If a newly proposed rulemaking is finalized, the process by which federal agencies are required to analyze the environmental impacts caused by their actions could be comprehensively updated for the first time in over four decades. On Jan. 10, the Council on Environmental Quality (CEQ) published a notice of proposed rulemaking in the Federal Register to update its regulations implementing the National Environmental Policy Act of 1969 (NEPA). The proposed revisions seek to narrow both the scope of projects that must be reviewed under NEPA, as well as the nature and extent of such review. These changes are intended to reduce the time, cost and workload required to comply with NEPA, and could also make it more difficult for opponents of agency actions that seek to block those actions in court based on alleged NEPA violations.

Background of NEPA

NEPA, enacted in 1970, is a procedural law; it does not mandate substantive environmental outcomes. The purpose of NEPA is to promote accountability and transparency in federal decisions to ensure that environmental concerns are integrated into federal decision-making. The CEQ, a division of the Executive Office of the President, is charged with overseeing implementation of NEPA  CEQ first promulgated regulations implementing NEPA in 1978.

NEPA applies to major federal actions significantly affecting the quality of the human environment, including those undertaken by nonfederal entities that receive federal funding or require federal permitting approvals. Federal agencies have three primary means of complying with NEPA. First, federal actions that have previously been determined to involve no significant impacts to the environment may receive a categorical exclusion (CE) from a more in-depth and time-consuming, review. Second, projects for which impacts are not expected to be significant or are unknown require the preparation of an environmental assessment, which identifies a project's anticipated effects and assesses their significance. Third, projects with known significant environmental impacts require the preparation of an environmental impact statement (EIS), which is a lengthier document that analyzes adverse environmental effects from, as well as alternatives to, the proposed action. These are often required for, among other things, federal approvals for major infrastructure projects as well as for approvals of oil and gas leases.

The NEPA process allows for substantial public participation, including the right to challenge an agency's NEPA analysis in federal court. Moreover, the extent of impacts to be considered in an EIS can change as scientific and social research develop, as evidenced by a recent focus on climate change and environmental justice impacts.

Proposed Changes to NEPA

CEQ's proposed revisions to the NEPA regulations seek to create a more efficient and timely review process. The proposed changes would impact all aspects of the NEPA process, including fundamental components such as the application and scope of NEPA review, analysis of alternatives and timing requirements.

The most significant change proposed by CEQ is the revision of the term "effects." Because NEPA requires a federal agency to analyze the environmental effects of its proposed action, revision of the definition of effects should correspondingly alter the required scope of an agency's NEPA analysis. Under existing regulations, the term is defined to include all direct, indirect and cumulative environmental effects caused by an action. Collectively, this includes all effects caused by the action that occur at the same time and place (direct), effects caused by the action that are later in time or further removed in distance but still reasonably foreseeable (indirect), and effects that result from the incremental impact of the action when added to other past, present or reasonably foreseeable actions (cumulative).

The proposed definition removes reference to direct and indirect effects, revising the term to include those effects that are "reasonably foreseeable and have a reasonably close causal relationship to the proposed action or alternative." The proposed definition explicitly eliminates the requirement to analyze cumulative effects. In addition, the proposed definition clarifies that a "but for" causal relationship is insufficient to trigger an agency's responsibility to analyze a particular effect. Rather, the phrase "reasonably close causal relationship" is intended to eliminate effects that are remote in time, geographically remote or the product of an attenuated causal chain, as well as those effects which an agency has no authority to prevent or which would happen regardless of the agency action.

The proposed rule does not specifically address the extent to which an agency would be required to analyze effects from greenhouse gas emissions and potential climate change impacts, other than to note that any such analysis must be consistent with the proposed definition of "effects." However, CEQ's proposed draft guidance on consideration of greenhouse gas emissions, released last June, would give agencies latitude in determining when quantification and analysis of GHG emissions and their effects are warranted. CEQ solicits input on whether the proposed regulation should incorporate any aspects of this draft guidance.

The proposed rule also aims to provide clarity for determining whether a particular federal action triggers NEPA. Currently, NEPA applies to "major federal actions"—those with effects that may be major and that are potentially subject to federal control and responsibility. This includes an agency's failure to act. CEQ proposes to strike "potentially" as well as the portion of the definition that relates to a failure to act, narrowing the definition only to affirmative actions that are clearly subject to federal control and responsibility. Further, the definition clarifies that loans, loan guarantees, or other forms of financial assistance in cases where the federal agency does not have sufficient control and responsibility over the effects of the action, are not within the scope of the definition.

Under the current regulations, an agency must analyze all reasonable alternatives, including those not within the jurisdiction of the lead agency. CEQ proposes to strike the term "all" from this requirement, allowing an agency to provide a reasonable number of examples that are technically and economically feasible. In addition, CEQ proposes to remove the requirement that an agency analyze alternatives outside of its jurisdiction.

The proposal contains a host of additional revisions aimed at streamlining the NEPA process.  In particular, CEQ proposes to facilitate the use of CE's by clarifying the process by which an agency can create an exclusion, and to allow agencies to establish procedures for employing CEs created by other agencies.  These changes also include more practical components, such as establishing time limits for NEPA reviews (two years for Environmental Impact Statements and one year for Environmental Assessments).

Finally, CEQ has proposed revisions reflecting its goal of resolving allegations of NEPA noncompliance as expeditiously as possible.  To that end, the proposed rule stipulates that the NEPA regulations do not create a presumption that a NEPA violation provides a basis for injunctive relief (although a court may still find that it is the appropriate remedy), and that harm arising from an agency's failure to comply with NEPA can be remedied by the agency complying with the requirements in the proposed regulations.

The proposed revisions, if adopted as a final rule, would supersede all previous CEQ NEPA guidance, and CEQ anticipates that it would withdraw all CEQ NEPA guidance that is currently in effect.

Potential Impacts to the Regulated Community

The proposed revisions could have a significant impact on many industries, particularly energy generation and transmission. In prior years, NEPA requirements have delayed large-scale projects and allegations of deficiencies in the NEPA process are frequently raised by project opponents in efforts to block such projects. For example, in 2018, a Montana district court enjoined construction of the Keystone XL pipeline on the basis that the lead agency, the U.S. Department of State, violated NEPA by failing to evaluate the cumulative climate impacts of the project.  The proposed rule's changes to the definition of effects and potential incorporation of the draft GHG guidance arguably should give more flexibility to agencies in performing review of environmental effects and may make it harder for such issues to give rise to vacatur of agency approvals.

The presumptive time limits for NEPA review should also significantly reduce the current average timeframes for NEPA review by more than 75%. Moreover, the proposal's limitations on the scope of judicial review could make it more challenging for projects to be blocked by courts as a result of NEPA deficiencies. For these reasons, among others, we note that it is unlikely that these provisions will be implemented without legal challenges from environmental advocacy groups.

Based on its likely impacts to such a wide variety of industries that require approvals, funding or other actions by federal agencies, developers of projects that are potentially subject to NEPA review and other stakeholders are encouraged to comment on the proposed rule. The deadline to submit comments is March 10, and two public hearings will be held, on Feb. 11, in Denver, Colorado, and Feb. 25, in Washington, D.C.

Ben Clapp is an associate in the environmental, energy and natural resources and emerging technologies groups of Babst, Calland, Clements and Zomnir. He advises clients on the environmental components of complex transactions. Contact him at [email protected].

Varun Shekhar is an associate in the environmental group of the firm. His practice encompasses a variety of environmental programs, with emphasis on federal, state and local regulatory matters arising under the Clean Air Act (CAA). Contact him at [email protected].

Casey Snyder is an associate in the environmental group of the firm. His practice focuses on various federal, state, and local environmental regulations, including assisting clients with regulatory issues affecting the oil and gas industry. Contact him at [email protected].

Brianne Kurdock is a member of the firm's Washington, D.C. office and a shareholder in the energy and natural resources, environmental and transportation safety groups and pipeline and HazMat safety practice. Contact her at [email protected].