Alert
03.22.24
On December 6, 2022, and January 4, 2023, we published two client alerts outlining the proposed greenhouse gas (GHG) emissions disclosure requirements and explaining the differences between the Scope 1, 2 and 3 GHG emission categories. As we previously described, FAR 23.001 defines GHG as carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, nitrogen trifluoride and sulfur hexafluoride. Under the proposed Federal Acquisition Regulation (FAR) regulation, virtually all federal contractors will be required to identify and report an inventory of their Scope 1 and Scope 2 GHG emissions, starting one year after a final FAR rule is issued. With limited exceptions, this requirement will apply to all government contractors who received $7.5 million or more in federal contract obligations in the prior fiscal year. Government contractors who do not qualify as small business concerns and who received more than $50 million in federal contract obligations in the prior fiscal year will also be required to report an annual inventory of their Scope 3 GHG emissions. To date, the final FAR rule has not been issued.
On December 22, 2023, the 2024 National Defense Authorization Act (NDAA) was signed into law. Section 318 of the NDAA prohibited the required disclosure of information relating to GHG emissions by DoD contractors for one year. The NDAA effectively suspends the FAR Council’s November 14, 2022, proposed rule and postpones the required disclosure of GHG emissions and plans to reduce GHG emissions.
Section 318 also differentiates the duration of the GHG reporting prohibitions between traditional and nontraditional defense contractors. Traditional defense contractors shall not be required to disclose their GHG inventory or any other report on GHG emissions, as a condition of a DoD award, through December 22, 2024. However, nontraditional defense contractors are exempt indefinitely from the requirement. Section 3014 of title 10, U.S. Code, defines a nontraditional defense contractor as an entity not currently performing or that has not performed any contract or subcontract for the DoD, subject to full coverage under the cost accounting standards, for at least a one-year period.
On February 25, 2024, the DoD issued a class deviation, formally implementing section 318 of the NDAA. This class deviation effectively suspended the GHG emissions reporting requirements until December 22, 2024, for traditional defense contractors and indefinitely for nontraditional defense contractors. There is one exception, however, if an official one level above the contracting officer determines that requiring such disclosure is necessary to verify a voluntary disclosure of such inventory or other report, then the GHG reporting requirement applies.
Accordingly, while current federal defense contractors should be advised that GHG emissions reporting has now been delayed until at least December 22, 2024 (for traditional contractors), it is unclear whether additional legislation or rulemaking will set new GHG reporting requirements or deadlines for contractors (traditional or nontraditional) following December 2024. We will continue to monitor GHG disclosure obligations and report on changes as they develop.