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Environmental, social, and governance risks and opportunities

Defense Contractor Prohibition on Greenhouse Gas Emissions Disclosures

Not permitted to “disclose a greenhouse gas inventory or any other report on greenhouse gas emissions”
GHG

Department of Defense contractors are not permitted to “disclose a greenhouse gas inventory or any other report on greenhouse gas emissions.”

As governments across the United States are beginning to regulate greenhouse gas emissions, looking at the back story and teasing out the broad impact of this prohibition is worth our time.

We blogged, Government Proposes Federal Contractors and Their Suppliers Disclose GHG Emissions describing the November 14, 2022, proposed Federal Supplier Climate Risks and Resilience Rule that proposed to require greenhouse gas emission disclosures by contractors to the U.S. government, the world’s single largest buyer of goods and services. That proposed amendment to the Federal Acquisition Regulation garnered much controversy and remains under review.

Beginning at about the same time several states and a score of cities enacted building energy performance standards (BEPS) and other laws requiring not only disclosure of greenhouse gas emissions but in some instances also mandating reductions. And beyond what has been enacted, there are proposals from other federal government agencies to a host of blue states and local governments (.. yes, climate change is a partisan issue so the military mission is at risk of suffering for it).

On December 23, 2023, President Biden signed into law the National Defense Authorization Act for Fiscal Year 2024, which authorizes the Navy to purchase 13 nuclear powered attack submarines and authorizes the maximum number of active duty personnel for each of the armed forces: Army 452,000, Navy 347,000, Marine Corps 172,300, Air Force 324,700, and Space Force 9,400. Also reflecting one of the more contentious debates in Congress with the aim of a pragmatic slowing of climate change being addressed through the military mission, the Act expressly provides,

SEC. 318. PROHIBITION ON REQUIRED DISCLOSURE BY DEPARTMENT OF DEFENSE CONTRACTORS OF INFORMATION RELATING TO GREENHOUSE GAS EMISSIONS.

There are of course other prohibitions for purposes of secrecy, security oversight, and classified access in Department of Defense procurement that bar the release of utility data, personnel population, and the like (that are the component parts of greenhouse gas emission calculation), but this law expressly prohibits the disclosure of information relating to greenhouse gas emissions.

In government speak, the National Defense Authorization Act says in describing the prohibition on disclosure requirements, “The Secretary of Defense may not require that any nontraditional defense contractor (defined as those that did not have a contract in the last year), as a condition of being awarded a contract with the Secretary, disclose a greenhouse gas inventory or any other report on greenhouse gas emissions, ..” Then in a subsection below adds “other than nontraditional defense contractors” and broadens the scope. Advice from the Office of the General Counsel of the Department of Defense is that this section will be broadly interpreted.

The Secretary of Defense may issue a waiver of this prohibition on a contract by contract basis but only “provided that the information provided is directly related to the performance of the contract.” So, not a large number of waivers are anticipated.

While we are receiving inquiries about the application of the law, it is not yet possible to gauge its import in the regulation of greenhouse gas emissions.  These prohibitions apply to Defense contracts and for the life of this funding, fiscal year 2024 only, so the FAR amendment could move forward for other agencies or it might be halted entirely. There will be a great geographic disparity in application, with California and Maryland having among the greatest number of Defense contractors, those states also have greenhouse gas emission laws?

As little as two years ago greenhouse gas emission regulation by government was like the Wild West and today it is better characterized as a very crowded place, but this is still a new and emergent regulatory space where it is clear there will now be laws, and in this rare truly bipartisan action by Congress on greenhouse gas emissions, there will be businesses exempted from those laws. 

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