New NEPA Regulations Introduce Climate and Justice Considerations, Offer Flexibility, and Impact Project Timelines

The Council on Environmental Quality (CEQ) published Phase II of its reforms to the regulations implementing the National Environmental Policy Act (NEPA) on May 1, 2024. This action follows CEQ’s publication of Phase I reforms in April 2022, which along with Phase II, modifies the NEPA regulations implemented under then-President Trump in 2020. Prior to the changes under Presidents Trump and Biden, the NEPA regulations had remained largely unchanged since 1978. While the Phase I modifications were fairly narrow, primarily focused on restoring the definition of “effects” necessitating Federal agency consideration to include both “indirect” and “cumulative effects,” the Phase II changes are far broader. The Phase II changes respond to NEPA amendments enacted in the Fiscal Responsibility Act and BUILDER Act of 2023 (FRA), which were intended to introduce efficiency reforms into the NEPA process. The changes also mark the first time that NEPA regulations directly require Federal agencies to consider climate change and environmental justice community impacts in their decision-making processes and adds new processes to consider Tribal impacts and communities, such as incorporating “Indigenous Knowledge” into Federal decisions. Collectively, these changes codify directives previously incorporated only in guidance documents and Executive Orders that could be rescinded upon a change in presidential administrations.

The new regulations apply to any NEPA process that begins after July 1, 2024. Federal agencies implementing NEPA will have up to an additional twelve months to revise their agency specific-NEPA regulations. The regulatory changes are important to energy and other infrastructure project developers that require a permit from a Federal agency to construct or operate their project, as well as to recipients of Federal financial assistance, including grants and loans as these authorizations often trigger NEPA review.

Background

Signed into law in 1969, 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.”¹  Although envisioned as a disclosure statute that necessitates Federal government consideration of the environmental impacts of Federal projects and permit authorizations, the statute’s provisions for public participation have resulted in reams of NEPA-driven litigation that has curtailed, delayed and even canceled projects. In an effort to reduce “red tape” and expedite infrastructure projects, the Trump administration issued regulations in 2020 intended to narrow the scope of what was constituted a “Major Federal action” subject to NEPA review, limit the types of “effects” that would be subject to agency consideration, and reduce the time period agencies could spend on NEPA processes.

Upon taking office in 2021, President Biden directed CEQ to review and revise the 2020 regulations consistent with Executive Orders 13990, Protecting Public Health and the Environment and Restoring Science to Tackle Climate Change and 14008, Tacking the Climate Crisis at Home and Abroad with a view towards incorporating climate change, environmental justice impacts and Tribal sovereignty considerations into the NEPA process. In the interim, passage of the FRA required CEQ to maintain some of the Trump-era NEPA regulatory reforms, such as narrowing the definition of “major Federal action” to exclude certain actions lacking federal control, limiting the amount of time spent to publish NEPA documents, limiting the length of NEPA documents and increasing an agency’s ability to use categorical exclusions. Hence, CEQ did not complete the Phase II regulatory review process until approximately two years after it finalized the more routine Phase I regulatory changes. Akin previously discussed these FRA reforms here and here.

Primary NEPA Regulatory Changes

With the finalization of the Phase II revisions, CEQ restores many aspects of the 1978 regulations, with adaptations that incorporate the FRA reforms and updates that are consistent with the Biden administration’s focus on mitigating the impact of Federal decision-making on climate change effects and disproportionate impacts on environmental justice communities.

FRA-Related Reforms

CEQ added additional language to the NEPA regulations to comply with specific FRA reforms related to the three types of NEPA disclosure documents: (1) Environmental Impact Statements (EIS), the classic NEPA document that details the significant environmental effects of agency decisions and the range of alternatives considered; (2) Environmental Assessments (EA), a more concise NEPA document that is permissible in lieu of preparation of an EIS for actions that are not likely to have a significant environmental impact; and (3) categorical exclusions (CE or CATEX), a category of actions that may be authorized by a Federal agency if it determines though its NEPA procedures to not have a significant effect on the human environment.

• CATEX reforms²—the regulations direct agencies to establish CATEXs for categories of actions that “normally do not have a significant effect on the human environment.” CATEXs are still permitted under extraordinary circumstances, if the agency conducts an analysis and determines that the proposed action does not in fact have the potential to result in significant effects, or the agency modifies the action to avoid the potential to result in significant effects and documents this analysis. CATEXs may be established either individually or jointly with other agencies, with agencies having substantial discretion to determine their own CATEXs. Once established, the CATEXs must be listed in the agency's NEPA procedures. CEQ directs agencies to reevaluate their CATEXs at least every 10 years and allows agencies to adopt and apply the CATEXs of another agency.
• Page limit reforms³—Agencies must limit the length of an EIS to 150 pages (or 300 pages for actions of “extraordinary complexity”) and EAs to 75 pages.
• Time period reforms⁴—Importantly, the regulations establish deadlines for completion of EISs and EAs. EISs must be completed within two years while EAs must be completed within one year, although the lead agency may extend the deadline in consultation with the applicant. CEQ also added guideposts for measuring these deadlines, which are to occur from earliest of three dates: (1) the date the lead agency determines an EA or EIS is required; (2) the date the lead agency notifies the applicant that its application to establish a right-of-way is complete; and (3) the date the lead agency issues a Notice of Intent to prepare an EIS.
• Programmatic EIS—CEQ revised and reorganized the regulations on programmatic EISs (documents that analyze all or some of the environmental effects of a policy, program, plan or group of related actions) to clarify when the process may be used, including adoption of the FRA's language limiting the additional review required for documents that tier off of the programmatic EIS within a five-year period.⁵
• Project-sponsor developed EAs and EISs—EAs and EISs no longer need to be prepared by a Federal agency, or a contractor of the agencies, but may be prepared by a project sponsor, with the caveat that a Federal agency remains “responsible” for the accuracy of the NEPA document's contents consistent with the FRA's reforms to NEPA sections 106(b)(2), 107(f) and 111(4).⁶  This reform enables project sponsors, who may be better able to prioritize environmental reviews to expedite the review process.

Further, the regulations continue many of the 2020 reforms on what constitutes a “major Federal action” necessitating NEPA review consistent with FRA changes. The responsible agency must determine that the action is subject to substantial Federal control and responsibility before commencing a NEPA process. In contrast, actions with no or minimal Federal funding or Federal involvement, or where the Federal agency cannot control the outcome of the project are not subject to NEPA review.⁷ CEQ adds some additional color as to what constitutes a major Federal action, i.e., “granting authorizations, including permits, licenses, rights-of-way, or other authorizations,” as well as adoption of official policies, plans and programs. However, the regulations essentially mirror the exclusions to “major Federal actions” in the FRA, rather than provide additional examples. While broader than the 1978 regulations, the exclusions are narrower than what was adopted in 2020. One exclusion for purposes of federal funding includes “loans, loan guarantees, or other forms of financial assistance where a Federal agency does not exercise sufficient control and responsibility over the subsequent use of such financial assistance or the effects of the action.”⁸

Climate Change and Environmental Justice Impacts

One of the more significant aspects of the regulations that have the potential to delay energy and other infrastructure projects is the direction to federal agencies “to the fullest extent possible,” to “identify and assess the reasonable alternatives to proposed actions that will avoid or minimize adverse effects” of their actions “on the quality of the human environment,” including “alternatives that will reduce climate change-related effects or address adverse health and environmental effects that disproportionately affect communities with environmental justice concerns.”⁹These somewhat amorphous obligations have the potential to create confusion and ambiguity regarding project impacts and appropriate mitigation. The focus on climate change and environmental justice communities permeates throughout the new regulations, including:

• As part of an EIS's alternatives analysis, the regulations expand upon what may be considered to be an “environmentally preferable alternative” that will best “promote the national environmental policy express in section 101 of NEPA,” to include “addressing climate change-related effects or disproportionate and adverse effects on communities with environmental justice concerns.”¹⁰
• In identifying the “environmental consequences” of an action as set forth in an EIS, to include, “where applicable, climate change-related effects, including, where feasible, quantification of greenhouse gas emissions, for the proposed action and alternatives and the effects of climate change on the proposed action and alternatives,”¹¹  as well as, “where applicable, disproportionate and adverse human health and environmental effects on communities with environmental justice concerns.”¹²
• Including “climate change-related effects” as part of “reasonably foreseeable effects” to be evaluated, using mathematical or other models, while disclosing relevant assumptions or limitations.¹³
• Clarifying that the definition of “effects” includes “climate change-related effects” and the “Reasonably foreseeable effects of climate change on the proposed action.”¹⁴
• Codifying definitions for “environmental justice” and “communities with environmental justice concerns” into the regulatory fabric of NEPA, and the need to protect environmental justice communities from hazards related to climate change, as well as “the cumulative impacts of environmental and other burdens, and the legacy of racism or other structural or systemic barriers.”¹⁵

Tribal Sovereignty and Participation

The NEPA Phase II regulations contemplate a much broader role for Tribes than found in either the 1978 or 2020 versions. Whereas Tribal considerations were primarily limited to impacts on Indian reservations, the new regulations require that agencies consider adverse impacts on “Tribal sacred sites,”¹⁶  which may not be located, and often are not located, on reservation lands. Indeed, the word “reservation” is no longer found within the NEPA regulations. Instead, the regulations reference “land held in trust or restricted status by the United States for the benefit of that Tribal Nation” when referring to “activities or decisions for projects approved by a Tribal Nation that occur on or involve” such land as being non-Major federal action.¹⁷  Because not explicitly limited to reservation lands, the new regulations fail to qualify when consultations with Tribal governments are necessary. For example, significance and alternatives determinations must analyze whether an action or alternative “may adversely affect rights of Tribal Nations that have been reserved through treaties, statutes, or Executive Orders.”¹⁸  This would presume a need for an agency to consult with the Tribe to understand whether its rights are adversely affected. In addition, Tribal affiliation is considered in the context of environmental justice.

In another nod to Tribal participation, the Phase II regulations reference “Indigenous Knowledge” as a form of “special expertise”¹⁹  that may be considered by the lead agency in the preparation of a NEPA document as a form of “high-quality information… to describe reasonably foreseeable environmental trends.”²⁰ CEQ does not define “Indigenous Knowledge,” but directs agencies to consider a December 2022 White House guidance document.

Possible New Complexities Created by the NEPA Phase II Regulations

The NEPA Phase II regulations reinsert several regulatory principles removed by the Trump Administration as vague or unclear. For example, the 2020 regulations removed references to EIS’s as “action-forcing” documents on grounds that NEPA is procedural and does not mandate particular results or substantive outcomes. The Phase II regulations restore that language and the concept that NEPA should result in agency’s making decisions that are more beneficial to the environment than would be made without NEPA processes. The regulations also renew the focus on ensuring projects do not have climate change or environmental justice impacts.

For large infrastructure projects, the emphasis on climate change impacts could result in agencies picking winners and losers depending on the carbon intensity of projects. For example, the no-action alternative to the Federal Energy Regulatory Commission certificating a natural gas pipeline under the Natural Gas Act could be seen as more preferable than the no-action alternative of constructing a high voltage transmission line to support renewable energy grid integration, even if both projects would sit in the same right-of-way and have the same geographic footprint.

The next step is for Federal departments or agencies to update their individual NEPA regulations. Proposed procedures must be published in the Federal Register by July 1, 2025, and agencies are required to consult with CEQ prior to doing so. The process ultimately will entail each department or agency independently issuing a notice of proposed rulemaking that will be subject to public comment. Departments or agencies likely will use the opportunity to refine their CATEXs, including adopting CATEXs of other agencies.

In the interim, the Phase II regulations likely are not going to be the last word on NEPA implementation. It is possible that legal challenges to the regulations will be filed on grounds that CEQ exceeded its authority, complicated further by potential changes to the Chevron deference standard previously applied to government rulemakings. Moreover, should there by a change in Presidential administrations in January 2025, we would expect some further changes to the NEPA regulations. Congress also has been discussing the potential for moving permitting reform legislation to enable energy projects to advance more quickly. The NEPA rollercoaster is not likely to end anytime soon regardless of who is in power with various constituencies advocating for an easier and more predictable process for developing and implement energy and other large-scale infrastructure projects.

^{1 40 C.F.R. §§ 1500.1(a).}

^{2 Id. §§ 1500.5(a), 1501.4, and 1507.3(c)(8).}

^{3 Id. § 1502.10.}

^{4 Id. § 1501.10 (b)(1) - (2).}

^{5 Id. § 1501.11 (c)(2).}

^{6 Id. § 1508.1(j)).}

^{7 Id. § 1508.1(q)(1)(vi).}

^{8 Id. § 1508.1(q)(1)(vii).}

^{9 Id. § 1500.2(e).}

^{10 Id. §§ 1502.12; 1502.14(f);1508.1(n).}

^{11 Id. § 1502.16(a)(6).}

^{12 Id. § 1502.16(a)(13).}

^{13 Id. § 1506.6(d).}

^{14 Id. § 1508.1(i)(4).}

^{15 Id. § 1508.1(f) and (m).}

^{16 See e.g., id. § 1501.3(d)(2)(ii).}

^{17 Id. § 1508.1(w)(2)(viii).}

^{18 Id. §§ 1501.3(d)(2)(viii) and 1502.15(b)).} 

^{19 Id. § 1501.8(a).}

^{20 Id. § 1502.15(b).}