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A federal district court has ruled that the Bureau of Land Management (“BLM”) failed to adequately consider climate change when approving a set of oil and gas leases on public lands in Wyoming. The ruling should be of broader interest to developers and energy companies because it offers guidance on how to properly analyze a project’s effects on climate change under the National Environmental Policy Act (“NEPA”). The law in this area remains unsettled –especially since President Trump rescinded the Obama Administration’s formal guidance on NEPA and climate change in 2017. Future developments are likely, and project sponsors should monitor them closely.

At issue in the case are oil and gas leases covering 300,000 acres of public lands in Wyoming. For each lease sale, BLM prepared an environmental assessment to comply with NEPA. The environmental assessments discussed climate change on a “conceptual level,” without quantifying and analyzing the greenhouse gas emissions that would result from the lease sales. The court found the analysis inadequate under NEPA, and it halted drilling under the leases and sent the matter back to BLM for additional environmental review. In its lengthy ruling, the court offered concrete guidance to BLM on how to fix its analysis of greenhouse gas (“GHG”) emissions and climate change on remand, including that:

  • BLM should quantify GHG emissions that would result from drilling oil and gas wells on the leased parcels.
  • BLM should provide more detail about “downstream” GHG emissions that would result from the consumption of oil and gas produced under the leases.
  • BLM should better evaluate the “cumulative” effect of the leases together with other projects, including by comparing GHG emissions from the leases against available emissions forecasts and other BLM programs.

This guidance may also serve as a useful roadmap to NEPA compliance for other projects, particularly other energy projects. And development opponents are likely to use the court’s reasoning to challenge future NEPA documents. Below we break down the court’s direction on three categories of GHG emissions, each requiring a different level of detail.
Continue Reading District Court Provides Guidance On Climate Change Analysis Under NEPA

The Ninth Circuit Court of Appeals recently upheld – for the second time – California’s Low Carbon Fuel Standard (“LCFS”) against constitutional challenges brought by industry groups. The case, Rocky Mountain Farmers Union v. Corey (9th Cir. 2019) (No. 17-16881) (“Rocky Mountain II”), considered the groups’ claims that all 3 historical versions of the LCFS violate the Commerce Clause and the “federal structure of the Constitution” by regulating extraterritorially. The court held that while the plaintiff’s claims had changed form since the first time the court upheld the LCFS, “both the regulations and the claims have the same core structure now as they did then.” The court used this similarity to guide its analysis and uphold the district court’s dismissal.
Continue Reading On Repeat: Courts Again Uphold Low Carbon Fuel Standard Programs

California Chamber of Commerce, et al. v. California Air Resources Board, et al., Case No. C075930 (Cal. Ct. App. 3d. Dist., 2017).

On April 6, the California Court of Appeal for the Third District issued its long-awaited decision in the consolidated lawsuits challenging the greenhouse gas (“GHG”) emission allowance auctions, which are a key component of the California Air Resources Board’s (“CARB”) Cap-and-Trade Program.  The court held that CARB has the authority to establish the auctions and that they do not constitute an illegal tax.  The second holding is key and breaks new legal ground; it also was made over a strong dissent.  As the court put it, “the hallmarks of a tax are: 1) that it is compulsory; and 2) that the payor receives nothing of particular value for payment of the tax.”  (Op. at 5.)  The auction system is not a tax because 1) “the purchase of allowances is a voluntary decision driven by business judgments as to whether it is more beneficial to the company to make the purchase than to reduce emissions,” and 2) “the allowances are valuable, tradable commodities, conferring on the holder the privilege to pollute.”  (Id.)  This is a major victory for the Program and the State’s efforts to address climate change by reducing GHG emissions. However, there is a question whether the decision will stand.  There was a strong dissent, and the decision is sure to be appealed to the California Supreme Court.  Meanwhile, the Legislature is currently at work on crafting legislation aimed at determining how the existing ambitious emission reduction mandates will be met.  The court’s decision will factor into those critical legislative deliberations, which will resume later this month after the spring recess.
Continue Reading GHG Allowance Auctions are Not a Tax; Key Element of State’s Cap-and-Trade Program Upheld

The fashion industry has recently been using its clout and cachet to combat climate change. Who else has a heavy hand in the fight against climate change? The answer, while a bit less surprising, is the White House. With a common goal, it has been an inspiring journey for these two unlikely allies.
Continue Reading Climate Change Gets Fashionable: The Fashion Industry Embraces The President’s Climate Change Initiative

On October 15, 2013, the United States Supreme Court granted certiorari to review six of the nine submitted petitions stemming from an appellate court ruling upholding Environmental Protection Agency (“EPA”) greenhouse gas (“GHG”) controls at utilities, factories and other facilities around the country.  Specifically, the challenged appellate ruling from the Court of Appeals for the District of Columbia Circuit unanimously upheld EPA’s GHG emission endangerment findings, rebuffed challenges to the EPA’s tailpipe rule for automobile emissions and its applicability to stationary sources, and determined the EPA was “unambiguously correct” in using existing federal law to address global warming.  However, the Supreme Court’s review will be more limited than some petitioners sought and should not jeopardize the Obama administration’s larger climate-change agenda.
Continue Reading Supreme Court Grants Limited Review of GHG Emissions Regulations

Today the European Parliament approved a proposal to delay the issue of 900 million emissions allowances (each representing the right to emit one metric ton of carbon dioxide or greenhouse gas equivalent, or CO2e). The purpose of the measure is to ease supply pressure in the European Union Emissions Trading System (EU-ETS), which has been trading CO2e allowances at a level that is viewed by most policy makers and traders to be too low to have the intended policy effect, which is to encourage investments in CO2e emissions-abating technologies. Final wording of legislation that will implement the proposal is yet to be agreed on. In April, the European Parliament rejected a similar proposal, and that rejection led many to question the long-term viability of EU-ETS. We observed here that a collapse of the EU-ETS would not bode well for California’s emerging carbon emissions trading market.
Continue Reading EU Carbon Trading System Wins Parliament’s Support

Plans announced by the White House today (June 25) show a credible pathway to meet targets pledged by the President pursuant to the Copenhagen Accord (reduction of greenhouse gas emissions 17% below 2005 levels by 2020). Relatedly, last month the Obama administration increased the assumed social cost of greenhouse gas emissions used for cost-benefit analysis of proposed regulatory decisions to 35 cents per ton, up from 21 cents per ton. These developments arguably represent the Obama administration’s most comprehensive and meaningful push for federal regulation of greenhouse gasses.
Continue Reading Recent Federal and International Developments Good for California Cap and Trade

By Jeffrey Rector 

Last week, the European Parliament rejected a proposal to reduce the quantity of greenhouse gas (GHG) emissions allowances in order to fix a supply-demand imbalance in the European Union Emissions Trading System (EU ETS). Some view this as the beginning of the end of the European Union’s ten-year carbon cap-and-trade experiment. A high profile failure of the EU ETS is likely to provide ammunition to critics California’s cap-and-trade program.Continue Reading Can California Cap and Trade if Brussels Stumbles?

By Whitney Hodges, Randy Visser & Olivier Theard 

The landmark Global Warming Solutions Act of 2006 (“AB 32”) tasked the California Air Resources Board (“ARB”) with reducing greenhouse gas (“GHG”) emissions to 1990 levels by 2020. In adopting a scoping plan assembling a number of differing, but complementary, GHG reduction strategies, the ARB included a “cap-and-trade” program as one such strategy to help satisfy AB 32’s goals while allowing industry flexibility in choosing emissions reduction options (i.e., facilities could choose to buy pollution credits, or could choose to reduce emissions and sell credits on the market). The “cap-and-trade” program was deemed preferable to other potential options such as a carbon tax.Continue Reading What Will It Cost for California to Save the World? California Conducts its First Greenhouse Gas Cap-and-Trade Auction