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Climate Metric Ruling Threatens Policy Delays, Creates ‘Chaos’

Feb. 25, 2022, 11:00 AM

A February court order stifling agency use of a key carbon cost metric has thrown federal climate action into a state of uncertainty, legal experts say.

The use of the Biden administration’s interim social cost of carbon estimate—used by agencies to calculate the monetary costs of impacts wrought by burning greenhouse gases—was barred by a Louisiana court this month, a victory for Louisiana, Texas, and eight other states that challenged the estimates.

It’s unlikely the injunction will withstand further court scrutiny, lawyers said. But if the restriction stays in place, it will have an “extraordinary effect,” according to Holland & Hart LLP partner Emily Schilling.

“I’ve never seen an order that has the breadth of impact that this order had, it covers every agency,” she told Bloomberg Law.

Starting From Scratch

Agencies looking to craft regulations will now have to start from scratch in their analyses if the order isn’t tossed on appeal, exacerbating an already slow timeline on critical climate policy.

Agencies will need to “more painstakingly and closely look at whatever the best relevant information is that an agency can gather, so that means rule makings, oil and gas permitting, leases, highway planning, car regulation, everything,” according to Georgetown Law professor William Buzbee.

Those delays were confirmed in a brief filed Feb. 19 by acting Office of Information and Regulatory Affairs chief Dominic Mancini.

“Agencies would be required to redirect resources to revise already-drafted proposed rules, regulatory impact analyses, and other analyses in support of other agency actions,” the brief noted.

‘Created Chaos’

The federal government wants to put the decision on hold while an appeal proceeds in the U.S. Court of Appeals for the Fifth Circuit, asking for an order for a temporary freeze by the end of the month.

“By saying, in effect, that all the federal government’s environmental decision-making for a decade or more is flawed and must be set aside, the poorly reasoned, sweeping Louisiana court ruling has created chaos,” said John Leshy, a law professor at the University of California Hastings College of the Law who served as Interior solicitor in the Clinton administration.

President Joe Biden directed agencies in a January 2021 executive order to use the estimates crafted by an interagency working group in regulatory analyses, a move swiftly challenged by multiple states led by Louisiana.

The states claimed the order flew in the face of the Administrative Procedure Act and separation of powers, citing the executive order’s language that agencies “shall use” the interim costs. The U.S. District Court for the Western District of Louisiana sided with states and tossed the use of the metric on Feb. 11.

Air Policy Uncertainty

Groups have already begun stepping in to take advantage of the vacuum left by the order.

The Competitive Enterprise Institute urged the EPA on Feb. 15 to launch reconsideration proceedings for Biden’s new vehicle emission standards, which relied on the social cost of carbon in its analysis.

The timeline for much-anticipated carbon limits for power plants could also take a hit, on top of a major U.S. Supreme Court battle over the scope of EPA’s authority to regulate.

“Ultimately, the substance of any rulemaking would not be impacted, necessarily, but certainly the justification would be, and that’s an important piece for this administration, if they’re going to be coming down hard on greenhouse gas emissions from existing power plants,” Schilling said.

Interior Leasing Takes Hit

The preliminary injunction is creating numerous conflicting mandates at the Interior Department and forcing the agency to scrap environmental analyses and rulemakings and start over, according to Mancini’s declaration.

Mancini’s declaration said the department’s Bureau of Land Management has stopped work on oil and gas leasing and permitting on federal lands.

Interior Department spokeswoman Melissa Schwartz declined to respond to specific questions this week, referring only to a previous statement saying it is committed to accounting for the climate impacts of its programs.

The agency is taking advantage of the injunction to support its goal to slow-walk oil and gas leasing, said Scott H. Segal, a partner at Bracewell LLP. The land bureau last week missed its deadline to announce a first-quarter lease sale, which the agency promised to hold following an earlier court ruling to end the White House’s oil and gas leasing pause.

“There’s an irony there that they would say, ‘Gosh, if we ever decide to do a lot more leasing on federal lands, this would slow us down,’ and at the same time they tell progressive constituencies in Congress and elsewhere that they don’t intend to do a lot of leasing,” Segal said.

The land bureau’s halt to work on oil and gas leasing and permitting is one of the most visible effects of the injunction, but the bureau’s work on other energy-related rules is also being cast into doubt.

The bureau is using the social cost of carbon to determine the global impact of methane leaks as part of its proposed waste prevention rule for leaks from oil and gas operations on federal land.

The preliminary injunction may also prevent federal agencies from using the best available science—which includes the social cost of carbon—in its environmental analyses, forcing it to revise its environmental reviews of oil and gas lease sales, Mancini wrote.

Federal scientists complying with the injunction may violate scientific integrity policies that require the use of the best available scientific information, he wrote.

Next Steps

Given the impacts, the Fifth Circuit could take up the case fairly quickly and reverse the decision based on the court’s “unusual position” on executive authority as potential grounds, Schilling said.

The court’s ruling “seems like a rather aggressive use of an injunction,” because the judge in the case “stretched” the level of proof the court would normally need to justify granting an injunction, Segal said.

Many statutes, including the Clean Air Act, also specify which courts can weigh in on such sweeping decisions, Buzbee noted.

“A lot of laws specify that large regulatory actions are to be reviewed in the D.C. Circuit,” Buzbee said. “The Clean Air Act even has a provision people must essentially, very specifically, make certain arguments to the agency first before they can go to court at all.”

It’s difficult to see how any court could lawfully deny the federal government the right to decide how to evaluate environmental impacts of their proposals, said Mark Squillace, a natural resources law professor at the University of Colorado-Boulder.

A social cost of carbon estimate doesn’t dictate certain results but “simply provides information that might be necessary and that the agency might find relevant to reaching a reasoned decision,” he said.

The case is Louisiana v. Biden, 5th Cir., No. 22-30087, 2/23/22.

To contact the reporters on this story: Maya Earls in Washington at mearls@bloomberglaw.com; Jennifer Hijazi in Washington at jhijazi@bloombergindustry.com; Bobby Magill at bmagill@bloombergindustry.com

To contact the editor responsible for this story: Chuck McCutcheon at cmccutcheon@bloombergindustry.com