Legal Issues Dominate Intersection of Climate and Energy Transition
“I’m all for providing further clarity, not only for industry but all stakeholders in our proceedings,” said Richard Glick, chairman of the Federal Energy Regulatory Commission, soon after FERC announced that it was backtracking on its new climate policy under the National Environmental Policy Act. The new measure addresses large natural gas projects and provides a framework for assessing how pipelines and other facilities contribute to climate change. Following a grilling of the commissioners by members of the Senate Committee on Energy and Natural Resources, FERC decided to take a step back and solicit further public input before issuing a revised policy.
This was only the latest bump in the road as the Biden administration attempts to move forward with new climate and energy policies and regulations. Environmental practitioners advising their clients in this space are confronting a volatile policy landscape, where Congress, litigants, and the courts are pushing federal agencies in different, sometimes contradictory, directions. Not only do practitioners require special expertise in the emerging legal issues underlying the energy transition, they are finding that they need to follow developments on a continuous basis and must be prepared to advise clients on how to proceed in an uncertain regulatory environment.
FERC’s recent interim policy statement, for example, which had been approved by its three Democratic nominees and voted against by its two Republican nominees, detailed how the commission would consider the greenhouse gas emissions of facilities that transport natural gas in interstate commerce, or import or export natural gas internationally. Among other things, it stated that an Environmental Impact Statement will be required any time a proposed project exceeds emissions of 100,000 metric tons of carbon dioxide equivalent annually, considering both the construction and operation of the project and, in appropriate circumstances, the downstream combustion of transported gas. Using project data from the last four years, approximately 72 percent of projects would have required an EIS had the policy been in effect during that time frame.
Senate Minority Leader Mitch McConnell, echoing criticisms of others, including Senate Energy Chair Joe Manchin, asserted that FERC’s climate policy would complicate approvals with “new ill-defined ‘environmental justice’ factors” and considerations of climate impacts. “At a time when we should be looking for ways to expedite the approval of these important projects,” he said, “erecting new roadblocks to affordable, abundant energy makes no sense, particularly in this tenuous time.”
Meanwhile, the courts are keeping up the pressure on the commission. Earlier this month, the D.C. Circuit ordered FERC to complete a supplemental environmental review for a natural gas upgrade project in Massachusetts, in response to a challenge filed by two environmental groups. The court agreed that the commission’s environmental assessment failed to account for the reasonably foreseeable indirect effects of the project—specifically, GHGs attributable to burning the gas to be carried in the pipeline. The court rejected FERC’s finding that the project would have no significant environmental impact, reasoning that “the end use of the transported gas is reasonably foreseeable, and the commission, in response, invokes nothing more than a mere possibility of offsetting reductions.” Quoting an earlier decision, the court held “the commission is wrong to suggest that downstream emissions are not reasonably foreseeable simply because the gas transported by the project may displace existing natural gas supplies or higher-emitting fuels.”
The roller coaster for lawyers in the energy and climate space did not stop there. Earlier this year, a federal district court judge in Louisiana issued an injunction against the federal government’s reliance in rulemaking proceedings on the social cost of carbon, an economic metric which places a monetary value on the societal benefits of reducing GHG emissions and avoiding climate impacts. The nationwide directive caused federal rulemaking to go topsy turvy. According to the White House Office of Information and Regulatory Affairs, at least 38 regulations would need to be postponed or rewritten if the temporary ban stayed in place. The Department of Justice, however, filed a successful emergency appeal with the Fifth Circuit, which issued a stay of the injunction and allowed the government, for now, to continue to rely on the metric in its rulemakings.
The Fifth Circuit’s intervention had real impacts. Notably, the Department of the Interior had planned to hold an onshore oil and gas lease sale in March, but hit the pause button after the judge ruled that it couldn’t use the social cost of carbon in its environmental review. Now that the appeals court has blocked that decision, stakeholders are awaiting Interior’s next move, with environmental and energy lawyers watching closely.
Legal Issues Dominate Intersection of Climate and Energy Transition