Alaska Natural Gas Export Appeal Tests US Emission Baselines

The Department of Energy’s discretion in studying the climate impacts of its authorization to export liquid natural gas to countries that don’t have a free trade agreement with the US will come under fire at a federal appeals panel next week.

The Sierra Club, Earthjustice, and the Center for Biological Diversity must convince the US Court of Appeals for the D.C. Circuit during Oct. 21 oral arguments that the agency’s emissions baselines were useless estimates to determine the Alaska LNG Project’s long-term climate impact and effect on the public interest, as required under the Natural Gas Act.

Those baselines assumed the LNG project would either entirely displace other sources of energy, or not replace any.

The D.C. Circuit is being asked to review if the agency’s study treated the uncertainty of the project’s future emissions reasonably under the National Environmental Policy Act.

The groups say the emissions baselines didn’t amount a “hard look” at environmental impacts under NEPA, thus producing an inaccurate assessment of the public interest benefits that the DOE must show under the Natural Gas Act.

The environmental groups want the DOE “to simply make some guesstimate” as to what greenhouse gas emissions could be in the next few decades, said Jim Wedeking, an environmental attorney at Sidley Austin LLP. “I’m not sure what that would add for anybody, especially when the agency itself said that wouldn’t matter to their decision.”

Baselines Versus Forecast

The case is unique in challenging how the agency consulted wide emissions baselines instead of how the DOE calculated the emissions forecast, Wedeking said.

The baselines define the hypothetical emissions range the agency studies when considering an energy project’s potential climate impact, whereas the forecast calculations rely on a formula that measures the amount of carbon dioxide released in proportion to how much LNG is produced and shipped.

Approvals of non-free-trade LNG exports have become a lightning rod for environmental administrative action challenges, as climate advocates look to claw back the country’s expansion of fossil fuel production and trade.

The Sierra Club separately challenged the export approval for the Texas Golden Pass LNG terminal in 2023, but the D.C. Circuit ruled the group failed to prove how the non-free-trade option would “substantially” increase export volumes.

The Biden administration also halted new natural gas export licenses earlier this year, yet was quickly blocked in federal court. The administration is currently appealing.

In the present case, the DOE previously granted the environmental groups’ request for an additional environmental assessment after first granting export authority to the Alaska LNG Project. The agency’s supplemental environmental impact statement included a lifecycle analysis of greenhouse gas emissions from the project’s production to ultimate consumption.

The agency said it was likely Alaska LNG will replace energy sources that emit higher levels of greenhouse gases, but it was unreasonable to predict exact energy substitution effects for the project.

Alaska LNG can export 929 billion cubic feet of LNG per year from the Kenai Peninsula, according to the DOE’s final authorization.

The Natural Gas Act’s text is inherently biased towards export projects contributing to the public interest, so arguments questioning the DOE’s assessment must clear a high bar, said Christine Tezak, a managing director with the Washington-based consulting firm ClearView Energy Partners LLC.

“The appellants can continue to complain that they don’t like the analysis, but if they ask and the agency answers and they don’t meaningfully push back, then the agency tends to be upheld,” Tezak said.

Climate Impact

The Biden administration moratorium directed the DOE to scrutinize how LNG shipments affect climate change, the economy, and national security.

The policy marked an evolution from previous DOE assessment standards, broadening the interpretation of public interest under the Natural Gas Act to include consideration of the climate crisis.

Restrictions on and potential hurdles to non-free-trade exports have spurred concern among energy stakeholders. The US has comprehensive free trade agreements with only 20 countries, excluding some of the largest economic forces in Asia and Europe.

The Sierra Club’s challenge predates the latest climate considerations standard, but environmental litigators are looking for any indication that the court could want more than emissions uncertainty rationales when determining if exports benefit the public interest.

Keith Hall, the director of Louisiana State University’s Energy Law Center, said the environmental groups face an uphill battle to convince the appeals panel that emission baselines must be more specific to prove that export approvals don’t harm the public interest.

But circuit court reviews of agency actions’ global climate impact signal that climate advocates have bolstered their legal footing, he said.

“It’s something that wouldn’t have been discussed 30 years ago,” Hall said. “There’s always gonna be some uncertainty, but the environmentalists already moved the needle by having this as a pretty big part of the discussion.”

Judges Bradley N. Garcia, Justin R. Walker, and A. Raymond Randolph are on the D.C. Circuit panel.

The environmental groups are represented by Earthjustice.

The Sierra Club has received funding from Bloomberg Philanthropies, the charitable organization founded by Michael Bloomberg. Bloomberg Law is operated by entities controlled by Michael Bloomberg.

The case is Sierra Club v. Dep’t of Energy, D.C. Cir., No. 20-01503, oral arguments scheduled 10/21/24.