Congress, the media, and the public have given significant attention to remarks this week by a commissioner of the Consumer Product Safety Commission ("CPSC") indicating that the agency would be considering a federal ban on gas stoves due to their health effects.  The suggestion of a ban on gas stoves has drawn comments from bipartisan policymakers in both chambers, and even the White House has weighed in against the prospect of a potential ban.

The CPSC is unlikely to ban gas stoves in the near future, although it has the authority to ban unreasonably dangerous products that cannot be made safe, and has done so with toxic substances in children's products and other product categories in the past.   A CPSC rulemaking on mandatory safety standards for gas stoves, however, is a possibility, and that process may drive the establishment of voluntary industry standards by a standards-setting body.  Additionally, other federal and state regulators have recently sharpened their focus on indoor air quality and gas-powered appliances, for both health and environmental reasons.  The Environmental Protection Agency ("EPA"), for instance, is undertaking several activities related to indoor air quality.  And the California Air Resources Board ("CARB") recently adopted a plan that would effectively prohibit the sale of gas-powered space and water heaters in California by 2030.

Particularly with regard to federal regulatory activity on gas stoves and other gas-powered appliances, potentially affected parties will have ample opportunities to help shape the outcome of any mandatory or voluntary product standards put in place or accepted by the CPSC, and to engage with other regulators.  This alert provides an overview of recent and emerging legislative and regulatory activity related to indoor air pollution, focusing particularly on activity by the CPSC and EPA.  Companies—both those with interests in gas stoves and those concerned with indoor air quality issues more broadly—should carefully follow indoor air quality developments, including in their interactions with regulators, given the increased focus on this area.

Consumer Product Safety Commission

The Consumer Product Safety Act ("CPSA") tasks the CPSC with regulating the safety of consumer products, which the statute broadly defines as products sold or used by consumers.  The CPSA exempts from CPSC jurisdiction most items subject to regulation by another federal agency, including food, drugs, tobacco, pesticides, motor vehicles and motor vehicle equipment, and firearms.The CPSC has five commissioners and is bipartisan by statute, although one seat is currently vacant.

The CPSC has the power to promulgate product safety standards that are "reasonably necessary to eliminate or reduce an unreasonable risk of injury associated with such product."  The public, including industry, may offer written comments in a CPSC rulemaking on product safety standards, and the CPSC must "give interested persons an opportunity for the oral presentation of data, views, or arguments."  Additionally, if the agency receives a submission of a voluntary safety standard and determines that the standard is "likely to result in the elimination or adequate reduction of the risk of injury" and that "it is likely that there will be substantial compliance with such standard," it must terminate the rulemaking and rely on the voluntary standard. 

The CPSC faces a relatively high bar to implementing a mandatory safety standard, including the requirement that it make a finding that "the rule imposes the least burdensome requirement which prevents or adequately reduces the risk of injury for which the rule is being promulgated."  There is an even higher bar for banning a product, which requires a finding that there is "no feasible consumer product safety standard [that] would adequately protect the public from the unreasonable risk of injury associated with such product."  Both mandatory standards and a ban could be challenged in federal court, and most courts considering CPSC mandatory standards or bans have subjected the agency's required findings to stringent scrutiny.

Although Commissioner Trumka's recent remarks gained attention due to his reference to a potential ban on gas stoves, the adoption of voluntary or mandatory standards is a more likely outcome.  There is a clear CPSC interest in the topic.  The agency's fiscal year 2023 operating plan includes as a priority a focus on "chronic hazards, including hazards associated with ...万博体育app手机登录gas stoves" and sets a target date of March 1, 2023, for agency staff to provide a plan to the commissioners for seeking public input on the topic.  In considering the operating plan, the Commission unanimously accepted, as part of a larger manager's amendment, Commissioner Boyle's addition of "chronic hazards" to the agency's priorities.  During that meeting, Commissioner Trumka offered an amendment to begin rulemaking on standards for gas stoves, but he withdrew that amendment due to lack of support.  The instruction to begin seeking public input on gas stoves was a fallback, which the Commission adopted unanimously.

The agency is also facing congressional pressure to begin promulgating safety standards for gas stoves.  In December, on the same day that a study was published indicating that gas stoves may be a major cause of childhood asthma, a group of House and Senate Democrats wrote the CPSC to urge the agency to begin a rulemaking to address health risks from gas stoves.  The letter included a focus on the impacts of indoor air quality on vulnerable populations, which is consistent with the priority listed in the CPSC fiscal year 2023 operating plan to "enhance agency data collection and analysis of product safety incidents, injuries, and deaths to identify vulnerable populations" and to "allocate safety work to better address any existing safety disparities among such identified vulnerable populations." 

Environmental Protection Agency

The EPA has also shown a growing interest in indoor air quality, including related to emissions from gas-powered appliances.  The EPA has expansive statutory authority to research, but not regulate, indoor air quality issues under the Radon Gas and Indoor Air Quality Research Act of 1986.  Despite lacking authority to regulate in this area, the EPA's research can be authoritative and lead to regulatory and legislative activity and industry scrutiny.  For example, the EPA's 1993 report on the risks of secondhand smoke exposure influenced public understanding of the dangers of secondhand smoke and the subsequent proliferation of smoke-free laws.  A recently published report by the National Academies of Sciences, sponsored in part by the EPA, stressed the importance of issues relating to indoor chemicals, and the effect of these chemicals on air quality and human health.

As part of its efforts on indoor air quality, EPA has also become involved with indoor air quality sensor technology.  Most notably, the EPA recently published guidance on the benefits and limitations of low-cost air quality monitors.  While noting that air quality monitors may be helpful in measuring indoor pollution, the EPA also cautioned consumers that there is limited information as to the accuracy of these monitors and noted that there is "currently no widely accepted air concentration limits for most pollutants indoor."  The guidance also reflects increased concerns about indoor air pollution, including from stoves, stating that "[i]n some instances, you may wish to use one or more monitors to compare pollutant levels or environmental factors before, during, and after an activity like cooking."  The development of indoor air quality monitors may be significant to providing alternatives to simply banning products, by providing consumers with information they can use to respond to indoor air quality issues.  Similarly, enhanced research regarding indoor air pollution may provide greater clarity about pollutant levels of concern indoors.

The EPA also has jurisdiction under the Federal Insecticide, Fungicide, and Rodenticide Act over air-cleaning devices if device claims include pest or other micro-organism mitigation (e.g., air filters, air purifiers).  The agency has significantly increased its focus on these devices due to the COVID-19 pandemic, and we can expect a continued concern with indoor air quality issues to result in continued EPA engagement regarding this category of products.

As additional evidence of the agency's interest in these issues, the EPA published a request for information in October 2022, seeking input on "actions, strategies, tools and approaches that support ventilation, filtration and air cleaning improvements, and other actions" to promote indoor air quality, with a focus on reducing disease transmission indoors.  The request for information was prompted, in part, by the Biden Administration's Clean Air in Buildings Challenge, which calls on building owners and operators to improve indoor air quality and reduce the spread of COVID-19.

Finally, in exercising its authority to address outdoor air pollution, the EPA may affect indoor appliances and indoor air quality.  For example, in August 2022 environmental groups, including the Sierra Club, petitioned the EPA to list heating appliances (including indoor appliances such as space heaters, gas stoves, and dryers) as a source category under the Clean Air Act and to issue performance standards.

State and Local Legislation

State and local regulators and legislative bodies have also engaged in activity related to gas-powered appliances.In addition to the California Air Resources Board plan that would effectively prohibit the sale of gas-powered space and water heaters in California by 2030,  amendments to the state's building code that strengthened ventilation standards and established requirements for single-family homes to be ready for electric appliances went into effect on January 1.  The Los Angeles prohibition on gas appliances in new buildings will be effective this month, and in November 2022, the largest county in Maryland passed a law requiring all new construction to be fully electric by the end of 2026.  Numerous other local governments have enacted their own gas bans, although there is currently ongoing litigation regarding whether these gas bans may be preempted under the Energy Policy and Conservation Act.  Additionally, these gas bans have prompted backlash from some state governments.  As of June 2022, 20 states have passed legislation prohibiting local communities from enacting gas bans, and legislators in states where such "preemption legislation" failed may try again in the coming year.

Product manufacturers, retailers, and consumers can expect continued state and local legislative activity on gas appliances in 2023.  For example, New York's Climate Action Council plan, passed in December, contains recommendations for implementing New York's 2019 Climate Leadership and Community Protection Act.  The plan calls for making buildings more energy efficient through a mix of adopting zero-emission building codes and standards and providing incentives to transition to energy efficient appliances.  Cities such as Denver and Eugene, Oregon, are also considering bans on natural gas in new residential buildings.

Non-Governmental Organizations

Non-governmental organizations are likely to continue advocating for regulation of gas-fueled appliances and indoor air quality.  For example, a 2022 study conducted by the U.S.公众兴趣研究集团教育基金和Sierra俱乐部发现,消费者在各零售商购物可能无法了解与燃气炉和通风需求相关的健康风险,此外,2022年6月,美国医学协会传递了分辨率..manbext网页版and asthma," and resolving to advocate for programs to encourage the transition from gas stoves to electric stoves.

通缩法(IRA)将大步限制并减少甲烷污染甲烷证明是气候问题的重要部分ips/unep.org/news-andssories/story/are-raistriew-climate-heres-show-redues-thes#:~Text=me%20is%20By implementing a Methane Emissions Reduction Program, the IRA takes a significant step towards reducing methane-related warming.  This program implements a carrot-and-stick regulatory regime, whereby the Environmental Protection Agency (EPA) rewards methane reduction efforts with financial assistance, and penalizes excess methane waste with a set fee.

The IRA is the latest in a series of efforts by the United States to reduce methane emissions from the petroleum and natural gas sectors.  Since taking office, the Biden Administration has recognized the challenges posed by methane emissions and prioritized cutting their emissions.  In advance of the 2021 UN Climate Change Conference in Glasgow (COP 26), the United States and the European Union jointly launched the Global Methane Pledge, which asked countries to band together and commit to a collective goal of reducing global methane emissions at least 30% from 2020 levels by 2030.  As of this summer, the State Department has announced that 120 countries have joined the pledge.  In November of 2021, the Biden Administration further announced a series of regulatory actions to tackle methane emissions, from the oil and gas sector, landfills, abandoned coal mines, and agriculture.

The Methane Emissions Reduction Program complements each of these efforts and is the next significant step in the country's attempt to tackle methane-related warming.  It would reduce methane emissions through two key mechanisms.  IRA § 60113.First, it would provide $1.5 billion for EPA to support emissions monitoring and methane reduction efforts in petroleum and natural gas systems, through grants, rebates, contracts, loans and other forms of financial support.  Id.  These funds are directed at permanently shutting in and plugging wells on non-federal lands, to improving and deploying equipment that reduces methane emissions, and to supporting innovation in reducing methane emissions.  Id.

Second, these incentives are coupled with a methane waste emissions fee applied to petroleum and natural gas systems emitting more than 25,000 metric tons of carbon dioxide equivalent gas.  The fee will be calculated by multiplying the metric tons of methane emissions exceeding waste emissions thresholds by: (a) $900 for emissions in 2024!2025年排放1200元and (c) $1,500 for emissions in 2026 and each year thereafter.  Id.  Fees will only be imposed on emissions above a certain waste emissions threshold, which vary by industry segment and represent the leakage rate from well-designed and maintained systems in that segment, in turn providing an incentive for oil and gas systems to reduce methane leakage.

The Methane Emissions Reduction Program further promotes EPA's regulatory authority under the Clean Air Act, by exempting from the payment requirement any facilities that are in compliance with methane emissions requirements established for new and existing sources, so long as standards and plans have been approved and are in effect in all States and compliance with the requirements imposed by those standards and plans will result in equivalent or greater emissions reductions than can be achieved by EPA's November 2021 proposed rule to reduce methane in the oil and natural gas industry.  This is a powerful floor!EPAss/www.epa.gov/system/files/documents/2021-11/2021-oil-and-gas-subject.-overview-fact-she..大于2019年全美释放的二氧化碳量passenger cars and commercial aircraft combined."  By imposing a tax on emitters that are lagging behind and providing an exemption once all States are enforcing requirements that would achieve equivalent or greater reductions, the IRA's Methane Emissions Reduction Program creates strong incentives for both States and industry to adopt and comply with strong methane emissions standards.

As noted in another blog post, the Rhodium Group has estimated the IRA, if enacted, would cut domestic greenhouse emissions 44% from 2005 levels.  In an earlier study of the emissions reductions associated with a prior iteration of the IRA, Rhodium described the methane emissions fee as one of six "big-ticket items that stand out" for its impact on reducing emissions.  That the Methane Emissions Reduction Program is just one of many, game-changing provisions in the IRA underscores the potential impact of this bill for the energy sector and for achieving our nation's climate objectives.

As the world struggles to adjust to the harsh new reality of Russia's invasion of Ukraine, the most recent instalment of the Sixth IPCC Report slipped out almost unnoticed.  And that is worrying, since the assessment in this section of the Report is even starker than previous assessments – noting in particular that in order to avoid global temperatures increasing by greater than 1.5 degrees C above preindustrial levels, the world needs to halve its emissions this decade: a reduction that the world does not currently appear to be remotely on course to do.

However, whilst the IPCC Report and the Russian invasion of Ukraine are not linked, Russian aggression in Ukraine may serve as a catalyst to speed up the European energy transition and accelerate its retreat from dependency on Russian gas and exposure to volatile international oil markets, which could in turn deliver a more rapid reduction in European emissions.  In the process, perhaps setting the world on a path to achieving an outcome that currently seems unattainable.

What is the IPCC Report?

The Intergovernmental Panel on Climate Change (IPCC) is a panel of the world's leading climate scientists.  The Panel publishes regular updates of global knowledge on the climate crisis.更新设计帮助政府决策。更新内容非常全面,每次需要5至7年完成The current Report is the Panel's Sixth Report since its establishment in 1988, and commentators have noted it may be the last to be published while there is still some chance of avoiding the worst impacts from climate change.

This Sixth Report is being released in four parts between August 2021 to October 2022.  The first part examined the physical basis of climate science (how the atmosphere is changing – and will change – and whether human influence is responsible).  The second part, which was released on 28 February, assesses the effects of climate change, such as extreme weather, droughts, floods and temperature rises, and how best to adapt to these changes[i].

What does the Second Part Say?

The conclusions of the most recent instalment of the Sixth Report make for sobering reading:

• The risks associated with lower levels of warming are greater than the previous 2014 IPCC adaptation assessment had concluded;
• The window to adapt to climate change is "brief and rapidly closing";
• The impacts on human systems, natural systems, and ecosystems are more widespread and accelerating;
• Ecosystems are reaching the limits of their ability to adapt to the changing climate, and the effectiveness of adaptation will decrease with increasing warming;
• Some losses are already irreversible;
• Sea-level rise is already inevitable, posing an existential threat for some small islands and increased vulnerability for infrastructure, including ports and energy systems;
• Up to 1bn people could be at risk from coastal flooding by 2060;
• Half the world's population live in areas that are "highly vulnerable" to climate change;
• Even at 1.5 degrees or less, 8% of current farmland will become unproductive.

Given that the world has already warmed by 1.1 degrees since the pre-industrial period and that there is a lag in the world's climate response to emissions, it is likely that the world will warm by 1.5 degrees within 20 years, even if deep greenhouse gas emissions cuts are achieved.COP26多次表示,本十年是决定性的十年:2030年前排放量必须减半,世界才有机会保持在1.5度以下变暖状态。

/p>若不将全球变暖限制在1.5度以下,将触发冰帽和冰川融化的灾难性链反作用增加野火和树死accelerating peatland dry-out and permafrost thaw – all of which would release additional carbon emissions further accelerating global warming.

The Report identifies five areas as priorities for future climate adaptation.  One of those areas is the reform of energy systems, where the Report makes a number of recommendations:

• Energy generation diversification.
• Improved demand-side management through better storage, and energy efficiency.
• Climate responsive energy markets, smart-grids, robust transmission systems, and improved supply-deficits response capacity.

So How is the Russia-Ukraine Crisis Relevant?

A Commission Communication ("Joint European Action on Affordable, Secure and Sustainable Energy") was due for release on 2 March!however, the Commission has announced a delay to the publication in order to revise it in light of the Ukraine crisis.  A leaked draft of the original Communication set out a number of recommendations that were very closely aligned to the IPCC Report recommendations set out above – though the Communication's conclusions were motivated as much by geopolitical and economic, as climate change factors.

It is likely that Putin's aggression in Ukraine will shift the focus of the redrafted Communication to an accelerated switch to renewables, which would also help deliver against the IPCC Report's demands.  In his twitter feed, Commission Vice President Timmermans noted on 28 February: "It's time we tackle our own vulnerabilities.以闪电速度跳入可再生能源我们自己清洁廉价无穷能量越快移动,越快减少对他人依赖度,我们站在一起越强。

Whilst远非唯一文件显示欧盟通向2050NetZero目标,尽管即将修改,看通信初始草稿仍然有启发作用,它清楚地表明欧盟从依赖俄罗斯燃气向可再生能源过渡的方向。

Even before the Ukraine crisis, the draft Communication was crystal clear on the dangers of European "dependence on a single supplier of fossil gas" demanding "diversification of gas supply and using the full potential of green and low carbon energy sources" including increasing the use of LNG to "reduce our dependence on imported Russian gas and strengthen security of supply."

The draft Communication argued that "[s]ustained high energy prices are impacting the entire economy….廉价燃气价格.使可再生清洁能源投资更有利可图,这意味着“快速清洁能源过渡需求从来就没有更强和清晰”,提高燃气价格缩短了“从易变化石燃料向更廉价可再生能源技术过渡的回溯时间.减少对进口依赖并推倒物价”。

通信草案建议多项需求方响应,包括提高能效清除监管屏障加速天然气存储投资The motivation may be different – "to make Europe less vulnerable to fluctuations on the fossil fuel markets" – but the sense of urgency is the same "as soon as possible."

Once again, mirroring the IPCC's conclusions, the draft Communication proposed an "ambitious combination of funding and regulatory measures [to] accelerate the green transition."  Although it does not feature in the original Communication, it would not be a surprise to see the amended version place an expanded role for nuclear power as a green alternative back on the agenda again – not least given the recent announcement by the German Government that they would consider postponing the decommissioning of German nuclear reactors as part of the national response to the Russia-Ukraine crisis.

Conclusion

Although perhaps reached for different reasons, the conclusions of the IPCC Report and the Commission are identical: an accelerated shift away from dependence on hydrocarbons for energy and an increased focus on the rapid deployment of renewable energy is essential.  For the EU, the shift is necessary not only for climate change reasons, but also for its long-term political, economic and social well-being.

The EU was already heading down the renewables path: the Russian invasion of Ukraine will accelerate that process in the medium- to long-term and will force the EU to seek other sources of natural gas in the short-term.  The process of seeking new sources of gas will have an impact on global gas prices, which will in turn further accelerate the global shift to an increasing reliance on renewable energy.

No one should be under any illusion that the energy transition will be rapid, pain-free, or easy, but the EU's experience with dependence on Russian gas demonstrates clearly one of the real geopolitical vulnerabilities of continuing to rely on the existing model.

Covington's mixed teams of regulatory and public policy experts are uniquely placed to advise clients on how to navigate the turbulent geopolitics of international relations and their impact on the energy transition.

We would be happy to discuss with you how these complicated inter-relationships may affect your company and your business.

[i] The report of the third working group, which will examine how to cut emissions, will be released at the end of the second quarter.第四即最后一次工作组报告综合其他三个工作组报告的结论,将于10月在COP27前发布-定于2022年11月举行。

Taxonomy Re-Cap

The Taxonomy Regulation establishes the EU's binary system to distinguish between economic activities that are "environmentally sustainable" and those that are not.

Together with other laws of the EU Sustainable Finance Package such as the Corporate Sustainability Reporting Directive ("CSRD") and the Sustainable Finance Disclosure Regulation ("SFDR"), the Taxonomy Regulation is designed to channel capital investments to sustainable economic activities.To this end, the Taxonomy Regulation provides criteria to allow companies and financial market participants to label specific economic activities and related investments as "environmentally sustainable," and EU rules require a growing number of companies and investors to report on the degree to which their economic activities and investments comply with the Taxonomy Regulation.

To be environmentally sustainable for purposes of the Taxonomy Regulation, an economic activity must fulfill the following four cumulative requirements:

1. Substantially contribute to one of six environmental objectives (e.g., climate change mitigation, transition to a circular economy);
2. Not significantly harm any of the other environmental objectives (e.g., by harming pollution prevention and control due to "a significant increase in the emissions of pollutants" or by harming protection and restoration of biodiversity and ecosystems due to its significant detrimental effects on the good condition and resilience of ecosystems).
3. Be carried out in compliance with minimum safeguards, which are essentially the core human rights and labor obligations of the OECD, UN Guiding Principles of Business and Human Rights, the International Labor Organization, and those enshrined in the International Bill of Human Rights!和
4. 兼容技术筛选标准>

技术筛选标准至关重要They set out the specific conditions that a particular economic activity (e.g., electricity generation from natural gas or construction of a nuclear power plant) must meet in order to be deemed environmentally sustainable for purposes of the Taxonomy Regulation.

The European Commission Is the Key Taxonomy Gatekeeper

Under the Taxonomy Regulation, the EU Member States and the European Parliament have delegated the authority to adopt the technical screening criteria to the European Commission, but Member States and Parliament retain the right to scrutinize and object to them.

The Commission has already successfully adopted Commission Delegated Regulation 2021/2139 (the so-called "Climate Delegated Act"), which sets out the technical screening criteria for dozens of economic activities that are deemed to substantially contribute to climate change mitigation or adaptation (ranging from "anaerobic digestion of sewage sludge" to "transport by passenger cars").

On February 2, the Commission complemented this Climate Delegated Act with the CCDA, which will still be subject to scrutiny by Member States and the European Parliament.The CCDA specifies the screening criteria for specific nuclear and gas activities, and also amends the specific disclosure rules established in Commission Delegated Regulation 2021/2178 to allow investors and other stakeholders to distinguish Taxonomy compliant gas and nuclear activities from other Taxonomy compliant activities such as the construction of off-shore wind parks (see Annex III to CCDA).

Gas Activities: The Commission's Sustainability Criteria

The CCDA includes three natural gas activities that can be Taxonomy compliant subject to strict conditions:

• Construction or operation of electricity generation facilities that produce electricity using fossil gaseous fuels (i.e., natural gas);
• Construction, refurbishment, and operation of combined heat/cool and power generation facilities using fossil gaseous fuels!
构建、翻新和运行热生成设施,使用与高效区热冷相连接的化石气燃料产生热/cool。

三大活动技术筛选标准大致相似Taking the example of the first activity, electricity generation from natural gas, the key conditions are as follows:

• The life-cycle greenhouse gas emissions from the electricity generation must not exceed 100g CO2e/kWh (the emissions are to be calculated based on the EU's 2013 life-cycle method or applicable ISO standards).
• The life-cycle emissions must be verified by an independent third party.
• For facilities relying on a form of abatement, such as carbon capture or use of low-carbon gases, the abatement activity must itself comply with the applicable technical screening criteria in the Climate Delegated Act.

We note that the life-cycle emission target of 100g CO2e/kWh in practice means that operators seeking to comply with it must rely heavily on abatement activities, such as carbon capture technologies or the blending of fuels.依据>Central研究 绿氢与天然气混合还有可能实现这些生命周期排放目标。

The laxer emission target is:

• Direct greenhouse gas emissions are lower than 270g CO2e/kWh of the output energy, or annual direct emissions do not exceed an average of 550kg CO2e/kW of the facility's capacity over 20 years.

The additional cumulative requirements are:

• The gas power plant replaces an existing high emitting electricity generation activity that uses solid or liquid fossil fuels;
• The power to be replaced cannot be generated from renewable energy sources, based on a comparative assessment with the most cost-effective and technically feasible renewable alternative for the same capacity;
• The newly installed production capacity does not exceed the capacity of the replaced facility by more than 15%;
• The gas power plant is designed and constructed to use renewable and/or low-carbon gaseous fuels (e.g., "green" or "blue" hydrogen) and the switch to the full use of such fuels must take place by December 31, 2035.责任公司管理者必须批准并承诺对开关实施可核查计划 。
• 替换现有电源活动导致在新建燃气厂使用寿命期间温室气体排放减少至少55%
• /li/p>如果天然气电厂位于使用煤发电的欧盟成员国内,该成员国公开承诺淘汰煤发电。

DOE's new rule is likely to be controversial.  Environmental groups may challenge it in court.  In addition, the incoming Biden administration could seek to undo the rule through either repeal under the Congressional Review Act, if the Democrats have a majority in the Senate, or through a new rulemaking proceeding at DOE.

This change in DOE policy will be of interest to proposed LNG export projects that seek authorizations or amendments to authorizations from DOE and their counterparties in associated gas sales contracts.

Background

Under section 3 of the Natural Gas Act (NGA), DOE authorizes exports of natural gas and LNG unless found to not be consistent with the public interest.  Exports to countries with which the U.S.NGA认为自由贸易协定符合公众利益并必须获授权“不修改或延迟 ” 。 但是,对于没有FTA的国家(非FTA国家)出口,DOE进行公众利益审查,包括NEPA评估Accordingly, the new rule affects only authorizations to export LNG to non-FTA countries.

As reported on this blog, DOE issued a Notice of Proposed Rulemaking (NOPR) in May 2020 proposing the categorical exclusion from NEPA review of LNG exports by marine vessel.  DOE received 16 comment letters on its proposal, some in opposition.  The final rule adopts the proposal without change.

The final rule

In the notice of the final rule, DOE says that its review of applications for LNG export authorizations is limited to "consideration of effects that are reasonably foreseeable and have a sufficiently close causal connection to the granting of the export authorization." [1]  Thus, according to DOE, the environmental impacts of its export authority under the NGA are limited to those associated with activities occurring at the point of delivery to the export vessel  (i.e., when the LNG is delivered to the flange of the LNG export vessel) and extending to the territorial waters of the receiving country.DOE stated that the new rule is consistent with the court precedent that an agency has no obligation to ‘‘gather or consider environmental information if it has no statutory authority to act on that information.''[2]

In response to comments that DOE should consider upstream and downstream impacts of exports, DOE says upstream production impacts are not reasonably foreseeable and downstream emissions at the point of consumption are "too attenuated to be reasonably foreseeable and do not have a reasonably close causal relationship to the granting of an export authorization."

Based on prior NEPA reviews and technical reports, DOE finds the transport of natural gas by marine vessel normally does not pose the potential for significant environmental impacts.[3] Accordingly, such transportation is within the scope of a categorical exclusion from NEPA review in its regulations.

While the rule appears to effectively eliminate NEPA review of LNG exports, DOE says, in response to comments, that when reviewing an export application it will consider whether there are extraordinary circumstances that require an Environmental Assessment or Environmental Impact Statement.

The new rule becomes effective January 4, 2021.

[1] Citing  Dep't of Transp.vunem/Pub公有性 541U.S.752(2004)SierraClub vFed能源规管通信 827F.3d36Cir市2016年)

This change in DOE policy should be of interest to gas and LNG export authorization holders and their counterparties in sales contracts, and to proposed export applicants that are now seeking or will seek such authorizations from DOE.

Background

Under the Natural Gas Act (NGA), DOE authorizes exports of natural gas and LNG that are consistent with the public interest.  Exports to countries with which the United States has a free trade agreement (FTA) are deemed in the public interest by the NGA and must be authorized "without modification or delay."  However, for exports to countries without an FTA (non-FTA countries), DOE conducts an informal adjudication and authorizes a proposed export unless it is shown to not be consistent with the public interest.

As discussed in a previous post to this blog, DOE issued a Notice of Proposed Policy Statement in February 2020 proposing to extend the terms of non-FTA export authorizations to December 31, 2050.  The 20-year term was based on studies that evaluated the impact of LNG exports on the U.S.economy and energy markets.  However, a more recent 2018 LNG export study^[1] considered unconstrained (or market-determined) levels of LNG exports through the year 2050 and, according to DOE, supports export terms lasting through December 31, 2050.  The notice said authorization holders had indicated that a longer term would better match the operational life of LNG export facilities (designed for 30 to 50 years), provide more security in financing those facilities and maximize the ability to contract for exports.

The new policy

In a Notice of the Final Policy Statement (Policy Statement), DOE adopts a term through December 31, 2050 as the standard export term for long-term non-FTA authorizations.  The Policy Statement establishes the following implementation process.

Existing authorization holders may, on a voluntary opt-in basis, request a term extension by filing an application to amend their authorizations to extend the term through December 31, 2050, with an attendant increase in the total export volume over the life of the authorization.

Pending non-FTA applicants may, on a voluntary opt-in basis, amend their application to request an export term through December 31, 2050, with an attendant increase in the total requested export volume over the life of the authorization.

Future long-term non-FTA authorizations will have a standard export term lasting through December 31, 2050, unless a shorter term is requested.

Applications to amend existing non-FTA orders and pending applications will be noticed in the Federal Register, and DOE will conduct a public interest analysis of them.  The public interest analysis for existing orders will be limited to the application for the term extension.  An intervenor or protestor may challenge the requested extension but not the existing non-FTA order.

For applications to amend existing non-FTA orders and pending non-FTA applications, the policy statement provides suggested application templates to ensure more consistent, streamlined proceedings.

The policy statement does not apply to authorizations to export to FTA countries because DOE is required to grant FTA applications ‘‘without modification or delay'' under the NGA.  Applicants for FTA export authorizations were not subject to the standard twenty-year term.  The Policy Statement notes, however, that authorization holders typically prefer to align their FTA and non-FTA exports over the same time period for administrative efficiencies.  DOE expects non-FTA authorization holders to request comparable termination dates for their FTA authorizations and encourages the use of consolidated FTA and non-FTA extension applications.

DOE found that under the new policy, exports of LNG will generate positive economic benefits in the U.S.2050年全年提高公众兴趣,提供机制提高LNG在整个授权期内出口总量。 DOE拒绝反对拟议政策的评论时说,根据2018LNG输出研究发现的结果,它不认为可信地断言新政策会投放数万亿美元U.S.制造资产和数以百万计的工作风险。此外,DOE没有找到用记录证据支持的国内物价提高的参数 。