White House guidance gets early welcome from industry as possible lift for natural gas projects

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White House guidance gets early welcome from industry as possible lift for natural gas projects

 

FERC seen likely to cite guidance in litigation

Litigation over indirect effects of projects

 

A draft White House guidance on climate considerations in National Environmental Policy Act reviews was quickly welcomed by industry as potentially helping to add clarity and streamline heavily litigated natural gas project reviews.

Interstate natural gas projects that move Appalachian Shale gas to market have faced lawsuits from environmental groups contending that the Federal Energy Regulatory Commission falls short in considering upstream or downstream greenhouse gas emissions related to the projects.

Draft Council on Environmental Quality guidance released Friday broadly addresses how federal agencies should address GHG emissions in their NEPA analyses. The approach appears to align in a number of areas with direction of the majority at FERC and to run counter to the prior Obama administration guidance the Trump administration previously pulled. But some environmentalists contended the draft left out key details on the central debate over indirect effects from downstream and upstream GHG emissions.

William Scherman, partner with Gibson, Dunn & Crutcher, said the new guidance should be helpful in litigation regarding FERC's NEPA review of gas projects because "the new guidance is consistent with FERC's approach.

"The prior guidance was often seen as undermining FERC's litigation position in defending its prior certificate orders because FERC was taking a somewhat different approach." That was likely a factor in the US Circuit Court of Appeals for the District of Columbia decision in the Sierra Club in 2017, he said. In Sierra Club, the court found FERC failed to provide enough information about the GHG emissions from downstream power plants or fully explain its reasoning.

Multiple industry groups representing the oil and gas sectors welcomed the effort.

In a research note, ClearView Energy Partners said "even prior to finalization, we think that the draft guidance could bolster FERC's narrower view on its GHG reviews under NEPA as it faces judicial review of project permits." ClearView's Christi Tezak expected that future FERC orders would reference the draft to support the position that FERC is correct not to make inquiries that it views as "overly speculative," as well as that FERC has drawn the scope of its reviews in the right place.

FERC Chairman Neil Chatterjee said in an email he "look[ed] forward to taking advantage of [the CEQ] expertise as this guidance applies to FERC." The commission "remains committed to improving our processes where possible and to ensuring timely and thorough reviews of all project applications," he said. Several FERC observers pointed out that, as an independent agency, FERC is not required to follow CEQ guidance.

CHANGED APPROACH

FERC in May 2018 narrowed circumstances in which it would consider upstream or downstream emissions and cast as "inherently speculative" the full burn calculations that FERC had previously been providing to determine an upper bound GHG amount. That shift in approach drew objection from the panel's Democrats.

Touching on that issue, the draft CEQ guidance said agencies don't have to quantify effects "where information necessary for quantification is unavailable, not of high quality or the complexity of identifying emissions would make quantification overly speculative."

Nathan Matthews, an attorney with the Sierra Club, said, he did not believe the wording on that issue changed FERC's responsibilities. The question in contention was when those impacts were considered too speculative, he suggested.

FURTHER CLARITY

Cynthia Taub, a partner at Steptoe & Johnson, said she believed the guidance could be helpful for projects, but hoped for "a little more specificity" in the final version, on such issues as when quantification is warranted. Comments on the draft pushing for some added clarity are possible, she said.

The draft guidance might be cited to support FERC's view that it is unable to assess the significance of GHG impacts using the Social Cost of Carbon tool. The draft guidance says NEPA and CEQ's implementing rules do not require agencies to monetize the costs and benefits of a proposed action. "For this reason, an agency need not weigh the effects of the various alternatives in NEPA in a monetary cost-benefit analysis using any monetized Social Cost of Carbon estimates ... and other similar cost metrics," it said.

The guidance also says a separate cumulative effects analysis for GHGs is not required, and it backs a reference to local, regional, national and sector-wide emissions estimates for context. In a statement, the Sierra Club called that an attempted end-run around existing obligations.

The guidance also says NEPA does not require agencies to adopt mitigation measures for GHG emissions, although it suggests agencies can consider alternatives based on potential effects due to GHG emissions.