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Climate Law & Environmental Finance Update

CEQ Resists Mandatory NEPA Regulations and Final Guidance on Climate Impacts, But Courts May Not Wait

August 20, 2014

On August 7, 2014, the White House Council on Environmental Quality (CEQ) denied a petition by several environmental groups to update its National Environmental Policy Act (NEPA) regulations to explicitly require climate change analyses to be included in federal agencies' environmental review documents. Among other things, CEQ concluded that existing NEPA regulations "already encompass consideration of climate effects," setting the stage for a likely legal challenge to CEQ's decision.

Yet CEQ's hands-off approach may focus more attention on a court decision earlier this summer that suggests federal agencies may need to be specific in evaluating climate change risks as part of their NEPA analyses. On June 27, 2014, a federal judge in Colorado required the Bureau of Land Management (BLM) to demonstrate why it chose not to factor the potential economic impact of GHG emissions into its NEPA review of a proposed mine expansion project. The judge took the position that if a federal agency decides to assess the potential economic benefit(s) of certain projects, it must also (i) consider potential economic costs associated with any increases in GHG emissions forecasted for the project; or (ii) reasonably explain why such an evaluation cannot or should not be made.

A Petition for New NEPA Climate Rules

In the waning days of the Bush Administration, a coalition of environmental groups filed a petition with CEQ demanding that it amend its NEPA regulations to unambiguously mandate that climate impacts be considered in agencies' environmental reviews. Upon taking office in 2009, the Obama Administration did not immediately respond to the petition. Instead, CEQ issued draft NEPA guidance in 2010 on the "Consideration of the Effects of Climate Change and Greenhouse Gas Emissions." CEQ's guidance, which has yet to be finalized, proposed a voluntary approach for federal agencies that were seeking to account for climate change related risks impacting major federal projects. 

The Colorado Decision

Fast-forward to 2014. In High Country Conservation Advocates v. U.S. Forest Service, 13-cv-1723 (D. Colo. June 27, 2014), Judge R. Brooke Jackson blocked BLM's approval of an application submitted by Arch Coal, Inc. to increase the size of the West Elk coal mine by 1,700 acres. Among the bases for Judge Jackson's decision was that BLM failed to adequately consider the potential economic costs of GHG emissions in its final Environmental Impact Statement (FEIS).

Judge Jackson found it was insufficient for BLM—in consultation with the Forest Service—to discuss only the general effects of climate change. He ruled that BLM should have calculated the economic burdens of the project's forecasted increase in GHG emissions, and refused to accept BLM's argument that there was not a good way to calculate such burdens. Judge Jackson instead pointed to the social cost of carbon (SCC), an accounting methodology that the U.S. Department of Energy formulated in 2010. The SCC is described as "an estimate of the monetized damages associated with an incremental increase in carbon emissions in a given year, and '[i]t is intended to include (but is not limited to) changes in net agricultural productivity, human health, property damages from increased flood risk, and the value of ecosystem services due to climate change.'" 

Judge Jackson concluded that NEPA's "hard look" standard of review obligated BLM to at a least analyze the merits of the SCC protocol and explain why it cannot or should not be incorporated into the FEIS.

CEQ's Refusal to Promulgate Climate-Specific Regulations

In its August 7 letter denying the petition to issue new GHG regulations or finalize the draft GHG guidance, CEQ concluded that NEPA regulations already require agencies to consider "reasonable foreseeable environmental impacts of their actions," that include "foreseeable GHG and climate change implications." While stopping short of mandating such evaluation, CEQ noted that courts have affirmed this interpretation in some manner, and that it "continues to work directly with the Federal agencies to advise them on integrating climate considerations into the analysis for specific Federal agency actions." 

Measuring Climate Cost Impacts

CEQ's reluctance to finalize the draft guidance or promulgate new regulations means courts in the near term will likely come to varying conclusions on the GHG impact analyses mandated under existing NEPA regulations. This shines an even brighter spotlight on the Colorado decision. If Judge Jackson's views that the SCC protocol should be employed absent a good contrary reason are sustained on appeal and/or followed by courts in other jurisdictions, the cost implications for permitting and approval of major projects are potentially enormous.   

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