The National Environmental Policy Act (NEPA) plays a critical role in infrastructure and energy project development. The statute requires federal agencies to consider the environmental impacts of proposed major federal actions as part of the agencies' decision-making process. Most proposed projects that require a federal approval, such as a permit, or that receive federal financing must comply with NEPA's requirements. The significance of the expected environmental impact dictates the precise NEPA process that must be followed, as well as the final NEPA approval document that must be prepared. Federal agencies also use the NEPA process as an "umbrella," under which to ensure the project proponent's compliance with other federal environmental programs.
NEPA does not mandate a particular result or substantive outcome, but its procedural requirements can be extremely time consuming and those delays can, at times, defeat the purpose of time-sensitive projects. In 2020, the White House Council on Environmental Quality (CEQ) found that federal agencies took an average of 4.5 years to complete an Environmental Impact Statement (EIS), with an average length of over 650 pages. Accordingly, calls for NEPA reform have grown in recent years, and each of the Obama, Trump, and Biden Administrations have pursued their own efforts to streamline and shape NEPA.
This summer, Congress passed the first major amendments to NEPA since the statute's enactment in 1969, and CEQ published its long-anticipated second phase of proposed revisions to the NEPA implementing regulations. These statutory and regulatory reforms are discussed below and have the potential to significantly impact NEPA's application to infrastructure and energy project development.
Fiscal Responsibility Act of 2023
On June 3, 2023, President Biden signed into law the Fiscal Responsibility Act of 2023 ("FRA"). In addition to raising the debt ceiling, the FRA amends NEPA in several important ways:
- Time Limits: The FRA adopts a default 2-year time limit for the preparation of an EIS and a 1-year limit for the preparation of an Environmental Assessment (EA). The FRA also creates a new judicial enforcement mechanism, whereby project sponsors can petition for a court-imposed schedule if an agency fails to complete its environmental review within the proscribed time limit. However, the FRA also allows the lead agency to extend the time limits "if necessary."
- Page Limits: The FRA imposes page limits of 75 pages for EAs, 150 pages for typical EISs, and 300 pages for EIS's analyzing actions of "extraordinary complexity." However, the FRA provides that appendices do not count against the page limits, and therefore, in practice, the new page limits may not have much practical effect.
- Defining Major Federal Action: NEPA applies when a proposed action is a "major Federal action." The FRA defines "major Federal action" as an action that the agency "determines is subject to substantial Federal control and responsibility." This new statutory definition likely narrows NEPA's applicability. The prior regulatory definition for "major Federal action" included actions that were "potentially" subject to Federal control and responsibility. The FRA also specifies certain actions that are not major Federal action, including projects "with no or minimal Federal involvement where a Federal agency cannot control the outcome of the project," and "activities or decisions that are non-discretionary and made in accordance with the agency's statutory authority."
- Effects and Alternatives Analysis: The FRA codifies the longstanding requirement, from CEQ's implementing regulations and case law, that an EIS must consider the "reasonably foreseeable environmental effects of the proposed agency action" and analyze a "reasonable range of alternatives to the proposed agency action . . . that are technically and economically feasible, and meet the purpose and need of the proposal."
- Sponsor-Prepared EISs and EAs: The FRA requires lead agencies to establish procedures for project sponsors to prepare environmental review documents under agency supervision, with the lead agency required to independently evaluate the environmental document and take responsibility for its contents. This amendment also largely codifies existing agency practice and NEPA regulations.
The FRA's NEPA amendments were designed to streamline the environmental review process, but it is uncertain whether they will have a significant practical impact. For example, as mentioned above, agencies can extend the FRA's time limits for EISs and EAs "as necessary," and agencies can work around the FRA's page limits through the use of appendices. Many of the FRA's amendments also simply codify longstanding agency practices and regulatory requirements. Nevertheless, the codification of these practices and requirements will make it more challenging for future administrations to adopt conflicting policies and should increase regulatory certainty for project proponents. The FRA's new definition of "major Federal action" is perhaps the Act's most notable amendment. The new definition could narrow the scope of projects subject to NEPA. Although, the definition's interpretation and application will likely be the subject of litigation in the coming years.
CEQ Phase II NEPA Regulations
On July 31, 2023, CEQ published its Proposed Rule for the second phase of revisions to the NEPA implementing regulations. CEQ's first phase of revisions to the NEPA regulations were issued on April 20, 2022, and focused on undoing several discrete and particularly controversial changes to the NEPA regulations adopted under the Trump Administration. The current Proposed Rule is a more comprehensive revision of the NEPA regulations. The proposal implements aspects of the FRA, restores aspects of the original 1978 regulations, and advances the Biden Administrations goals with respect to climate changes and environmental justice. A few of the most notable aspects of the Proposed Rule are discussed below.
- NEPA as an "Action Forcing" Statute: Courts have consistently interpreted NEPA as imposing procedural requirements to ensure that agencies consider environmental effects of proposed actions, but not mandating that agencies reach a particular result or substantive outcome. CEQ's proposal challenges the notion that NEPA is merely a procedural statute. The Proposed Rule would delete a reference to NEPA being a "procedural statute," and would instead characterize NEPA as "the basic national charter for protection of the environment." The Proposed Rule would also include a list of environmental and human health goals, and would then assert that NEPA contains "action-forcing" procedural provisions to ensure that Federal agencies "achieve" those goals.
- Climate Change: The Proposed Rule would include several changes aimed at ensuring agencies integrate climate change considerations into their analysis of environmental effects. For instance, agencies would need to analyze "reasonably foreseeable climate change-related effects," as well as "[p]possible conflicts between the proposed action and the objectives of Federal, regional, State, Tribal, and local plans, policies, and controls for the area concerned, including those addressed climate change." The Proposed Rule would also encourage agencies to use the NEPA process to identify and assess alternatives to the proposed action that will avoid or minimize adverse effects, such as alternatives that will reduce climate changes-related effects.
- Environmental Justice: The Proposed Rule would create a broad and amorphous definition of "environmental justice," one that includes ensuring that all people are fully protected from structural or systemic barriers and have equitable access to a healthy, sustainable, and resilient environment. The Proposed Rule would then require that agencies identify and assess reasonable alternatives that address adverse health and environmental effects that disproportionately affect communities with environmental justice concerns. The Proposed Rule would also direct agencies to require mitigation measures to address adverse effects that disproportionate and adversely affect communities with environmental justice concerns.
- Beneficial Effects: The Proposed Rule would state that only actions with significant adverse effects require an EIS. The proposal would also instruct agencies to consider the duration of effects when determining whether a project has a significant adverse effect. CEQ then singles out renewable energy projects as a type of project that may not require an EIS because of the project's beneficial environmental effects. CEQ explains that an "agency should consider short-term construction-related greenhouse gas (GHG) emissions from a renewable energy project in light of long-term reductions in GHG emissions when determining the overall intensity of effects," and that "the agency could reasonably determine that the climate effects of the proposed action would not be significantly adverse, and therefore an EIS would not be required."
- Innovative Approaches to NEPA Reviews: The Proposed Rule would add a new section (Section 1506.12) stating that CEQ may authorize innovative approaches to NEPA compliance that allows agencies to proposed modified procedures for NEPA review for the purpose of facilitating "sound and efficient environmental review for actions to address extreme environmental challenges." Under this alternative compliance provision, agencies could propose an alternative approach to specific provisions of the regulation, explain the environmental challenge the approach is intended to address, and then explain how the alternative approach would ensure sound and efficient environmental review. CEQ would then have 60 days to approve, revise, or deny the agency's request. The Proposed Rule would codify examples of extreme environmental challenges, including sea level rise; increased wildfire risk; bolstering the resilience of infrastructure to increased disaster risk from the effects of climate change; water scarcity; degraded water or air quality; species loss; disproportionate and adverse effects on communities with environmental justice concerns; imminent or reasonably foreseeable loss of historic, cultural, or tribal resources; and impaired ecosystem health.
The Proposed Rule represents a comprehensive revision of CEQ's NEPA regulations. It implements the FRA amendments intended to streamline the environmental review process. However, as highlighted above, it also includes provisions that would transform NEPA reviews into an "action-forcing" process intended to advance the Biden Administration's environmental goals. Certain infrastructure and renewable energy projects with "beneficial" environmental effects may benefit from the Proposed Rule. However, for most infrastructure projects, the Proposed Rule would likely result in increased scrutiny, with a particular emphasis on adverse effects related to climate change and environmental justice concerns.
CEQ is accepting public comments on the Proposed Rule through September 29, 2023. CEQ plans to hold virtual public meetings on the proposal August 26th, August 30th, September 11th, and September 21st.
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