Introduction
On May 1, 2024, the Council on Environmental Quality (“CEQ”) promulgated the Bipartisan Permitting Reform Implementation Rule (“Final Rule”), 89 Fed. Reg. 35,442 (May 1, 2024), which is better known as Phase 2 of the Biden Administration’s revisions to the regulations that implement the National Environmental Policy Act (“NEPA”).
NEPA imposes a procedural requirement that does not mandate outcomes, only informed decision making. Despite its procedural nature, NEPA is one of the primary mechanisms for project opponents to challenge projects and is the most litigated federal statute. CEQ describes the changes in the Final Rule as promoting efficient and effective environmental review while increasing regulatory certainty. Given the history of NEPA litigation, and the significant changes in the Final Rule, it is likely that these changes will open new pathways for litigation and require courts to interpret the changes before providing regulatory certainty.
Background Leading to the Final Rule
Prior to 2020, the regulations implementing NEPA, 40 C.F.R. parts 1500-1508, had not been meaningfully updated since 1978. In 2020, CEQ finalized significant changes to the regulations, which were designed to speed up project review and limit agency discretion in considering impacts beyond the immediately proposed project. In 2021, CEQ started a phased process to revise the NEPA regulations. In April 2022, CEQ issued its Phase I Rule, 87 Fed. Reg. 23,453 (April 20, 2022), which restored the 1978 regulations’ provisions on the purpose and need statement, defined “effects of the action,” and restored agency discretion to adopt procedures beyond those contained in the CEQ regulations.
On June 3, 2023, the Fiscal Responsibility Act of 2023, Pub. L. No. 118-5, 137 Stat. 10 (June 3, 2023), was signed into law, resulting in some of the most significant substantive amendments to NEPA since it took effect in 1970. The statutory amendments, which focus on streamlining NEPA and narrowing the scope of environmental review for projects involving federal approval or funding, are consistent with agency practice, existing NEPA regulations, CEQ guidance documents, and case law interpreting NEPA. The Final Rule expands upon the NEPA amendments’ revised definition of “major Federal action” triggering NEPA review as an action subject to “substantial” federal control and responsibility, and authorizes agencies to jointly adopt categorical exclusions.
The Final Phase 2 Rule
The Final Rule makes extensive changes to the NEPA regulations. Many of the changes are designed to modernize the regulations and provide additional clarity for applicants and agencies conducting NEPA review. Other changes restore provisions of the 1978 regulations. However, there are several significant changes that go beyond the 1978 regulations or the 2020 regulations, which are discussed below.
CEQ has provided a redlined version of its Final Rule which highlights the extensive nature of its proposed revisions.
1. Role of NEPA
Despite NEPA’s procedural nature, the Final Rule emphasizes that NEPA contains “action-forcing” procedural provisions to ensure federal agencies implement the letter and spirit of the Act. The Final Rule further explains that “[t]he purpose of the regulations in this subchapter is to set forth what Federal agencies must and should do to comply with the procedures and achieve the goals of the Act.” The regulations emphasize that agencies should implement actions and their statutory mandates consistent with the restated goals of NEPA to the maximum extent possible. The Final Rule requires agencies to identify an “environmentally preferable alternative” in the environmental impact statement (“EIS”) for each action. This means that the action agency will select and identify an environmentally preferable alternative in the draft environmental impact statement. The Final Rule describes the environmentally preferable alternative as the alternative that
will best promote the national environmental policy expressed in section 101 of NEPA by maximizing environmental benefits, such as addressing climate change-related effects or disproportionate and adverse effects on communities with environmental justice concerns; protecting, preserving, or enhancing historic, cultural, Tribal, and natural resources, including rights of Tribal Nations that have been reserved through treaties, statutes, or Executive Orders; or causing the least damage to the biological and physical environment. The environmentally preferable alternative may be the proposed action, the no action alternative, or a reasonable alternative.
In many cases identifying the environmentally preferable alternative will require subjective judgment and balancing competing factors. However, the Final Rule does not require an agency to select the environmentally preferable alternative as the final selected alternative. Since NEPA remains a procedural statute that informs, but does not dictate, agency decision making, it is unclear what effect this provision will have on future NEPA analyses.
2. Climate Change
Agencies have, to varying degrees, considered the effects of climate change when conducting NEPA reviews in the past. The Final Rule specifically requires agencies to consider an action’s potential effects on climate change and consider the effects of climate change on the action. The Final Rule adds climate change to “effects” that must be considered, specifically “climate change-related effects, including, where feasible, quantification of greenhouse gas emissions, from the proposed action and alternatives and the effects of climate change on the proposed action and alternatives.” Additionally, the Final Rule emphasizes that instead of discussing climate change generally, agencies should incorporate forward-looking climate projections to assess both the effects of the action and the environmental baseline.
3. Environmental Justice
The Final Rule requires agencies to specifically analyze disproportionate and adverse health and environmental health effects on communities with environmental justice concerns. The Final Rule defines “environmental justice” as:
[T]he 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.
The Final Rule defines “communities with environmental justice concerns,” as “those communities that may not experience environmental justice as defined [in] this section. To assist in identifying communities with environmental justice concerns, agencies may use available screening tools, such as the Climate and Economic Justice Screening Tool and the EJScreen Tool, as appropriate to their activities and programs. Agencies also may develop procedures for the identification of such communities in their agency NEPA procedures.”
The Final Rule also encourages agencies to adopt mitigation measures that specifically address impacts to communities with environmental justice concerns.
4. Significance – Context and Intensity
CEQ describes the threshold question of whether NEPA applies based on whether the effects of the action are significant. The Final Rule requires agencies to consider the context of the action and intensity of the effects of the action. With respect to context, the Final Rule states that agencies should analyze the significance of an action in context, including global, national, regional, and local. With respect to intensity, CEQ indicates that agencies should consider the duration of effects of the action. The Final Rule includes a list of considerations for use in determining intensity, such as the degree to which the action may adversely affect public health, cultural resources, tribal rights, or wetlands, among others.
5. Categorical Exclusions
Categorical Exclusions (“CE”) allow agencies to designate certain categories of activities as not requiring an environmental assessment or EIS. The Final Rule accords agencies flexibility in establishing a CE and allows agencies to develop CEs outside of the normal NEPA process, such as through a land use plan or programmatic EIS. Additionally, the Final Rule allows agencies to establish CEs with other agencies jointly. This revision has the potential to be particularly helpful in complex federal permitting processes with multiple federal agencies.
6. Public Participation
As part of the modernization of the regulations, the Final Rule includes multiple provisions requiring agencies to publish NEPA documents and supporting materials on their websites, requires the agencies to establish tracking numbers for environmental assessments and EISs, and is more specific with respect to meaningful engagement with potentially affected and interested parties.
7. Innovative Approaches
CEQ had originally proposed to add provisions allowing agencies to use, following CEQ review, innovative approaches to NEPA review. The Proposed Rule did not establish procedures for innovative approaches but envisioned that these approaches would be used to address extreme environmental challenges, such as sea level rise, increased wildfire risk, water scarcity, and species loss, among others.
Following public comment on the Proposed Rule, CEQ removed the provisions for agencies to use innovative approaches. Instead, CEQ stated that the additional flexibility created by the final rule, coupled with an agency’s own NEPA procedures, would be sufficient to allow agencies to address extreme environmental challenges.
8. Effective Date
The Final Rule took effect upon publication in the Federal Register and will apply to any NEPA process begun after July 1, 2024. However, the Final Rule also vests agencies with discretion to apply the new regulations to ongoing activities and NEPA reviews.
Conclusion
Although the Final Rule aims to increase meaningful NEPA review and efficiency, it remains to be seen whether those goals will be achieved. These changes to the NEPA regulations will almost certainly result in more legal challenges to both the regulations and the projects analyzed under those regulations. It may be some time before we understand the full effect of the Final Rule.
