Environmental
Federal Environmental
Endangered or Threatened Species Act Listing Expected to Expand
Since enactment of the federal Endangered Species Act (ESA) in 1973, a total of 1,666 species in the U.S. have been listed as either “threatened” or “endangered” as of late April, 2021.¹ The Service has designated nearly 112,000,000 acres of territory as “critical habitat” for conservation of listed species.² Those numbers are slated to potentially grow at a rapid pace in the near future.
According to a “workplan” published by the U.S. Fish & Wildlife Service (Service) in May of 2019, nearly 250 species will be reviewed for potential listing in the next five years.³ For the 2021 fiscal year alone, 150 candidate species are under some phase of listing review.⁴ Approximately 2,200,000 additional acres of territory are currently proposed for critical habitat designation.⁵ The Service can designate an area as critical habitat for a listed species even in the physical absence of that species so long as the area is capable of supporting the species.⁶ While the Service is required to consider public comments on proposed critical habitat designations, nothing prevents the Service from designating an area as critical habitat over the objection of a landowner or lessee of the area at issue.
"The ESA prohibits a federal agency from taking action, such as issuing permits, that would adversely modify areas designated as critical habitat."8
Listing decisions and critical habitat designations both have broad implications for activities that receive federal funding or require any form of permit, license, or other approval by an agency of the federal government. When this “federal nexus” exists, the government agency(s) involved are required to at least coordinate, if not formally consult, with the Service to evaluate any potential impact of the proposed activity on listed species and critical habitat, and to establish any necessary conditions to minimize or avoid adverse impacts.⁷
Critical Habitat Designation Can Create Additional Regulatory Hurdles
A critical habitat designation does not technically prohibit future development of a designated area, but it certainly creates many additional regulatory hurdles to clear. The ESA prohibits a federal agency from taking action, such as issuing permits, that would adversely modify areas designated as critical habitat.⁸ In light of the broad reach of federal regulatory programs, most land development activity will at some stage involve a facet of the federal government. Once that regulatory hook takes hold, a landowner or project developer will be required to coordinate with the Service and potentially face imposition of conditions that could jeopardize the feasibility of a proposed project.
Many of the pending and final decisions on listing and critical habitat designations are the result of petitions filed by individuals or organizations. Since 1973, over 2,500 listing petitions have been filed with the Service.⁹ Well over one-third of those petitions are still considered active and await some form of action by the agency.¹⁰ In some cases, the Service was unable to act on the petitions during the timeframes set forth in the ESA, which resulted in litigation. According to a report published by the federal Government Accountability Office in 2017, 141 lawsuits were filed against the Service during the years 2005 – 2015 alleging failure by the agency to timely act on listing petitions.¹¹ Several more “failure to list” suits have been filed in the ensuing six years. In many cases, these lawsuits result in court-imposed deadlines for the Service to complete certain listing-related tasks. Seventeen of the species scheduled for a listing decision during the 2021 fiscal year are governed by a court-ordered deadline.¹² Petitions for listing determinations show no signs of slowing down.
Environmental advocacy organizations and others have found the ESA to be an effective tool to challenge a variety of proposed projects. The now-cancelled Atlantic Coast Pipeline faced continual challenges arising from alleged impacts of the pipeline on multiple listed species and their critical habitat.¹³ A federal judge in Montana struck down on ESA grounds the nationwide 12 permit issued by the U.S. Army Corps of Engineers to govern the impacts of linear projects (pipelines, roads, etc.) on “waters of the United States.” The judge concluded that the Corps failed to adequately coordinate with the Service concerning potential effects of the permit on listed species and their critical habitat.¹⁴ In February 2021, the Center for Biological Diversity threatened to sue the Corps under the ESA on the basis that 16 of the Corps’ nationwide permits were reissued without adequate consideration of potential effects on listed species and critical habitat.¹⁵
Potential Listing Decisions are Listed in the Federal Register
Landowners and developers should monitor potential listing decisions listed in the Federal Register for species currently or formerly present in areas on the horizon for development. The Service is required to consider all public comments submitted on proposed listings and critical habitat designations. While economic factors are not relevant to listing determinations, the Service must consider economic impacts when designating critical habitat.¹⁶ If a critical habitat designation would have substantial adverse economic consequences, the Service must weigh those consequences as part of the decision-making process.
"The Service is required to consider all public comments submitted on proposed listings and critical habitat designations. While economic factors are not relevant to listing determinations, the Service must consider economic impacts when designating critical habitat."
Environment, Social, and Corporate Governance
Environment, Social, and Corporate Governance Considerations for Publicly-Traded Companies and Investment Funds
What a difference a year makes. Last year we reported that the SEC had declined to impose more specific disclosure requirements for climate change risk on the grounds that the status quo, a relatively imprecise materiality-based climate risk disclosure standard in place for a decade, provides investors with sufficient knowledge to make informed investments.
Since then, environment, social, and corporate governance (ESG) considerations, of which a company’s climate change impacts are a key component, have leapt to the forefront of the investing public’s conscience.
Climate Change Disclosure Requirements on the Rise
Not surprisingly, the SEC’s approach to regulating public companies’ ESG disclosures appears to be rapidly evolving in line with the public’s interest in ESG issues. In February 2021, acting SEC Chair Allison Herren Lee announced that the agency would enhance its focus on the effectiveness of climate-related disclosures in public company filings.¹⁷ And in March, Lee announced that SEC staff are evaluating climate change disclosure rules with the goal of “facilitating the disclosure of consistent, comparable, and reliable information on climate change,” and issued a request for public comments on potential approaches to disclosing climate risks.¹⁸ While it is unclear exactly what direction the SEC will take under new Chair Gary Gensler, the days could be numbered for the old materiality standard, and public companies may soon be required to perform a deeper analysis of their own climate change impacts as well as the risk climate change poses to their business.
For additional discussion, see Climate Change section of this Report.
"Wall Street continues to play a significant role in the rise of ESG considerations. ESG fund offerings have ballooned in response to demand. Some firms, such as BlackRock and Bank of America, have attempted to position themselves as market leaders on ESG issues, with Bank of America recently announcing that it would deploy more than $1 trillion to ESG-related investments by 2030, with the goal of driving the transition to a low-carbon, sustainable economy."¹⁹
Regulatory Scrutiny for ESG-Focused Funds
Wall Street continues to play a significant role in the rise of ESG considerations. ESG fund offerings have ballooned in response to demand. Some firms, such as BlackRock and Bank of America, have attempted to position themselves as market leaders on ESG issues, with Bank of America recently announcing that it would deploy more than $1 trillion to ESG-related investments by 2030, with the goal of driving the transition to a low carbon, sustainable economy.¹⁹ Other firms, attempting to ride a wave of investor demand, have been criticized for creating ESG-focused investment funds with seemingly little motivation to compel ESG-related change.
This proliferation of ESG-focused investment funds has attracted scrutiny from the SEC. In April, the SEC Division of Examinations issued an ESG Risk Alert reflecting the results of an investigation of the disclosures and investment practices of ESG-focused funds.²⁰ The Alert warned fund managers and advisors that it had identified a significant amount of deficiencies in ESG-related compliance programs and disclosures, including a failure by funds to follow the global ESG investment frameworks, misleading claims about ESG investment approaches, and proxy voting that was inconsistent with the fund’s stated ESG principles.
Going forward, pressure on companies to conform their operations to established ESG frameworks is anticipated to intensify, with a corresponding interest by investors to allocate their funds to what they consider to be ESG-friendly investments. Expect a continued increase in the level of scrutiny given by the SEC to public company climate risk disclosures as well as the disclosures and investment practices of ESG-focused funds.
Presidential Executive Orders
President Biden Executive Orders – Impacts of CEQ and NEPA Reform
Upon taking office, President Joseph R. Biden, Jr. issued a series of Executive Orders that will directly and indirectly affect pipelines and other projects requiring federal approvals.
President Biden’s Executive Order on Tackling the Climate Crisis at Home and Abroad directed the Council on Environmental Quality (CEQ) to:
- ensure federal permitting decisions consider the effects of greenhouse gases and climate change and that federal infrastructure investments reduce “climate pollution.”²¹
- develop environmental justice tools, including a geospatial Climate and Economic Screening tool and maps of disadvantaged communities.²²
Delays Likely for Pipeline and Other Federal Projects
President Biden targeted pipeline infrastructure directly in a separate executive order by revoking the presidential permit for the Keystone XL Pipeline.²³
CEQ is a division of the Executive Office of the President tasked with implementing environmental reviews triggered under the National Environmental Policy Act (NEPA).²⁴ NEPA requires federal agencies to evaluate the environmental impacts of certain federal permitting projects, including pipeline projects. CEQ is currently revisiting its 2016 Obama era policy on greenhouse gas emissions and climate change in NEPA reviews after revoking the Trump administration draft guidance which had proposed more flexibility when estimating greenhouse gas emissions.²⁵
"In February 2021, FERC solicited comments on identifying and mitigating environmental justice effects of pipelines as part of revising its approach to its 1999 Policy Statement on the Certification of New Interstate Natural Gas Transportation Facilities."²⁶
The Federal Energy Regulatory Commission (FERC) has already taken steps to expand environmental review of interstate pipelines. In February 2021, FERC solicited comments on identifying and mitigating environmental justice effects of pipelines as part of revising its approach to its 1999 Policy Statement on the Certification of New Interstate Natural Gas Transportation Facilities.²⁶ The comment period closed on May 26, 2021. FERC Chairman Richard Glick assured a group of senators that the commission will not delay acting on pending project certifications while considering policy reforms. In March 2021, FERC changed its longstanding policy and now requires analysis of a proposed pipeline project’s greenhouse gas emissions and climate change impacts.²⁷ FERC’s recent actions thus far align with the Biden administration’s intent to incorporate additional environmental justice review and address climate change concerns, a signal that pipeline projects will face increased scrutiny and potentially longer review timeframes for FERC approvals.
For additional discussion, see sections on Environmental Justice and Climate Change.
