General

On February 18, 2010, the President's Council on Environmental Quality issued guidance papers on three topics under the National Environmental Policy Act (NEPA), primarily discussing climate change and greenhouse gas emissions. Courts usually defer to the Council on Environmental Quality's NEPA interpretations.

NEPA requires all federal agencies to assess the environmental effects of various federal actions, including from federal projects to federally-permitted activity. NEPA is enforced primarily by federal agencies on themselves, subject to public, U.S. EPA, Council on Environmental Quality and in particular by judicial oversight. NEPA promotes transparency on federal actions and ensures that agencies take into account the environmental effects of their decisions before they are made.

NEPA works at a tiered level. For projects with significant environmental impacts on the human environment, an environmental impact statement is required. This is a lengthy document subject to public review before finalization. NEPA also works on projects with less significant impacts through an environmental assessment and a finding of no significant impact. These are much shorter studies. Finally, minor federal actions can be excluded from the NEPA process of either environmental impact statement or an environmental assessment, through documentation showing that the particular small project is exempt under agency regulations (e.g., classroom training). The EPA can also "grade" environmental impact statements, and the Council on Environmental Quality can be involved in the "mediation" over certain environmental impacts of federal projects. Normally, however, challenges to projects, if not resolved by the lead agency, are raised by citizens and states and are resolved in the federal court system.

Climate Change

After years of litigation with mixed results, the NEPA climate change guidance, which is still subject to public comment, now requires federal agencies to evaluate greenhouse gas emissions on their projects. Projects that emit 25,000 metric tons or more of CO2 equivalents on an annual basis require quantitative analysis^[1].  Although this trigger is not considered to be an absolute standard of "significance," this measure is a useful indicator of significance (this is the same standard used in EPA's new mandatory reporting of greenhouse gases final rule in 2009). Significant impacts require an environmental impact statement.

The guidance realizes that global warming is a global rather than region-specific impact, and thus advises agencies to carefully "scope" the geographic and territorial impact of their NEPA study. Agencies should look first at assessing emissions for portions of projects that it has regulatory jurisdiction to control^[2]. Assessing cumulative impacts and use of programmatic environmental impact statements are other vehicles to assess project-related climate impacts more broadly. Project mitigation should also be carefully evaluated and alternatives should be considered for their ability to reduce or mitigate greenhouse gases. Alternatives include enhanced energy efficiency, lower greenhouse gas emitting technology, renewable energy, carbon capture and sequestration, and capturing or beneficially using fugitive methane gas emissions.

Agencies also have to determine how their proposed actions effect the environment, such as risk of floods, storm surges, higher temperatures, ecosystem damage, and human health problems. The guidance is somewhat general on how to assess a project's impact on climate. However, NEPA's "rule of reason" still governs the level of detail of any NEPA environmental analysis discussed.

Mitigation

The Council on Environmental Quality also issued guidance on February 18, 2010, for NEPA mitigation and its monitoring. At Footnote 2 under case law, the document recognizes "mitigation FONSI"^[3]. In other words, projects with significant environmental impacts can have those impacts reduced by appropriate mitigation measures, reducing what was "significant" to be an insignificant level and warranting only an environmental assessment study on the project rather than a full-blown environmental impact statement. However, these mitigation measures must be enforceable. The guidance cites the Corps of Engineers' example of mitigating wetland losses as a model to emulate in monitoring effective mitigation measures and conditions.

Implementing mitigation requires monitoring and appropriate discussions in an agency's "record of decision." Adaptive management must be used to minimize the possibility of mitigation failure. This means that supplementary action may have to be taken before project mitigation fails. An agency response is required if there is mitigation failure in either its implementation or effectiveness. For instance, although implementing and monitoring mitigation will be the responsibility of the lead federal agency, appropriate enforcement clauses are needed in documents such as authorizations, agreements, permits or contracts. In Footnote 6 of the guidance, such enforcement clauses include appropriate penalty clauses, and should be developed based on a review of the agency's statutory and regulatory authorities. The guidance also recognizes the important role of the public in mitigation monitoring and requires the agency to make the results of relevant monitoring available to the public.

Categorical Exclusions

Finally, on February 18, 2010, the Council on Environmental Quality published guidance on applying "categorical exclusions" under NEPA. Categorical exclusions are categories of federal actions that do not typically result, individually or cumulatively, in significant environmental impacts. Such regulatory exclusions are first approved by the Council on Environmental Quality and then published in the lead agency's rule-making. All the agency has to do later is document that a particular minor project falls within an exclusion to be free of further environmental assessments or environmental impact statement reviews.

The development of new categorical exclusions will be subject to enhanced scrutiny. Impact demonstration projects, expert opinions and scientific analyses, use of benchmarks, supporting information, refining exclusions, and public involvement are means to fine-tune the categorical exclusion process under NEPA. Enhanced documentation will be needed to establish the applicability of a categorical exclusion to a specific project. Federal agencies are encouraged to engage the public when applying a categorical exclusion to a particular project.

At page 12 of the guidance, the Council on Environmental Quality says it will begin regularly reviewing agency categorical exclusions. It will make every effort to align its oversight with any reviews currently being conducted by the agency.

Conclusion

The new guidance documents have a three-fold effect. First, climate change impacts have to be addressed in some way in NEPA environmental impact studies. It is difficult to divorce most projects from climate change, and the agency's refinement of a geographic scope of impact will be critical in making such environmental studies reasonable in reach. Further, mitigation details that may reduce project impacts will have to be refined, monitored, documented, and enforced. Finally, exclusions from detailed NEPA studies will be under more scrutiny for the appropriate documented justification that is required. Wishful thinking in NEPA documentation will no longer be a substitute for assessing climate change, imposing and monitoring mitigation conditions, or finding that a project's impact is truly minor and not warranting an environmental impact statement or environmental assessment.

This new guidance dovetails with the recent SEC guidance in the private sector on regulated companies disclosing their climate change impacts to investors and regulators. If such companies also have new projects requiring federal permits, NEPA will impact them, too. Further, Louisiana courts may like the new climate change and mitigation guidance and use it when applying the "public trust" or IT doctrine to state permit challenges.

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1. These greenhouse gases are currently the same as regulated now by EPA, which includes carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride. They each have different global warming potential, e.g., one ton of methane equals 21 tons of CO2.
2. This is known as the "small handle" problem when dealing with federally-permitted projects
3. FONSI stands for "finding of no significant impact."
   

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