The Council on Environmental Quality (CEQ), a division of the Executive Office of the President, today promulgated by publication in the Federal Register significant changes to its regulations implementing the National Environmental Policy Act (NEPA).

As noted in our January 13, 2020 alert, this comprehensive revision of the CEQ NEPA regulations springs from a 2017 Executive Order that directed CEQ to “enhance and modernize the Federal environmental review and authorization process” by simplifying and accelerating the NEPA review process. The final rule is intended to address identified deficiencies in the NEPA process, which “continues to slow or prevent the development of important infrastructure and other projects that require Federal permits or approvals.” Examples from this month alone include a district court order to shut down the Dakota Access Pipeline due to allegedly insufficient environment review, and the United States Supreme Court’s affirmation of a district court order that halted construction on the Keystone Pipeline, also due to alleged NEPA compliance deficiencies.

Today’s final rule significantly reduces the scope of and timeline for federal environmental review, and makes the following key changes:

• New provisions to assist federal agencies in determining whether NEPA applies. CEQ adopted a series of considerations to assist agencies in making the threshold determination of whether NEPA applies to a proposed activity. The new “NEPA thresholds” section reflects judicial determinations that NEPA is inapplicable when an agency’s statutory obligations clearly or fundamentally conflict with NEPA compliance; when Congress has established requirements under another statute that displace NEPA compliance in some fashion; when an agency is carrying out a non-discretionary duty or obligation (in whole or in part); or when environmental review and public participation procedures under another statute satisfy the requirements (i.e., are the functional equivalent) of NEPA.

• New provisions to assist federal agencies in determining the appropriate level of environmental review. CEQ’s regulations provide for three levels of NEPA review -- categorical exclusions (CEs), environmental assessments (EAs), and environmental impact statements (EISs) -- but the prior rule did not clearly set out the decisional framework by which agencies should assess projects and select the appropriate level of review. The final rule adds a new section, “Determine the appropriate level of NEPA review,” which describes the basis upon which an agency makes such a determination.

• Presumptive time limits of two years for the preparation of EISs and one year for the preparation of EAs.According to CEQ’s final rule Regulatory Impact Analysis, the average time for federal agencies to complete an EIS is four and one-half years. A two-year presumptive time limit, measured from the date of the issuance of the notice of intent to the date a record of decision is signed, would bring the majority of EISs within the timeline achieved by only a quarter of EISs prepared over the last decade, according to CEQ’s report on EIS Timelines.

• A new definition of “reasonable alternatives.” The final rule directs agencies to consider “a reasonable range of alternatives” and clarifies that alternatives must be technically and economically feasible. So too must a reasonable alternative meet the applicant’s goals, as stated in its project purpose and need.

• Reduction in the scope of the “affected environment.” In determining the baseline affected environment, previously termed the project “context,” the final rule focuses on predictable environmental trends and planned actions in the area, and clarifies that discussion of the affected environment should not be speculative, in an effort to narrow the scope of what agencies should consider in assessing whether the effects of a proposed project are significant.

• Elimination of consideration of controversy in assessing potential significant effects. Finding that “the controversial nature of a project is not relevant to assessing its significance,” and recognizing that courts have interpreted controversy to mean scientific controversy and not merely public opposition, the final rule removes from agency consideration the controversy of a project in determining the appropriate level of environmental review. Under the prior rule, the degree to which a project’s effects on the environment are likely to be highly controversial was considered as one of 10 factors under the “intensity” prong used to assess the degree of significance of a project’s impact. The final rule recognizes only a few factors formerly categorized under the “intensity” prong, which is now referred to as the final rule as the “degree of the effects of the action” to clarify that some effects may not be of an intense nature but nonetheless should be considered when determining significance.

• Elimination of cumulative impact analyses. The final rule requires agencies to consider environmental effects that are reasonably foreseeable and have a reasonably close causal relationship to the proposed project, but removes the definition of “cumulative impact” and revises the definition of “effects.” Under the prior rule, agencies were required to consider direct, indirect, and cumulative effects, resulting in frequent litigation as to the reasonable foreseeability and relation to the proposed project of these effects. The final rule eliminates these references as well as the definition of cumulative impact to focus agencies on analysis of effects that are reasonably foreseeable and have a reasonably close causal relationship to the proposed project. It includes a new provision that states that the analysis of effects is bound by the definition of effects, and that cumulative impact, defined in 40 C.F.R. § 1508.7, is repealed. The final rule does not include additional direction specific to indirect effects. It does, however, clarify that a “but for” causal relationship is insufficient and that “effects that occur” at the “same time and place as the proposed action or alternatives,” or that “are later in time or farther removed in distance” must nevertheless be reasonably foreseeable and have a reasonably close causal relationship to the proposed project or alternatives.

• Punting consideration of GHGs and climate change.Despite inviting comment on the effect that elimination of cumulative impact analyses will have on NEPA review of a proposed project’s greenhouse gas (GHG) and climate change impacts, the summary section of the final rule makes only passing reference to climate change and does not address CEQ’s existing draft GHG guidance. CEQ explains that the rule “does not preclude consideration of the impacts of a proposed action on any particular aspect of the human environment,” but that, where climate change is analyzed, “agencies will consider predictable trends in the area in the baseline analysis of the affected environment.” Thus, it appears that agency consideration of climate change would be in the context of a baseline analysis of the consequences of climate change, rather than as an effect of the project.

The effective date of the new rule is September 14, 2020. However, this is a major rule subject to congressional review, elevating the stakes in the November election given Congress’s power to terminate the rule altogether. In any event, we expect these sweeping changes to NEPA, which garnered more than 1.1 million public comments from a broad range of stakeholders, to be subject to lengthy court battles.