such as a Categorical Exclusion, Environmental Assessment, or Environmental Impact Statement, and whether mitigation must be considered.
  • Where we are now: Until recently, FERC has questioned whether there is a reliable, objective means of determining the "significance" of GHG emissions.3 Chairman Glick, while a Commissioner, vigorously argued that it could.4 As Chairman, he intends to change FERC's position, although he notes that the methodology FERC employs "may evolve as the Commission becomes more familiar with the exercise."5 In its first foray into the assessment of "significance" since Chairman Glick took the helm, FERC compared a project's GHG emissions to: (1) total national GHG emissions (i.e., 5.903 billion MT CO2e in 2018); and (2) total emissions in the relevant state. FERC suggested that it also could compare the project's emissions to a state's GHG emissions reduction targets. FERC's exploration of this issue has widespread implications because CEQ previously has refrained from establishing a GHG emissions-specific test for "significance."6
  • Where we could go: FERC proposes a variety of potential methods for measuring significance of GHGs, including by: (1) comparing a project's GHG emissions to various policy-based metrics (e.g., carbon budgets in international agreements and state or regional GHG emissions reduction targets); and/or (2) assessing the project's potential impacts on climate change indicators (e.g., ocean acidification, sea-level rise, or storm events). Other federal and state and local agencies with NEPA-like statutes have been grappling with this question of significance. In California, for example, agencies established "significance" tests based on bright-line numeric values,7 efficiency metrics (e.g., percent reduction from "no action" or "business as usual" alternatives),8 and compliance with GHG reduction plans (e.g., cap-and-trade).9 Stakeholders with an interest in these essential NEPA GHG issues may wish to provide input during the FERC process.

What is the Appropriate Use of the Social Cost of Carbon Metric in NEPA Reviews?

  • Why it's important: The SCC is an estimate of the monetized damages caused by GHG emissions; it was developed for use in agency rulemaking processes to inform cost-benefit analysis. Environmental interest groups have advocated that it also should be used in NEPA reviews. Other parties, and some courts, have questioned whether a tool developed mainly for regulatory cost-benefit analysis is appropriate in the NEPA context, and cautioned that reliance on the SCC metric could skew the results of environmental impact assessments if not applied carefully.
  • Where we are now: FERC and other federal agencies generally have declined to use the SCC in NEPA reviews. They have asserted that (1) cost-benefit analysis is not required under NEPA, and (2) even where the agencies are analyzing the socioeconomic benefits of a proposal to monetize values, the SCC still is not an appropriate tool for project-specific analysis.10 The DC Circuit and other courts generally have upheld agencies' decisions not to use the SCC if the agency has justified that decision.11 Whereas the Trump CEQ rejected use of SCC in NEPA reviews,12 the Obama CEQ characterized it as an optional tool.13
  • Where we could go: In the NOI, FERC seeks input on a number of important questions about the SCC, including:
    • whether there is a statutory basis for its use;
    • which discount rate should be applied;
    • whether and how the SCC is relevant to analyzing the "significance" of a proposed project;
    • the extent to which the SCC is relevant to determining a project proponent's mitigation obligations; and
    • whether there are alternatives to the SCC.

It is unclear how the FERC and CEQ processes will relate to each other, as each agency attempts to address fundamental questions concerning the evaluation of GHG emissions and climate change in NEPA reviews. This will also be one of several important forums in which the utility of the Social Cost of Carbon will be examined. Stakeholders with an interest in these issues may wish to participate in both the FERC and CEQ comment processes.

© Arnold & Porter Kaye Scholer LLP 2021 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.

  1. Consistent with the Notice Extending Time for Comments issued on march 31, 2021, comments are due by May 26, 2021. FERC previously issued a Notice of Inquiry on the same topic in 2018. See Certification of New Interstate Natural Gas Facilities, 163 FERC ¶ 61,042 (2018) (2018 NOI).

  2. Northern Natural Gas Company, 174 FERC ¶ 61,189 (Mar. 22, 2021).

  3. See, e.g.Dominion Transmission, Inc., 163 FERC ¶ 61,128, at P 67 (2018) (finding that "the Commission cannot make a finding whether a particular quantity of greenhouse gas emissions poses a significant impact on the environment, whether directly or cumulatively with other sources, and how that impact would contribute to climate change" because there is "no standard methodology" to make such a determination).

  4. See, e.g., id. (asserting that the Commission's approach violates NEPA's "hard look" requirement); see also Ethan Shenkman, FERC in Limbo on Greenhouse Gas Reviews Despite Court's Mandates, Envtl. F. (Sept./Oct. 2019).

  5. Northern Natural Gas Company, 174 FERC ¶ 61,189, at P 33 (Mar. 22, 2021).

  6.  CEQ, Final Guidance for Federal Departments and Agencies on Consideration of Greenhouse Gas Emissions and the Effects of Climate Change in National Environmental Policy Act Reviews 11, 13 (Aug. 1, 2016) ("When considering GHG emissions and their significance, agencies should use appropriate tools and methodologies for quantifying GHG emissions and comparing GHG quantities across alternative scenarios. . . . The determination of the potential significance of a proposed action remains subject to agency practice for the consideration of context and intensity, as set forth in the CEQ Regulations."); see also CEQ, Draft National Environmental Policy Act Guidance on Consideration of Greenhouse Gas Emissions (June 26, 2019; rescinded Feb. 19, 2021) (not addressing significance); CEQ, Revised Draft Guidance for Federal Departments and Agencies on Consideration of Greenhouse Gas Emissions and the Effects of Climate Change in NEPA Reviews (Dec. 24, 2014) (clarifying that the proposed and later abandoned 25,000 MT CO2e/year reference point for quantitative disclosure was "not a substitute for an agency's determination of significance").

  7. See, e.g.Bay Area Air Quality Management District, CEQA Air Quality Guidelines, (establishing a significance threshold of 10,000 metric tons per year (MT/yr) of CO2e for stationary sources).

  8. See, e.g.Ctr. for Biological Diversity v. Dep't of Fish & Wildlife, 228 Cal. Rptr. 3d 23 (Cal. 1st Dist. Ct. App. 2015), as modified on denial of reh'g (Feb. 17, 2016) (finding that calculating an efficiency metric by comparing the project's GHG emissions to a hypothetical business-as-usual scenario can be appropriate, but that it was not appropriate to then compare that project-specific efficiency metric to statewide GHG reduction targets).

  9. See 14 CCR § 15064.4; see, e.g.Ass'n of Irritated Residents v. Kern Cty. Bd. of Supervisors, 225 Cal. Rptr. 3d 463 (Cal. 5th Dist. Ct. App. 2017) (upholding a finding that a refinery modification project would have less than significant GHG emissions based on compliance with California's cap-and-trade program).

  10.  See, e.g.Mountain Valley Pipeline, LLC, 161 FERC ¶ 61,043 (2017) (explaining that the SCC is not appropriate for project-level NEPA review because: "(1) EPA states that 'no consensus exists on the appropriate {discount} rate to use for analyses spanning multiple generations' and consequently, significant variation in output can result; (2) the tool does not measure the actual incremental impacts of a project on the environment; and (3) there are no established criteria identifying the monetized values that are to be considered significant for NEPA reviews.") (footnotes omitted).

  11. Compare Appalachian Voices v. Fed. Energy Regulatory Comm'n, No. 17-1271, 2019 WL 847199, at *2 (D.C. Cir. Feb. 19, 2019) (finding that the agency adequately documented in the record its decision not to apply the SCC); 350 Montana v. Bernhardt, 443 F. Supp. 3d 1185, 1196 (D. Mont. 2020), appeal dismissed, No. 20-35410, 2020 WL 4673856 (9th Cir. June 25, 2020) (same), with WildEarth Guardians v. Bernhardt, No. CV 17-80-BLG-SPW, 2021 WL 363955, at *8 (D. Mont. Feb. 3, 2021)(affirming an earlier decision finding the agency's decision not to use SCC arbitrary and capricious because it quantified the benefits of the project and failed to provide an explanation of why SCC was not an appropriate tool for calculating the costs of the project's GHG emissions).

  12. CEQ, Draft National Environmental Policy Act Guidance on Consideration of Greenhouse Gas Emissions (June 26, 2019; rescinded Feb. 19, 2021) ("SCC estimates were developed for rulemaking purposes to assist agencies in evaluating the costs and benefits of regulatory actions, and were not intended for socio-economic analysis under NEPA or decisionmaking on individual actions, including project-level decisions.").

  13.  CEQ, Final Guidance for Federal Departments and Agencies on Consideration of Greenhouse Gas Emissions and the Effects of Climate Change in National Environmental Policy Act Reviews 32 (Aug. 1, 2016) ("{T}he Federal social cost of carbon (SCC) estimates the marginal damages associated with an increase in carbon dioxide emissions in a given year. Developed through an interagency process committed to ensuring that the SCC estimates reflect the best available science and methodologies and used to assess the social benefits of reducing carbon dioxide emissions across alternatives in rulemakings, it provides a harmonized, interagency metric that can give decision makers and the public useful information for their NEPA review.") (emphasis added).

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