The U.S. Court of Appeals for the Sixth Circuit held this week that the Department of Energy (DOE) complied with its obligations under the National Environmental Policy Act (NEPA) in providing funding for a cellulosic ethanol plant. Klein v. EPA, No. 13-1165 (6th Cir. May 21, 2014).  In accordance with the Energy Policy Act of 2005, DOE awarded a grant of $100 million to Frontier Renewable Resources LLC to build a 20-million-gallon-per-year cellulosic ethanol production plant in Michigan’s Upper Peninsula.  Before rendering its final funding decision, DOE prepared an Environmental Assessment (EA) pursuant to NEPA, concluding that the project would not have a “significant adverse effect on the environment.”

The Sierra Club along with an individual who had a compromised immune system and resided near the proposed plant, challenged DOE’s decision.  The U.S. District Court for the Western District of Michigan ruled that the plaintiffs did not have standing to sue and that, even if they had standing, DOE’s EA complied with NEPA. Klein v. Energy Department, No. 11-cv-00514 (W.D. Mich. Dec. 11, 2012).  The Sixth Circuit affirmed the holding with respect to NEPA compliance, but reversed the lower court’s standing ruling.  The Court held that DOE’s assessment consisted of “more than 400 pages” and met all NEPA requirements.  The Court, bolstered by Circuit Judge Stranch’s concurrence, provided concise guidelines for demonstrating standing.

While developers of renewable energy facilities should be heartened by the NEPA ruling, the Court’s standing analysis could make it easier for project opponents asserting health or environmental interests to challenge a project.  Indeed, spokespersons for the Sierra Club and other non-governmental organizations have asserted that the decision will have that effect.  The lesson, once again, is that, to defeat legal challenges based on NEPA, project developers must work diligently to ensure that the reviewing agency’s NEPA analysis is thorough and complete.