A Nov. 12 ruling by the U.S. Court of Appeals, D.C. Circuit, could change the basis on which most of the nation’s environmental regulations are created—if the ruling stands.

At issue is the National Environmental Policy Act (NEPA) and the role the White House’s Council of Environmental Quality (CEQ) plays in defining its standards. An appeals court panel voted 2-1 that the CEQ cannot issue government-wide regulations on NEPA policies.

The decision invalidates a practice that can be traced back to the Carter administration.

“Everything that NEPA touches, that is under that regime, could potentially be up in the air,” said Tom Sharp, director of permitting intelligence at Arbo. “That’s why it’s such a big deal.”

The implications of the ruling are broad enough that most U.S. businesses, within and outside of the energy industry, are just beginning to think of the implications, said Jason Hill, a partner at Holland & Knight who specializes in natural resource and energy regulations.

Hill said that attorneys within and without government have questioned the CEQ’s role in NEPA law over the decades.

“This has been a lingering issue since the earliest days of NEPA and, other than occasional passing references in court opinions, in a footnote, out of the thousands (of cases) that have been decided, no one has taken this up directly,” he said.

President Richard Nixon signed NEPA into law in 1970. The law also created the CEQ, which advises the president on environmental policies. Later in the decade, President Jimmy Carter, by executive order, gave the CEQ the ability to make regulations, Sharp said.

Other governmental agencies would then use the CEQ regulations in crafting their environmental rules.

Environmental regulations written by the CEQ therefore touch virtually all environmental rules written by other agencies, which includes practically every sector of the energy industry. LNG terminal regulations would be affected as well as greenhouse gas emissions standards overall.

Since the Carter administration, attorneys have pointed out that Congress never gave the CEQ the ability to create regulations. However, the executive order created a precedent that has been followed, more or less, until the Nov. 12 ruling.

“CEQ traces its rulemaking authority not to legislation but to an executive order of the president.  But ‘an executive order is not “law” within the meaning of the Constitution,’” wrote Appeals Court Judge A. Raymond Randolph in the majority opinion.

The two judges who ruled in favor of striking the CEQ’s authority were both appointed by Republican administrations. Most appeals court hearings are decided by a three-judge panel randomly selected from a group of 11 judges who serve the court.

“CEQ, therefore, had no lawful authority to promulgate these regulations,” Randolph wrote in the opinion.

Sharp noted that the decision was unusual in that neither party in the original case, a dispute about tour flights over national parks in California, had brought up the CEQ’s authority in their arguments. Instead, the judges brought up and ruled against the law on their own, a point the dissenting judge in the case, Sri Srinivasan, brought up in his opinion.

“Appellate courts do not sit as self-directed boards of legal inquiry and research, but essentially as arbiters of legal questions presented and argued by the parties before them,” Srinivasan wrote.

A regulatory change this dramatic will most likely go through further legal hurdles before becoming law.

Sharp said the appeals court could decide to review the case en banc. “En banc” means all judges sitting on the appeals court would hear the case, not just a three-judge panel. A review is usually done within 45 days of the first ruling, he said.

After that, the case may or may not be taken up by the U.S. Supreme Court.

For now, the situation creates uncertainty for environmental compliance across the energy industry, Hill said.

“If CEQ doesn't have the authority to issue regulations, then every oil and gas operator out there, anybody that has recently had a project approved, relying on the framework of the CEQ regulations for approval, or that's undergoing that process right now—it calls into question what the process should be and should be going forward,” he said.

Comments