The reform mainly focuses on streamlining and narrowing the scope of environmental review at the federal level.

On June 3, 2023, President Biden signed legislation implementing the bipartisan debt ceiling and budget agreement as the “Fiscal Responsibility Act of 2023.” As part of this legislation, Congress agreed to several federal permitting reform measures, focused largely on amendments to the National Environmental Policy Act (NEPA).

NEPA requires federal agencies to consider the potential environmental impacts of discretionary major federal actions (e.g., including issuing permits and granting federal funding) before they are taken. As part of this analysis, agencies must evaluate alternatives to the proposed action and consider mitigation measures, and must provide an opportunity for public input. The scope and detail of NEPA review can affect the contours, timing, and ultimate outcome of federal decision-making and is frequently litigated by project opponents. The new amendments to NEPA in the Fiscal Responsibility Act draw substantially from other proposed legislation and regulatory amendments in recent years. These new provisions are designed to narrow the scope of federal actions that are subject to NEPA, consolidate NEPA review under a single “lead” agency, and impose time and page limits for environmental documents under NEPA, among other changes described below.

Long-Awaited NEPA Reform

Legislators and policymakers in recent years have focused on updating NEPA and streamlining environmental review at the federal level. The Trump Administration’s “One Federal Decision” Executive Order in 2017 particularly was designed to limit the duration and scope of NEPA review. Since then, various pieces of legislation on NEPA reform have been introduced, including the “Building United States Infrastructure through Limited Delays and Efficient Reviews Act of 2023” (the BUILDER Act), which formed the primary basis for the NEPA reform section of the new Fiscal Responsibility Act. Other recent proposals for permitting reform included the “Building American Energy Security Act of 2023” and the “Promoting Efficient and Engaged Reviews Act.” While the details in these proposals differ, they are all based on the recognition that an overly complex federal environmental review regime delays building critically needed infrastructure, including clean energy projects such as those funded by the Bipartisan Infrastructure Law and the Inflation Reduction Act.

The New BUILDER Act

As enacted, Section 321 of the Fiscal Responsibility Act includes a modified version of the BUILDER Act. Key provisions include:

• Defining “Major Federal Action.”NEPA environmental review obligations are triggered by a discretionary “major Federal action.” When initially enacted, NEPA did not define “major Federal action.” Rather the White House Council on Environmental Quality (CEQ) defined the term through NEPA’s implementing regulations. The current CEQ regulations define “major Federal action” to include “projects and programs entirely or partly financed, assisted, conducted, regulated, or approved by Federal agencies; new or revised agency rules, regulations, plans, policies, or procedures; and legislative proposals.”[1] The new BUILDER Act for the first time adds a statutory definition of “major Federal action” which only includes actions “that the agency carrying out such action determines is subject to substantial Federal control and responsibility.”[2] The “substantial” modifier is new in the BUILDER Act, compared to the current regulatory definition of “major Federal action,” and likely will further limit actions subject to NEPA. Additionally, the BUILDER Act definition expressly gives the federal action agency the authority to determine which actions are “subject to substantial Federal control and responsibility” and thus what are “major Federal actions” for that agency.
• The BUILDER Act also codifies regulatory exclusions adopted in 2020 during the Trump Administration, further narrowing the types of agency actions or decisions constituting a “major Federal action” subject to NEPA review. The BUILDER Act largely borrows from the list of exclusions from “major Federal action” that were adopted in the 2020 CEQ regulatory amendments, with a few changes that could further narrow the scope of federal actions subject to NEPA. The list of activities now statutorily excluded from “major Federal action” is broad and includes loans, loan guarantees, or other forms of financial assistance in which a federal agency does not exercise sufficient control and responsibility over the subsequent use of such financial assistance or the effect of the action, actions with no or minimal federal funding or minimal federal involvement in which the agency cannot control the outcome of the project, extraterritorial activities or decisions with effects located entirely outside the jurisdiction of the United States, and activities or decisions that are non-discretionary and made in accordance with the agency’s statutory authority.[3]
• Determining Level of Review. The BUILDER Act adds a new section to NEPA on the level of review necessary for a project. The new statutory subsection on “Threshold Determinations,” which largely codifies the 2020 CEQ regulatory amendments addressing these topics, explains that an agency is not required to prepare an environmental document under NEPA for a proposed agency action if it is (1) not a “final agency action,” (2) the action is excluded pursuant to one of the agency’s categorical exclusions or, as explained below, another agency’s categorical exclusions, (3) the preparation of such document would conflict with the requirements of another provision of law, or (4) the proposed action is “nondiscretionary.”[4] The new subsection on “Levels of Review” also provides instruction for when a more detailed environmental impact statement (EIS) or less detailed environmental assessment (EA) is required. An EIS is required when the proposed action “has a reasonably foreseeable significant effect on the quality of the human environment.” An EA is required when the action “does not have foreseeable significant effect on the quality of the human environment, or if the significance of such effect is unknown” unless the action is subject to a categorical exclusion.[5] Under existing regulations promulgated during the Trump Administration, the term “reasonably foreseeable” means “sufficiently likely to occur such that a person of ordinary prudence would take it into account in reaching a decision.”[6] The BUILDER Act clarifies that when an agency is deciding whether to prepare an EIS or EA, new scientific or technical research is not required unless such research “is essential to a reasoned choice among alternatives” and “the overall costs and time frame of obtaining it are not unreasonable.”
• Defining “Categorical Exclusion” and Using Another Agency’s Categorical Exclusions. For the first time the BUILDER Act adds a statutory definition of the term “categorical exclusion” (previously only defined in the CEQ regulations) to mean “a category of actions that a Federal agency has determined normally does not significantly affect the quality of the human environment.”[7] The BUILDER Act also authorizes agencies to adopt, with relatively minimal process, a categorical exclusion that has been listed in a different agency’s NEPA procedures, simply after consultation with that agency and notice to the public.[8] Given the range and volume of categorical exclusions available at the federal agencies, this change may significantly broaden the application and use of categorical exclusions by federal agencies and eliminate the need for either an EA or an EIS.
• Consolidated Review. The BUILDER Act includes a mechanism to consolidate the NEPA review for projects requiring multiple agency approvals under a single lead federal agency. This mechanism includes a process for the federal agency, in its discretion, to appoint state, tribal, or local agencies as “joint lead agencies”.[9] When disputes arise over which agency should be appointed lead or joint lead agency, the BUILDER Act also allows interested parties to request that CEQ designate these agencies.[10] Under the consolidated review of a lead or joint lead agencies, the BUILDER Act requires, “to the extent practicable,” that the environmental review for a multi-agency project be conducted via a single environmental document.[11]
• Page Limits. Under the BUILDER Act, an EIS must not exceed 150 pages, unless the underlying action is of “extraordinary complexity,” in which case it must not exceed 300 pages. EAs must not exceed 75 pages.[12] These page limits do not include appendices. This provision codifies these existing requirements from the 2020 CEQ regulatory amendments.
• Deadline for Review. The BUILDER Act requires that lead agencies set schedules and complete an EIS within two years and EAs within one year. This timer begins to run when the agency determines that an EIS or EA is required, issues a notice of intent to prepare the EIS or EA, or notifies the applicant that an application to establish a right-of-way is complete (as applicable) — whichever comes first. If the agencies do not meet this deadline, the project proponent can petition a court to impose a deadline on the agency (this court petition process is new under the BUILDER Act).[13] Lead agencies are also required to submit annual reports to Congress identifying instances in which these deadlines were not met.
• Use of Programmatic Environmental Documents. The BUILDER Act endorses the use of programmatic environmental documents, explaining that agencies can rely on these documents to cover subsequent review of related actions. If the related action occurs within five years, then additional review is not necessary unless there are substantial new circumstances or information about the significance of adverse effects that bear on the analysis. Outside of five years, the programmatic document may still be relied on, so long as the agency reevaluates the analysis in the programmatic environmental document and any underlying assumption to ensure reliance on the analysis remains valid.[14]
• NEPA Portal. The BUILDER Act requires CEQ to study and report to Congress on the potential for creating an online, unified permitting portal that would allow project developers to submit required documents, collaborate with federal agencies, and track project progress, with the goal of streamlining NEPA review.[15]

Other Measures

Apart from the BUILDER Act, the Fiscal Responsibility Act includes a handful of other permitting-related measures. For example, the legislation clarifies that energy storage projects may qualify for the coordination, streamlining, and litigation provisions in President Obama’s Fixing America’s Surface Transportation Act’s permit streamlining legislation. The Fiscal Responsibility Act also creates an expedited approval process for a proposed natural gas pipeline connecting West Virginia and Virginia.

What’s Missing?

The Fiscal Responsibility Act notably does not include any statutory changes directly addressing permitting for clean energy transmission lines (outside of the more general NEPA permitting reforms described under the BUILDER Act above). Some stakeholders had hoped that the Fiscal Responsibility Act would include provisions from proposed bills, such as the “Building Integrated Grids With Inter-Regional Energy Supply Act,” focused on expanding the country’s energy transmission grid to connect renewable energy sources and end-users across state lines. Instead, the Fiscal Responsibility Act Section 322 directs the North American Electric Reliability Corporation to conduct a study covering the current total transfer capability between each pair of neighboring transmission planning regions, and make recommendations to add transfer capability between each pair of neighboring transmission planning regions. Although more concrete measures are not included in the Fiscal Responsibility Act, we expect that the development of new transmission infrastructure will remain a key focus for federal lawmakers in the coming months.

What’s Next?

President Biden signed the Fiscal Responsibility Act, including the BUILDER Act, into law on June 3, 2023. CEQ is currently in the midst of phased rulemaking to revise its NEPA implementing regulations. Phase 2 of this rulemaking has been under review by the Office of Management and Budget since January 30, 2023, and will need to undergo further revisions as a result of the NEPA statutory amendments described above, before CEQ releases this proposed rule for public comment.

Latham & Watkins will continue to monitor developments in this area.

Endnotes

[1] 40 CFR § 1508.1(q)(2).

[2] Fiscal Responsibility Act of 2023, Pub. L. No. 118-5, Sec. 322, BUILDER Act, Sec. 111(10) (emphasis added).

[3] Id. at Sec. 111(10)(B).

[4] Id. at Sec. 106(a).

[5] Id. at Sec. 106(b).

[6] 40 CFR § 1508.1(aa).

[7] BUILDER Act, Sec. 111(1).

[8] Id. at Sec. 109.

[9] Id. at Sec. 107(a).

[10] Id. at Sec. 107(a)(5).

[11] Id. at Sec. 107(b).

[12] Id. at Sec. 107(e).

[13] Id. at Sec. 107(g).

[14] Id. at Sec. 108.

[15] Id. at Sec. 110.