CEQ Finalizes Amendments to NEPA Regulations, but Challenges Lie Ahead

11 min

On July 16, 2020, the Council on Environmental Quality (CEQ) finalized its first substantial revision to its National Environmental Policy Act (NEPA) regulations in over 40 years. The final rule largely tracks the January 10, 2020 proposal, which generated over a million public comments. The final rule's numerous changes to environmental review under NEPA take effect on September 14, 2020, but agencies have until September 2021 to align their own NEPA implementation procedures with the new regulations.

Impetus for Modernizing NEPA Regulations

CEQ's final rule seeks to increase certainty and predictability in environmental review, and thereby "eliminate some measure of unnecessary and burdensome delays that have hampered national infrastructure and other important projects." 85 Fed. Reg. at 43306. According to CEQ, the final rule largely clarifies and codifies what is already required by NEPA, and its implementing regulations, guidance, and case law. The discussion below walks through the major components of NEPA review under the new regulations, highlighting several key aspects of CEQ's final rule.

Environmental Review under the Final Rule

Triggers for NEPA Review—The final rule includes a new NEPA thresholds section that includes several factors for federal agencies to consider when determining "whether NEPA applies or is otherwise fulfilled." 85 Fed. Reg. 43320.

According to CEQ, this applicability analysis codifies several circumstances where courts have found NEPA inapplicable, such as when an agency is carrying out a non-discretionary duty; compliance with NEPA would conflict with the agency's statutory obligations or be inconsistent with congressional intent; compliance with another statute's requirements is the functional equivalent of compliance with NEPA; and a proposed activity or decision is not a "major Federal action." Id. While there is nothing revolutionary about the categories CEQ has identified as outside of NEPA review, the codification of previously judicially identified exceptions is potentially significant. Under the final rule, agencies are encouraged to evaluate NEPA's applicability and can now point to the regulations to justify a decision not to engage in environmental review under certain circumstances.

CEQ's changes to the definition of "major Federal action" are potentially more consequential. NEPA's statutory text requires review of "major Federal actions significantly affecting the quality of the human environment." 42 U.S.C. 4332(2)(C). The prior regulations interpreted "major" in "major Federal action" to not have meaning independent of "significant." CEQ's final rule interprets "major" differently. Under the final rule, "'[m]ajor' refers to the type of action," and "'[s]ignificant' relates to the effects stemming from the action." 85 Fed. Reg. at 43345.

CEQ introduced a list of actions that are not considered major federal actions triggering NEPA. Id. While this list was contemplated in the proposed rule, CEQ added several categories in the final rule, including "agency activities or decisions with effects that are located entirely outside of the jurisdiction of the United States" (i.e., extraterritorial activities) and "Non-Federal projects with minimal Federal funding or minimal Federal involvement where the agency does not exercise sufficient control and responsibility over the outcome of the project." 85 Fed. Reg. at 43346-47; 40 C.F.R. § 1508(q)(1)(i), (vi). This latter type of agency action implicates what is known as the "small-handle" principle, whereby only small federal involvement—through funding, permitting, or oversight—in an otherwise non-federal project is deemed to not trigger NEPA. CEQ's revised definition is designed to limit the instances when a small federal handle triggers NEPA review. In CEQ's words, "there is no practical reason for an agency to conduct a NEPA analysis" when "the agency could not influence the outcome of its action to address the effects of the project."

Scope of Analysis during NEPA ReviewCEQ makes several changes in the final rule that clarify important aspects of NEPA review. For example, the final rule sets out a decisional framework to help agencies determine the appropriate level of analysis, whether it is applying a Categorical Exclusions or developing an Environmental Assessment/Finding of No Significant Impact or a more detailed Environmental Impact Statement. 85 Fed. Reg. at 43321; 40 C.F.R. § 1501.3. In laying out this decisional framework, CEQ amended the list of factors agencies should consider when determining whether the effects of a proposed action are significant (and therefore require more detailed NEPA review). 85 Fed. Reg. at 43322. Under the prior regulation, agencies were directed to consider the significance of impacts by analyzing "context" and several "intensity" factors, including, among others, the proximity to historic or cultural resources or ecologically critical areas, the uncertainty or uniqueness of possible effects, or the likelihood the effects would be highly controversial. The final rule eliminates many of these factors, focusing instead on only "short- and long-term effects," "beneficial and adverse effects," "effects on public health and safety," and effects that would violate applicable laws protecting the environment. 40 C.F.R. § 1501.3(b). In CEQ's words, the revised language presents a "simpler, more flexible approach for agencies to assess significance." 85 Fed. Reg. at 43322.

More controversially, CEQ changed the regulations regarding the effects a federal agency should analyze. With respect to the effects to be analyzed, the final rule simplifies the definition of effects by eliminating references to "direct" and "indirect" effects, as well as the definition of "cumulative impact." 40 C.F.R. §§ 1508(g); 85 Fed. Reg. at 43343. Under the new definition, "effects" are changes to the environment that are "reasonably foreseeable and have a reasonably close causal relationship to the proposed action or alternatives"; a "but for" causal connection is insufficient and "[e]ffects should generally not be considered" (emphasis added) if they are remote in time or geography or are "the product of a lengthy causal chain." CEQ added the word "generally" to the definition in the final rule in response to comments received on the proposal. The change "reflect[s] that there may occasionally be a circumstance where an effect that is remote in time, geographically remote, or the product of a lengthy causal chain is reasonably foreseeable and has a reasonably close causal connection to the proposed action." 85 Fed. Reg. 42204, 43343-44.

Stakeholders, particularly environmental groups, have expressed concern that the elimination of cumulative impact means that greenhouse gas (GHG) or climate change impacts will not be analyzed under NEPA review. In response to this concern, CEQ states that "[u]nder the final rule, agencies will consider predictable environmental trends in the area in the baseline analysis of the affected environment," and that "[t]rends determined to be a consequence of climate change would be characterized in the baseline analysis of the affected environment rather than as an effect of the action." 85 Fed. Reg. at 43331. CEQ further clarifies that "[d]iscussion of the affected environment should be informative but should not be speculative." Id. The assessment of GHGs and climate change impacts has received a lot of attention in recent years in light of several court decisions finding the federal agency failed to properly assess a project's GHG impacts. See, e.g., Sierra Club v. Fed. Energy Regulatory Comm'n, 867 F.3d 1357 (D.C. Cir. 2017); WildEarth Guardians v. Zinke, 368 F. Supp. 3d 41 (D.D.C. 2019); Indigenous Envtl. v. U.S. Dep't of State, 347 F. Supp. 3d 561 (2018). In a rulemaking where CEQ repeatedly looks to case law to support its revisions, CEQ's deviation from recent case law with respect to GHG impacts is a notable exception.

CEQ's clarification of the scope of alternatives an agency should review has also generated controversy. Under the final rule, CEQ clarifies that agencies shall limit their consideration to a reasonable number of alternatives and that alternatives are "reasonable" if they are technically and economically feasible, meet the purpose and need of the proposed action, and are within the jurisdiction of the agency. 40 C.F.R. §§ 1502.14, 1508.1(z); 85 Fed. Reg. 43330-31 (though agencies "may discuss reasonable alternatives not within its jurisdiction when necessary for the agency's decision-making process, such as . . . to address legislative EIS requirements . . . and to address specific congressional directives").

The final rule also discusses Categorial Exclusions and codifies new mechanisms to allow agencies to adopt other agency's Categorical Exclusions. 85 Fed. Reg. at 43322, 43336; 40 C.F.R. §§ 1501.4; 1506.3. CEQ also codified several key elements of the "One Federal Decision" policy established by Executive Order 13807, including the requirement for a lead agency joint schedule, preparation of a joint record of decision, and a target two-year timeline for environmental review. 85 Fed. Reg. at 43313-14.

Public ParticipationCEQ expands on the requirement in the prior regulations that comments on an environmental impact statement or a proposed action should be as specific as possible. Under the final rule, comments from various stakeholders "shall provide as much detail as necessary to meaningfully participate and fully inform the agency of the commenter's position" and explain why the issues raised are important to consideration of potential impacts and alternatives. 40 C.F.R. § 1503.3. The final rule also provides that "[f]or consideration by the . . . agencies, State, Tribal and local governments and other public commenters must submit comments within the comment periods provided," and comments and objections of any kind not provided within a comment period "shall be forfeited as unexhausted." 40 C.F.R. §§ 1500.3; 1503.3(b). As proposed, this requirement applied only to public comments, but in the final rule, CEQ clarified that this rule applies to comments from State, Tribal, and local governments as well. 85 Fed. Reg. at 43317-18. CEQ also "expresses its intention [in the final rule] that commenters rely on their own comments and not those submitted by other commenters in any subsequent litigation." 85 Fed. Reg. at 43318.

While these changes are largely consistent with well-established principles of administrative exhaustion, environmental groups have criticized these changes as impermissibly restricting public participation in the NEPA review process and the public's ability to challenge an agency's NEPA evaluation.

Available RemediesBuilding on the public participation requirements discussed above, the final rule also requires an agency to certify in its Record of Decision that it considered all of the alternatives, information, analysis, and objections submitted by State, Tribal and local government and public commenters for consideration during development of the final EIS. An EIS certified in this matter is "entitled to a presumption that the agency adequately considered the submitted alternatives, information, and analysis . . . in its decision." 85 Fed. Reg. at 43314. CEQ asserts this is consistent with the "presumption of regulatory that governmental officials have properly discharged their duties." 85 Fed. Reg. at 43314.

CEQ also includes a new section, "Remedies," which states that "[h]arm from the failure to comply with NEPA can be remedied by compliance with NEPA's procedural requirements as interpreted by [the final rule]" and "[i]t is the Council's intention" that the final rule "create no presumption that violation of NEPA is a basis for injunctive relief or for a finding of irreparable harm" and that "minor, non-substantive errors that have no effect on agency decision making shall be considered harmless and shall not invalidate an agency." 40 C.F.R. §§ 1500.3(d); 85 Fed. Reg. at 43319. The impact of this new remedies section is unclear because (absent specific instructions by Congress) courts are ultimately the arbiters of whether injunctive relief is available and whether an error is harmless.

Impact on NEPA in the Near Term

Whether CEQ realizes its goal of "moderniz[ing] NEPA regulations [to] accelerate the environmental review and permitting process" remains to be seen. At a minimum, the rule will not be effective until September 14, 2020, and will apply only to new projects (though agencies have the discretion to apply the new rules to ongoing NEPA reviews). 85 Fed. Reg. 43304, 43339.

The Office of Management and Budget has already determined that the final rule is subject to the Congressional Review Act. 85 Fed. Reg. at 43353. Given that there could be a change in administration in the upcoming election, it is possible Congress will choose to review the rule, creating uncertainty as to when the rule may actually go into effect. CEQ acknowledges this uncertainty, stating that "if congressional review has changed the effective date, CEQ will publish a document in the Federal Register to establish the actual effective date or to terminate the rule." 85 Fed. Reg. 43304.

Litigation adds further uncertainty. The Southern Environmental Law Center, representing a group of seventeen environmental organizations, has already filed a complaint in the United States District Court for the Western District of Virginia challenging the final rule, alleging that CEQ "arbitrarily reversed longstanding regulations" in violation of the Administrative Procedure Act. Another group of environmental organizations has similarly challenged the rule in the United States District Court for the Northern District of California, alleging that CEQ failed to disclose significant environment impacts of the final rule in violation of NEPA, failed to adequately explain its decision to change longstanding agency practice, and finalized a rule inconsistent with the text, structure and intent of NEPA in violation of the Administrative Procedure Act.

Even absent considerations of the Congressional Review Act and litigation, the full impact of CEQ's new regulations will not be felt right away, because under the final rule agencies have up to 12 months after September 14, 2020 to "develop or revise, as necessary, proposed procedures to implement" CEQ's regulations. 85 Fed. Reg. at 43373. Moreover, the meaning and impact of the new regulations in practice will be fleshed out by the courts through numerous challenges to their application to individual projects.

And finally, CEQ's own work is also not done. The Council plans to "provide notice in the Federal Register listing withdrawn [NEPA] guidance" and subsequently issue updated NEPA guidance. 85 Fed. Reg. at 43351.

Venable's Environmental team is very experienced with NEPA landscape and is well positioned to help clients navigate the new NEPA regulations going forward. For more information, please contact Fred Wagner, Tom Lingan, Tyler Welti, or Chelsea O'Sullivan.