The National Environmental Policy Act (NEPA) requires federal agencies to assess the environmental impacts of major federal actions. In 2022, the Council on Environmental Quality (CEQ) issued the "NEPA Phase 1 Rule," which expanded the scope of agency reviews to include "indirect effects" and "cumulative effects," while also expanding the breadth of the "purpose and need" statement, which is the critical starting point for NEPA review. On July 31, 2023, CEQ published in the Federal Register its "Phase 2 Rule," which would further reverse Trump-era NEPA changes, implement new NEPA statutory provisions enacted by Congress as part of the debt ceiling legislation, and seek to advance the Biden Administration's broader climate and environmental justice initiatives. CEQ is accepting comments on the proposed rule until September 29, 2023.
CEQ has released a redline showing proposed changes to existing NEPA regulations, which visually illustrates the extensive nature of the proposed reforms. Key changes include the following:
- Forcing Greater Environmental Protection:
While NEPA has always been understood to be a procedural statute
that requires identification of potential environmental effects but
does not dictate outcomes, the Proposed Rule places a greater
emphasis on agencies making decisions that are environmentally
protective. For example, the proposal would emphasize
"action-forcing" NEPA provisions. The introductory
provisions of the regulations describing the purpose of NEPA would
be amended to state that the NEPA process is intended not only to
help public officials make decisions that are based on an
understanding of environmental consequences but also "take
actions that protect, restore, and enhance the environment."
Consistent with this view of NEPA's goal, the regulations would
for the first time require an environmental impact statement to
identify the "environmentally preferable
alternative."
- Emphasizing Climate Change and Environmental Justice
Concerns: Reflecting two of the key themes of the Biden
Administration, the Proposed Rule includes an increased emphasis on
climate change and environmental justice. For example, the
definition of "effects" would be revised to include
specific reference to both climate change and environmental justice
as examples of effects that should be considered in a NEPA
analysis. The Proposed Rule also includes for the first time a
definition of "environmental justice" as "just
treatment and meaningful involvement of all people, regardless of
income, race, color, national origin, Tribal affiliation, or
disability, in agency decision making and other Federal activities
that affect human health and the environment so that people (1) Are
fully protected from disproportionate and adverse human health and
environmental effects (including risks) and hazards, including
those related to climate change, the cumulative impacts of
environmental and other burdens, and the legacy of racism or other
structural or systemic barriers; and (2) Have equitable access to a
healthy, sustainable, and resilient environment in which to live,
play, work, learn, grow, worship, and engage in cultural and
subsistence practices." Additionally, CEQ has left the door
open to including greater focus on climate change by indicating
that it may incorporate its January 2023 guidance on analysis of
greenhouse gas emissions into the regulations.
- More Public Engagement: The Proposed Rule also
reflects another point of emphasis for the Administration related
to environmental justice by adding provisions related to public
engagement. For example, under the proposal each federal agency
would be required to have a Public Engagement Officer to coordinate
public engagement efforts.
- More Flexibility for Categorical Exclusions:
The Proposed Rule emphasizes the importance of categorical
exclusions in facilitating environmental reviews and allowing
agencies to focus on impacts that are potentially significant. CEQ
is proposing to allow agencies some additional flexibility in how
they go about adopting CEs, for example by allowing an agency to
propose and adopt a CE through mechanisms that are not specifically
NEPA-focused, such as long-range planning documents. To speed up
reviews, project proponents may need to encourage agencies to make
more extensive use of categorical exclusions.
- Generating More Environmental Information and
Data: The Proposed Rule would increase the obligation to
generate data relevant to a NEPA analysis. The burden of collecting
additional data where deemed appropriate will undoubtedly fall on
private applicants.
- Adopts Narrow View of Recent NEPA Statutory
Changes: The Proposed Rule generally takes a narrow view
of the exclusions from NEPA review recently adopted by Congress in
the Fiscal Responsibility Act. This interpretation is reflected,
for example, in CEQ's proposed approach to the exclusions from
the definition of "major federal action" for federal
financing where the agency lacks sufficient control and
responsibility over the subsequent use of the financial assistance
or the effects of the activity for which the agency is providing
the financial assistance. The Proposed Rule incorporates a
preference for continuing to require NEPA review for all federal
funding that is more than minimal and making adjustments in the
scope of that review where appropriate, an approach that is
arguably inconsistent with congressional intent. This approach may
ironically delay the distribution of Inflation Reduction Act
funding that is intended to further the Administration's
Climate and other goals.
- Retains Agency Flexibility for Avoiding Strict NEPA Deadlines: The Proposed Rule incorporates the FRA language regarding deadlines for NEPA reviews essentially verbatim. In doing so, CEQ has passed on an opportunity to clarify the statutory language in a way that would make the deadlines more meaningful, opting instead to retain greater flexibility with respect to schedules for NEPA reviews and increasing the likelihood that congressional attempts to speed up NEPA reviews will be largely unavailing.
Altogether, the Phase 2 Proposed Rule, if finalized, in conjunction with the Phase 1 rule would likely increase the burdens, delays, and costs associated with the NEPA process for many kinds of energy infrastructure and development projects, at least as compared to the NEPA regulations in place as of just a few years ago. Nevertheless, many of the changes seek to revert to the 1978 version of the regulations, which were in place for over three decades, so the overall impact of the changes may be less pronounced for some projects. As these and other efforts continue, many observers note that the Biden Administration's ambitious clean energy goals largely hinge on the ability of the private sector to reliably and efficiently deploy new energy infrastructure, creating at least some incentive for federal agencies to try to find ways to improve environmental permitting and reviews.
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