On December 4, 2020, the U.S. Department of Energy (“DOE”) issued a final rule updating its National Environmental Policy Act (“NEPA”) implementing regulations regarding applications to import to, or export from, liquid natural gas (“LNG”) terminals. The final rule follows DOE’s May 1, 2020 Notice of Proposed Rulemaking (“NOPR”) (see May 22, 2020 edition of the WER). In the preamble to the final rule, DOE explained that the objective of the revision is to improve the efficiency of DOE’s decision-making process through saving time and expense associated with NEPA compliance and eliminating unnecessary environmental documentation.

DOE elected to revise its regulations to be consistent with the Council on Environmental Quality’s (“CEQ”) regulations permitting agencies to identify categories of actions that normally do not have significant environmental effects, and with the legal principle articulated by the U.S. Supreme Court in Dep’t of Transportation v. Public Citizen (“Public Citizen”), that an agency is not required to review potential environmental effects if it lacks the authority to prevent them. The preamble to the final rule explains that: (1) DOE is required by section 3(c) of the Natural Gas Act to authorize LNG exports to free trade agreement (“FTA”) countries and lacks discretion with respect to such approvals; and (2) DOE’s review of applications for LNG exports to non-FTA countries is limited to analyzing the effects that are reasonably foreseeable and have a sufficiently close causal connection to the granting of the export authorization. As a result, DOE explained that it has no discretion to approve LNG imports because, pursuant to section 201 of the Energy Policy Act of 1992, they are deemed consistent with the public interest.

Accordingly, DOE is removing the reference to authorizations to import natural gas from its NEPA regulations, consistent with the legal principle articulated in Public Citizen. DOE also revised categorical exclusion B5.7 to focus exclusively on the analysis of potential environmental impacts resulting from activities occurring at or after the point of export, which fall within the purview of DOE’s export authorization authority under the NGA. Finally, DOE removed and reserved categorical exclusion B5.8, which referenced import or export authorizations involving new cogeneration powerplants, as well as other classes of actions that are either outside the scope of DOE’s authority or are covered by the revised categorical exclusion B5.7.

In response to comments that DOE failed to demonstrate the proposed changes would improve administrative efficiency, DOE replied that the proposed changes will improve the efficiency of DOE’s decision-making process by focusing its NEPA review on those activities that are within the scope of DOE’s authority under the NGA. Other commenters objected to use of a categorical exclusion, stating that NEPA reviews are not “unnecessary environmental documentation.” In response, the DOE noted that the categorical exclusion does not eliminate NEPA review, but will allow the agency to focus its resources on information germane to its decision-making authority.

Other commenters were concerned that DOE: (1) failed to adequately consider the potential significance of environmental impacts resulting from this rulemaking; (2) must analyze the potential cumulative impacts of this rulemaking; and (3) segmented its consideration of natural gas exports from other connected actions in promulgating this rule. DOE responded that it met its obligation under NEPA, noting, for example, that CEQ’s regulations do not direct agencies to prepare an environmental assessment or environmental impact statement before establishing agency procedures that supplement the CEQ regulations to implement NEPA.

Commenters also expressed concern that DOE’s Technical Support Document, in which DOE analyzed technical documents and effects associated with the rulemaking, only considered one pathway for potential environmental impacts (leaks during natural gas transportation), and did not address other potential impacts including those resulting from noise, ship strikes, air pollutants, greenhouse gas emissions, and invasive species from ballast water. The DOE disagreed and noted that the Technical Support Document is focused on the potential impacts associated with transporting the LNG cargo and that when considering the environmental impacts of the shipping industry more generally, LNG shipments authorized by DOE comprise less than one percent of vessel calls from U.S. ports annually. DOE also separately noted that it intends to continue participating as a cooperating agency in FERC’s environmental review of natural gas export facilities.

Commenters also challenged DOE’s reading of Public Citizen, arguing that DOE was incorrect in its conclusion that the case permits DOE to focus exclusively on the marine transport effects of its export authorizations. DOE, however, concluded that Public Citizen held that an agency has no obligation to “gather or consider environmental information if it has no statutory authority to act on that information”; and that the final rule is fully consistent with that holding.

In response to commenters requesting an extended comment period due to COVID-19, the DOE responded that a thirty-day comment period was sufficient. The rule will go into effect on January 4, 2021.

Click here to read the Final Rule.