On July 16, 2020, the Council on Environmental Quality (CEQ) published its highly anticipated final rule to improve its National Environmental Policy Act (NEPA) regulations.  The update, which largely mirrors the proposed rule, is the first comprehensive amendment to the regulations since their original publication in 1978.  The final rule is designed to streamline the NEPA review process, clarify important NEPA concepts, and codify key guidance and case law. CEQ’s final rule is informed by comments it received on both last year’s Advanced Notice of Proposed Rulemaking and proposed rule.  CEQ received over 1 million comments on the proposed rule, including approximately 2,400 unique substantive comments.

NEPA requires that federal agencies analyze the environmental effects of their proposed federal actions. This means that virtually any project that requires a federal permit or authorization could be required to undergo a NEPA review.  Development of broadband infrastructure, roads, bridges, oil and gas pipelines, and renewable energy facilities are just a few examples of the types of activities that could trigger NEPA.  A NEPA review can take significant agency and applicant resources, can substantially delay permits and can provide a basis for a federal court challenge to the project.  Indeed, NEPA is the most litigated environmental statute in the United States.

While federal agencies—like the Bureau of Land Management, US Department of Energy, and US Army Corps of Engineers—have their own NEPA rules, CEQ’s regulations govern NEPA compliance by all federal agencies.  Once the final rule is in effect, agencies will be required to develop or revise their NEPA implementation procedures to align with CEQ’s new regulations within one year of the final rule’s publication.  Notably, the final rule gives agencies discretion to apply the new regulations to ongoing activities and environmental reviews commenced prior to that date.

The following are some of the key provisions of the final rule, with some changes from the proposal noted:

• Amends the Definition of “Effects”: As proposed, the final rule eliminates references to “direct,” “indirect,” and “cumulative” effects in order to focus agency consideration on whether a proposed action causes an effect, as opposed to the type of effect.

  • Causation Standard – As proposed, the final rule amends the definition to clarify that “effects” must be “reasonably foreseeable and have a reasonably close causal relationship to the proposed action or alternatives.” The text of the final rule (to be codified at 40 C.F.R. § 1508.1(g)) states that “but for” causation alone is insufficient and the preamble of the rule analogizes the standard to proximate cause in tort law.  Effects “should generally not be considered if they remote in time, geographically remote, or the result of a lengthy casual chain.”  Nor should they include effects that the agency has no ability to prevent or that would occur regardless of the proposed action.

  • “Indirect” and “Cumulative” Effects – Similar to the proposal, the final rule eliminates the requirement that agencies conduct a separate analysis of indirect or cumulative effects and directs agencies to analyze only effects that are reasonably foreseeable and have a “close causal relationship” to the proposed action. In addition, the preamble notes that cumulative effects can also be discussed as part of the “affected environment” (i.e., environmental baseline) discussion.  The new rule’s provision on “affected environment” (to be codified at 40 C.F.R. § 1502.15) directs agencies to describe the environment of the area(s) to be affected, “including the reasonably foreseeable environmental trends and planned actions in the area(s).”

  • Climate Change Impacts – Throughout the development of this rule, much attention has focused on how the rule’s clarification of “effects” will impact federal agencies’ consideration of climate change-related impacts of proposed actions. Instead of explicitly directing how agencies should or should not consider a proposed action’s greenhouse gas emissions, the preamble states that the rule does not preclude consideration of climate change impacts and that the analysis of the impacts on climate change will depend on the specific circumstances of the proposed action.  The preamble also directs agencies to consider “predictable trends in the area in the baseline analysis of the affected environment,” provided such analysis is not purely speculative.

• Clarifies When NEPA Applies:

  • NEPA Thresholds: The final rule includes a “NEPA threshold” section (to be codified at 40 C.F.R. § 1501.1) with several factors for agencies to consider when determining whether NEPA applies to a proposed action, including whether: (1) another statute expressly exempts a proposed activity or decision from NEPA (this consideration was not in the proposed rule); (2) compliance with NEPA would clearly and fundamentally conflict with the requirements of another statute; (3) compliance with NEPA would be inconsistent with Congressional intent expressed in another statute; (4) the proposed action is a major federal action; (5) the agency has discretion to consider environmental effects; and (6) environmental review or analysis under another statute is functionally equivalent to relevant NEPA requirements .

  • Major Federal Action: The final rule also clarifies in its definition of “major Federal action” (to be codified at 40 C.F.R. § 1508.1(q)(1)(ii)) does not include non-discretionary decisions and non-Federal projects (including those with minimal Federal funding or involvement), such that the agency “does not exercise sufficient control and responsibility over the outcome of the project.” This clarification is aimed to address the “small handle” problem that can arise when the federal action is only a small piece of a non-federal project.

• Clarifies Level of NEPA Review: The final rule clarifies the basis upon which an agency selects the appropriate level of NEPA review—e.categorical exclusion, environmental assessment (EA), or environmental impact statement (EIS)—and modifies how agencies consider the “significance” of the effect of a proposed action on the quality of the human environment. The final provision (to be codified at 40 C.F.R. § 1501.3(b)) replaces the enumerated factors with a more flexible approach, based on the setting of the proposed action, and directs agencies to consider the affected area specific to the action.   As with the proposed rule, the final rule excludes consideration of “controversy” from the significance determination because “the extent to which effects may be controversial is subjective and is not dispositive of effects’ significance.”

• Expands Use of Categorical Exclusions: The final rule facilitates increased use of categorical exclusions by allowing agencies to adopt other agencies’ categorical exclusions. The final rule (to be codified at 40 C.F.R. § 1501.4) clarifies that extraordinary circumstances do not automatically preclude categorical exclusion.

• Refines the Scope of Alternative Analysis: As with the proposed rule, the final rule clarifies (to be codified at 40 C.F.R. § 1508.1(z)) that reasonable alternatives requiring consideration are only those that are technically and economically feasible, meet the purpose and need of the proposed action, and are within the jurisdiction of the agency. Unlike the proposal,  the final rule includes a provision (to be codified at 40 C.F.R. § 1502.14(f)) that clarifies that agencies shall limit their consideration to a reasonably number of alternatives

• Streamlines the Review Process: To final rule includes various modifications and improvements to streamline the NEPA review process, such as:

  • Presumptive Page and Time Limits – As with the proposed rule, the final rule presumptively limits EAs to 75 pages and EISs to either 150 or 300 pages, depending on scope and complexity and subject to extension by a senior agency official. To promote timely reviews, the final rule also establishes presumptive time limits of one year for EAs and two years for EISs.

  • One Federal Decision (OFD) Policy – As with the proposed rule, the final rule adopts elements of the OFD policy to improve interagency coordination of NEPA reviews. The final rule directs the lead agency in a multi-agency review to:  (1) prepare a joint schedule, (2) develop procedures to address delays or disputes, and (3) when practicable, prepare a single EIS or EA.

  • Reliance on Existing Studies, Analyses, and Information – The final rule encourages agencies to “tier” from existing federal, state, tribal, and local environmental analyses, studies, and decisions when doing so would facilitate the NEPA review. The final rule also directs Federal agencies to coordinate with State, Tribal, and local agencies to minimize duplication of review requirements.

  • Increased Applicant/Contractor Participation – Similar to the proposal, the final rule gives applicants and contractors more flexibility to prepare NEPA documents, including EAs, subject to a disclosure statement specifying any financial interest in the action. The rule still requires that agencies provide guidance, participate in document preparation, independently evaluate document contents, and take responsibility for assessment scope and accuracy.

• Provides Greater Flexibility for Public Involvement: In response to concerns from commenters that proposed comment time limits and provisions encouraging electronic communications could impede public access and input, the final rule allows agencies to tailor public involvement to more effectively reach interested parties and meet the specific circumstances of the proposed action. The final rule recommends that agencies invite comments on a broader range of topics than initially proposed, such as submitted alternatives, information, analysis generally, and the summary of the analysis.  The final rule also puts an emphasis on utilizing modern technology to enhance public involvement.

The rule will go into effect on September 14, 2020.  The new regulations will apply to all new NEPA analyses beginning after the effective date and they also provide agencies with discretion to apply the new regulations to ongoing NEPA processes.  As anticipated, the final rule has already generated substantial controversy and environmental groups have indicated that they plan to challenge the regulations.