FTC Green Guides: The Growing Scrutiny on ‘Clean’ Natural Gas Claims
In an era of increasing environmental awareness, companies, particularly those in the energy sector, face heightened scrutiny over how they market their products. Natural gas, often promoted as a cleaner alternative to other fossil fuels, has become a focal point of this scrutiny. However, the Federal Trade Commission (FTC) Green Guides, a set of guidelines designed to prevent misleading environmental claims, provide guidance that companies must follow to avoid the pitfalls of greenwashing. This article explores the implications of these guidelines for gas distribution companies, utilities, and energy companies, and the potential risks of marketing natural gas as clean energy.
COMMENTARY
Greenwashing refers to the deceptive practice of marketing products or services as environmentally friendly when they are not or exaggerating their environmental benefits. While there is no specific federal law defining greenwashing, it is considered a form of consumer fraud. This practice involves providing misleading or deceptive information about the environmental benefits of a product, service, or company practice. For gas distribution companies, utilities, and energy companies, this could mean making unsubstantiated claims about the environmental impact of natural gas or electricity generated from natural gas.
The FTC Green Guides, first published in 1992 and revised in 1996, 1998, and 2012, were established to guide advertisers in making environmental claims and to help prevent misleading marketing practices. These guides outline the principles of environmental marketing claims, consumer interpretation of claims, claim substantiation, and the qualification of advertising claims. They are advisory, but failure to comply can be used as evidence of violating Section 5 of the Federal Trade Commission Act, which prohibits unfair or deceptive acts in commerce. The Green Guides also play a role in shaping state laws and enforcement actions, with many states incorporating these guidelines into their consumer protection statutes.
The FTC Green Guides and Environmental Claims
According to § 260.4 of the FTC Green Guides, it is deceptive to misrepresent, directly or by implication, that a product, package, or service offers a general environmental benefit. Unqualified claims, such as stating that natural gas is “clean,” are particularly risky because they can be interpreted in many ways, often implying unsubstantiated environmental benefits. For instance, a claim that natural gas is “clean” might lead consumers to believe it has minimal environmental impact, which, without further qualification, can be misleading.
The Green Guides recommend that marketers use clear and prominent qualifying language to limit the claim to specific, substantiated benefits. For instance, rather than broadly stating that natural gas is “clean,” a more accurate statement could specify that natural gas produces fewer pollutants, supported by relevant data. This approach helps by providing consumers with a clearer understanding of the environmental benefits and limitations of natural gas.
The Role of State Attorneys General and Recent Developments
In December 2022, the FTC issued a Request for Comments on potential updates to the Green Guides. This prompted several stakeholders, including state attorneys general from 15 states and the District of Columbia, to provide comments. These attorneys general specifically addressed the issue of marketing natural gas as clean, arguing that such claims could constitute greenwashing if made without proper qualification or substantiation.
The state attorneys general emphasized that as more jurisdictions adopt laws to reduce the use of fossil fuels and move toward net-zero goals, greenwashing tactics are likely to proliferate. They highlighted that gas distribution companies often market natural gas as more efficient, better for the environment, and clean—statements that, without proper context or evidence, could mislead consumers. The attorneys general urged the FTC to expand the Green Guides, particularly § 260.15, to address claims of renewable, clean, or green gas and/or fuels in the marketing of fossil fuels, fossil gas, and alternatives to these sources.
This collective push by state attorneys general is significant, as it reflects a broader effort to possibly increase enforcement of misleading environmental marketing claims. The involvement of these states underscores the increasing legal risks for companies that make environmental claims about natural gas.
The Legal Risks of Greenwashing: Recent Cases
There are legal risks associated with marketing natural gas as “clean” as highlighted by two recent cases involving natural gas environmental claims by gas utilities.
1. Client Earth v. Washington Gas Light Co. (2022)
This case was brought by Client Earth, an environmental organization, along with other plaintiffs, under the District of Columbia Consumer Protection Procedures Act (CPPA). The plaintiffs alleged that Washington Gas Light Company (WGL) falsely marketed its natural gas products as “clean” and sustainable. They argued that since natural gas is primarily composed of methane, a potent greenhouse gas, it cannot reasonably be considered “clean.” The complaint focused on statements made by WGL in their billing statements, which claimed that “Natural gas is a clean, efficient and reliable energy. Converting an all-electric home to natural gas is the equivalent of planting 2.75 acres of trees or driving 5,520 fewer miles each year.”
Client Earth argued that these claims were deceptive, given that natural gas is composed of methane, which is a significant contributor to greenhouse gas emissions. Client Earth reviewed public reports from WGL, which revealed that in 2018, the company’s use of low-carbon gas was 0%, and by 2025, it was projected to increase to only 2%. This evidence suggested that the company’s natural gas was not “clean” or sustainable, contrary to its marketing claims.
The court dismissed the lawsuit, stating that the Consumer Protection Act used by Client Earth to bring the complaint does not apply to entities regulated by the Public Service Commission.
2. The People of the State of California v. Southern California Gas Company (2023)
This case was filed by the Attorney General of California against Southern California Gas Company (SoCalGas), the largest natural gas provider in California. The lawsuit was initiated on August 11, 2023, and centered around allegations that SoCalGas had engaged in misleading environmental marketing practices. The Attorney General’s complaint focused on a banner ad that stated, “Natural Gas is Affordable, Clean and Renewable.” This slogan was displayed on the SoCalGas’ website, in advertisements, and on various marketing materials like T-shirts and hats. The Attorney General argued that this claim was misleading, especially in light of California’s stringent climate change goals, which aim to reduce reliance on fossil fuels.
The complaint discussed California’s climate change policies, which include the goal of achieving net-zero emissions by 2045. The Attorney General emphasized that methane, the primary component of natural gas, is the second-largest emitter of greenhouse gases after carbon dioxide. Thus, marketing natural gas as “clean” was directly opposed to the state’s clean energy objectives.
The case was resolved swiftly. On August 14, 2023, just three days after the complaint was filed, SoCalGas agreed to a settlement. The company entered into a consent decree with the Attorney General’s office, agreeing to pay $175,000 in penalties. Additionally, SoCalGas was required to publish a corrective statement on its website.
These cases underscore the importance of ensuring that environmental claims are not only accurate but also substantiated by reliable evidence. They also highlight the potential legal consequences for companies that do not adhere to the guidelines set forth in the FTC Green Guides.
Best Practices for Compliance with the FTC Green Guides
To mitigate the risk of greenwashing when making environmental claims about natural gas, gas distribution companies, utilities, and energy companies should consider several best practices.
Specificity and Clarity: Environmental marketing claims should be specific, clear, and supported by reliable evidence. Avoid broad statements like “natural gas is clean” without context or qualification. Instead, provide the comparative reduction in emissions compared to other fuels.
Use of Qualifiers: When making environmental claims, use qualifiers to provide context and clarity. For example, if promoting natural gas as a “cleaner” alternative, specify the comparison (e.g., “cleaner than coal”) and the specific environmental benefits (e.g., lower CO2 emissions).
Substantiation: Ensure that all environmental claims are backed by substantial evidence, such as third-party certifications, scientific studies, or detailed analysis. For instance, if claiming that natural gas is “clean,” provide comprehensive data on its emissions profile and compare it with other energy sources to substantiate the claim.
Conclusion
The involvement of state attorneys general in pushing for expanding the FTC guidelines reflects a broader movement towards greater accountability and transparency in environmental claims. For gas distribution companies, utilities, and energy companies, there are legal risks of marketing natural gas as “clean” without proper qualification. Companies should consider adhering to the principles outlined in the Green Guides and following best practices to avoid the legal risks of greenwashing.
—Shawane Lee is a partner at Snell & Wilmer, advising public utilities and other companies in matters before governmental and regulatory agencies.