CASE STUDY – POWDER RIVER BASIN, USA. M. PAPAVASSILIOU & R. HAMILTON

 

WildEarth Guardians; Sierra Club v United States Bureau of Land Management, and Wyoming Mining Association; BTU Western Resources, Inc.; State of Wyoming; National Mining Association, 15-8109 1 (10th Cir, 2017).

CASE STUDY – MARA PAPAVASSILIOU AND RUBY HAMILTON

 

SUMMARY

In an appeal against a decision of the Federal District Court, the US 10th Circuit Court has found that the US Bureau of Land Management’s decision to approve four mining leases in the Powder River Basin region in Wyoming contravened the National Environmental Policy Act. The Court said that because the Bureau had based its decision on an “arbitrary and capricious” analysis of the greenhouse gas emissions that would result from the combustion of coal extracted from the mines, it had failed to provide “adequate disclosure to allow public participation” in a government decision.

 

FACTS

Background

In 2010, the US Bureau of Land Management (BLM) approved four coal leases to extend the life of two coal mines near the town of Wright, in the Powder River Basin region of Wyoming. The Powder River Basin region is the single largest contributor to United States’ domestic coal production. The subject mines account for approximately 19.7% of the United States’ annual domestic coal production, and contain approximately two billion tons of recoverable coal. The mines were set to cease operation after previously leased reserves were depleted.

Mining lease approval regulations

Under the Federal Land Policy and Management Act and the BLM’s own regulations, the BLM is responsible for approving mining infrastructure and issuing mining leases. Pursuant to the National Environmental Policy Act (NEPA), the BLM must prepare Environmental Impact Statements for mining leases. The National Environment Policy Act requires the BLM to compare the impact of its preferred action to a ‘no action’ alternative, to illustrate the environmental impact of the preferred action. This ‘alternatives analysis’ is the “heart of” the Environmental Impact Statement.  

The Final Environmental Impact Statement

The BLM published its Final Environmental Impact Statement for the leases in July 2010.The Final Environmental Impact Statement contained a number of material, uncontested facts, including;

  • anthropogenic carbon dioxide emissions contribute to climate change;
  • the quantity of the coal proposed to be mined in the leases would result in approximately 382 million tons of annual carbon dioxide emissions from electricity generation, the equivalent of about 6% of the United States’ total 2008 emissions; and
  • a shift to non-coal energy sources would result in less carbon dioxide being emitted.

The Final Environmental Impact Statement predicted that demand for coal in the US would grow during the life of the leases, and that “all forms of electric generation would grow at a proportional rate to meet forecast electric demand”. The Final Environmental Impact Statement concluded that because overall demand for coal was predicted to increase, and that all forms of electric generation would grow at a proportional rate, a refusal to grant the leases (and therefore constrain supply from the Wright Area) would have no consequential impact on demand for coal.

Following the Final Environmental Impact Statement, the BLM issued a Record of Decision for each of the four tracts, deciding to offer them for lease.

In 2012, WildEarth Guardians and the Sierra Club challenged the four Records of Decision and the Final Environmental Impact Statement in the Federal District Court, objecting to the BLM’s no action alternative analysis that a refusal to grant the leases would not result in lower national carbon dioxide emissions. The District Court dismissed the challenge, and determined that the BLM’s analysis was reasonable. The Plaintiffs appealed this issue in the 10th Circuit Court.

 

DECISION

The Court found the BLM’s decision to approve the leases was “arbitrary and capricious”, and therefore contravened the National Environmental Policy Act.

In the National Environmental Policy Act context, an agency’s Environmental Impact Statement is arbitrary and capricious if it fails to take a “hard look” at the environmental effects of the alternatives before it. This standard focuses on “the rationality of an agency’s decision making process rather than on the rationality of the actual decision”, a principle that also governs judicial review of executive action in Australia.

Irrational, “arbitrary and capricious”, and unsupported by data

The BLM’s decision was determined to be “arbitrary and capricious” as it was based on the “irrational and unsupported” assumption that there would be no “real world” difference between issuing the leases and refusing to do so. The BLM had argued that the coal that would be mined from the lease areas could be “perfectly substituted” by coal mined from another location, and that there would therefore be no overall effect on greenhouse gas emissions if the leases were not granted. This conclusion presumed that reduced supply of coal from the Wright Area would have no impact on coal price, or that an increase in coal price would not affect demand for coal, or decrease coal’s share of the energy mix.

The Court determined that this “perfect substitution” argument was not supported in the Final Environmental Impact Statement by hard data. The BLM failed to point to any information “indicating that the national coal deficit of 230 million tons per year incurred under the no action alternative could be easily filled from elsewhere, or at a comparable price”. The Court noted the Final Environmental Impact Statement’s principle reliance on the Energy Information Administration’s 2008 Energy Outlook Report, which predicted, in sections not referenced in the Final Environmental Impact Statement, that overall US coal demand would decline in response to increased coal price.

The Court stated that though the mere presence of evidence contrary to an agency’s conclusion would not invalidate the agency’s decisions, and though a “strong presumption” of deference towards agencies’ decisions exists, the assumption in question “nevertheless [fell] below the required level of data necessary to…permit a reasoned choice between the [alternatives]”. The Court found that the BLM did not ignore the effects of coal consumption, but rather “analyzed them irrationally”.

The Court iterated that even if it could conclude that the BLM had enough data before it to choose between the preferred and no action alternatives, it would still conclude that the perfect substitution assumption was arbitrary and capricious because the assumption underpinning the no action alternative itself was irrational. The Court accepted the argument that this assumption “[ignored] basic supply and demand principles”. The Court asserted that an “agency may choose the more environmentally harmful alternative, provided its reasons for doing so are disclosed and rational”. However it found there had been no “reasonable, good faith, objective presentation” of the topics required in an Environmental Impact Statement by the National Environmental Policy Act.

Remedy

The Court did not vacate the leases. The Court declined to do so because:

  • the Plaintiffs’ challenge rested on a “fairly narrow” issue;
  • the leases were already being mined; and
  • the parties did not address what would happen to the leases which had already been issued.

The Court noted that the District Court could choose to vacate the entire Final Environmental Impact Statement and Records of Decision, or could “fashion some narrower form of injunctive relief”. The Court reversed the District Court’s finding that the BLM’s actions were reasonable, and remanded the BLM to revise its Environmental Impact Statements and Records of Decision.

 

COMMENTARY

The decision that the National Environmental Policy Act had been contravened was not expected from the typically conservative 10th Circuit Court, which is also now the highest US court to rule on accounting for climate change impacts. The decision affirmed that US government agencies must reasonably and objectively take climate change impacts into account when making decisions governed by the National Environmental Policy Act.

The Court’s characterisation of the Plaintiff’s challenge as “fairly narrow” is, with respect, disappointing, since this characterisation, and the fact that mining in the lease areas had already commenced, underpinned the Court’s decision to not vacate the leases.  This characterisation could be questioned, since the Court itself described the inclusion of the no action alternative in the Environmental Impact Statement as “the heart of” the Environmental Impact Statement. The fundamental purpose of the National Environmental Policy Act was described by the Court as being “[to prevent] uninformed agency decisions and [to provide] adequate disclosure to allow public participation in those decisions”. In addition, the Court found that the BLM’s erroneous perfect substitution assumption was “key to the ultimate decision”. Failure to meet the basic requirements of the ‘no action alternative’ of the Environmental Impact Statement would therefore suggest that the National Environmental Policy Act had been substantially, rather than narrowly, contravened. This was stated by the Court when it asserted that the Final Environmental Impact Statement’s “[failure] to adequately distinguish between [the alternatives] defeated NEPA’s purpose”.  

Whether or not the leases remain in force will be decided by the District Court later in 2018.

In Australia, decisions by Ministers and government agencies often concern mines and industrial developments with significant greenhouse gas emissions implications, like the coal mines in this case. Australian courts have been slow to recognise climate change and the contribution of individual operations to it. This has been problematic for challenges such as that conducted by the Australian Conservation Foundation against the approvals for the Adani Carmichael coal mine (Australian Conservation Foundation Incorporated v Minister for the Environment and Energy [2016] FCA 1042).

Of course, this US case is not a legal authority in Australia for requiring government decision-makers to consider the climate change impacts of individual operations’ emissions. However, given the similarity of some legal principles in Australian and US administrative law, this case could provide valuable support for future arguments by advocates in the fight against climate change.