National Environmental Policy Act – Phase II Notice of Proposed Rulemaking Summary and Takeaways

Background

The Council on Environmental Quality (CEQ) recently released a notice of proposed rulemaking (NOPR) for Phase II of the National Environmental Policy Act (NEPA) rulemaking process, titled the “Bipartisan Permitting Reform Implementation Rule” (the “NEPA Phase II NOPR”).¹ The proposed rule deletes the current regulation’s focus on NEPA as a procedural statute and instead emphasizes the Act’s “action forcing” devices to consider the environmental effects of federal decision-making, to even include global effects as they relate to climate change. If finalized, the proposal also would broaden NEPA’s focus on environmental justice while limiting some aspects of NEPA review to align with NEPA updates authorized in the Fiscal Responsibility Act and BUILDER Act of 2023 (FRA).²

NEPA sets forth requirements for federal agencies to evaluate the environmental impacts of their decisions and to prepare an environmental impact statement when their decisions constitute a “major Federal action significantly affecting the quality of the human environment.” Upon taking office in January 2021, President Biden set forth an intention to reverse certain Trump-era modifications to the regulations implementing NEPA that took effect in June 2020. NEPA Phase I was completed in Spring 2022, which made three modifications to the Trump-era rules. Phase II was delayed until CEQ could incorporate the FRA directives.

Among the FRA reforms to NEPA are:

• A narrowing of the definition of the term “major Federal action.”
• A narrowing of the scope of agency review.
• Allowing project sponsors (rather than agencies) to prepare environmental impact statements (EIS).
• Setting new deadlines and page limits for EISs and environmental assessments (EAs), and granting project sponsors the option to challenge agency delays through judicial review.

Federal agencies are now accountable to a two-year deadline for an EIS review and one-year for an EA review with the intention to speed up the historically long and burdensome process. Similarly, the FRA set in place a 150 or 300-page limit on EISs, and a 75-page limit on EAs. The legislation also authorizes agencies to adopt a categorical exclusion (CE) established by another agency to enable some types of projects to forgo a detailed environmental review. Applicants for federal permits subject to NEPA review also can now challenge an agency’s NEPA delays through court proceedings, in which a court can set a 90-day timeline for an agency to set a practical agency review deadline. The court can extend the review time if it determines there are additional procedural requirements and consultations under other statutes (e.g., Endangered Species Act, National Historic Preservation Act).

Phase II Notice of Proposed Rulemaking

Climate Change and Environmental Justice

CEQ is signaling its intent to codify climate change and environmental justice considerations into NEPA procedures previously found only in guidance documents and executive orders. The proposed regulation would incorporate climate change and environmental justice into the definition of “effects” to include “climate change-related effects, including the contribution of a proposed action and its alternatives to climate change, and the reasonably foreseeable effects of climate change on the proposed action and its alternatives,” and “disproportionate and adverse effects on communities with environmental justice concerns, whether direct, indirect, or cumulative.” This would formalize requirements that executive agencies in the Biden administration have been socializing stakeholders to over the past several years.

The proposed rule states that agencies should consider climate change effects in environmental reviews as well as perform an alternative analysis to identify and assess alternatives that address disproportionate adverse health and environmental effects. For example, an agency’s cumulative effects assessments would need to discuss the reasonably foreseeable climate change-related effects and consider conflicts between the project’s stated goals and the objectives of local, tribal, state and other stakeholder’s climate change-related policies.

Agencies are directed to use the best available science to describe reasonably foreseeable environmental trends including those due to climate change, and an EIS would need to include discussion of relevant risk reduction, resiliency or adaptation measures, as well as the potential for disparate adverse health effects. Additionally, the review process would require consideration of the needs of affected communities when developing outreach strategies and identify a Chief Public Engagement Officer to facilitate community engagement.

Beneficial Effects

Only acts that have significant adverse effects would be subject to the NEPA Phase II NOPR’s requirements to prepare an EIS. A federal action would not require an EIS if it had only positive benefits and no significant negative ones. CEQ offers two examples to demonstrate how to analyze “beneficial effects.” In the first instance, a renewable energy project may result in both short-term increases in greenhouse gas (GHG) emissions during construction and long-term decreases in GHG emissions. In this situation, the agency may reasonably conclude that the proposed action would not have a significantly negative impact on the climate, therefore not mandating the preparation of an EIS.

The second example describes a project to restore a forest that may have both short-term negative effects on a species by driving them away from the area during project implementation, as well as long-term positive effects by lowering the likelihood that a severe wildfire will destroy the habitat completely. The agency would take into account both effects when determining whether the action has a major impact on the species. If it did not, the agency might conclude that an EIS is not necessary since the overall effects on the species would not be significantly adverse.

Significance Determination – Context and Intensity

CEQ seeks to restore and update the methodology agencies employ when considering the “context” and “intensity” as part of the significance determination. However, CEQ does not propose to restore the 1978 version of this definition; instead it proposes to “use the word ‘significant’ only to modify the term ‘effects.’…where ‘significant’ modifies a word other than ‘effects,’ CEQ proposes to replace ‘significant’ with another accurate adjective, typically ‘important’ or ‘substantial’.” The agency noted that public comments in the Phase I rulemaking raised concerns that the use of the word “significant” in phrases such as “significant issues” or “significant actions” created confusion on what the word “significant” actually means.

The proposed rule would restore the standalone consideration of “context,” which the previous 2020 rule had narrowed to only the potential affected environment. The restored definition would include proximity to unique or sensitive resources or vulnerable communities. Agencies additionally would need to analyze the significance of an action through multiple lenses, including potential global, national, regional and local contexts, as well as the duration of an action’s short- and long-term effects.

Lastly, where the 2020 rule removed several “intensity” factors that agencies could examine, the proposed rule would reinstate a list of long-standing factors agencies have used to inform the significance determination.

Categorical Exclusions

The proposed rule lays out additional mechanisms agencies may use to establish CEs. This is an effort to promote wider adoption of programmatic environmental reviews and expedite broad categories of projects. Agencies could establish joint CEs through a shared substantiation document and listing the joint CEs. They could establish new exclusions through a land use plan, decisions supported by a programmatic environmental review or other equivalent programmatic and planning decisions. CEQ suggests agencies will more quickly develop categorical exclusions for specific contexts, geographies or project types.

Innovative Approaches

CEQ would include a new regulation requesting federal agencies to pursue new approaches to NEPA compliance to address “extreme environmental challenges” caused by to climate change, with CEQ’s approval. The Proposed Rule discusses examples of extreme environmental challenges including sea level rise, increased wildfire risk, infrastructure risk after natural disasters, water scarcity and quality, air quality, species loss, environmental justice community concerns, loss of historic, cultural or tribal resources, and impaired ecosystem health.

CEQ describes the process through which an agency would ask for permission to adopt an “innovative” strategy for NEPA compliance and states that it would assess any request within 60 days. CEQ requests feedback from the public on whether these provisions are necessary and how they might be implemented in practice while providing the general examples of the following potential innovative approaches: new ways to use information technology; cooperative agreements or work with local communities; methods that more fully incorporate “Indigenous Knowledge”; new ways to work with project proponents and communities to advance proposals; and innovative tools for engaging the public and providing.

Next Steps

CEQ will hold four virtual public meetings for the proposed rule on August 26 and 30 and September 11 and 21. CEQ is also accepting public comments on the new rule through September 29, 2023.

We expect the comments to the NEPA Phase II NOPR to be extensive, particularly with respect to whether the proposed regulations adhere to the spirit of either or both the original NEPA text and the revisions set forth in the FRA. Specifically, the codification of environmental justice principles and focus on climate change effects likely will result in vigorous debate amongst commenters and public meeting participants. In addition, while Congress sought a more expansive use of CEs in the FRA to streamline NEPA reviews, the pending NOPR adds additional rules around their creation that could undermine their effects. Moreover, while the proposed rules adhere to the page limits enacted by Congress, CEQ did not place a limit to appendix lengths, which could allow the agency to considerably extend past the page limit. Another possible tension between the NOPR and the FRA text concerns activities that Congress explicitly excluded from the definition of “major federal action,” to include federal agency activities or decisions with effects located entirely outside the jurisdiction of the United States. The NEPA Phase II NOPR removes references to “of Americans” when defining “Human Environment” or “Environment,” which could require agencies to consider the impacts of their actions outside of the United States, particularly considering the emphasis placed in the rule on impacts from greenhouse gas emissions to climate change.

Developers with ongoing projects subject to NEPA review should take special care to review the proposed regulations. To the extent they are finalized, CEQ is reserving the right to apply any newly finalized regulations to pending applications.

For more information, please reach out to your Akin contact directly. Akin has prepared redline documents comparing the NEPA Phase II NOPR text with the prior 1978 regulations and the current 2020 regulations. Both are available upon request.

^{1 National Environmental Policy Act Implementing Regulations Revisions Phase 2, 88 Fed. Reg. 49924 (Jul. 31, 2023).}

^{2 A Look at the Permitting Provisions in the Fiscal Responsibility Act | Akin Gump Strauss Hauer & Feld LLP.}