CEQ Proposes Comprehensive Changes to NEPA Regulations

The National Environmental Policy Act, 42 USC § 4321 et seq. (NEPA), celebrated its 50th birthday and, days later, on January 9, 2020, the Council on Environmental Quality (CEQ) proposed comprehensive changes to its implementing regulations. Some of these changes should be welcome updates and improvements to the implementation of NEPA, while others arguably narrow the scope of environmental review for many projects and will likely be more controversial. This Advisory provides a review of 10 key proposed changes.

The desire to streamline NEPA has, to some extent, been bipartisan. The Obama Administration also tried to simplify and "fast track" the NEPA process, for example, by encouraging simultaneous federal agency approvals rather than seriatim approvals. The Trump Administration's regulatory overhaul has some of these same aims, but goes further.

As discussed in August 2017 and February 2018 Advisories and a January 2018 article, the Trump Administration has been particularly focused on expediting NEPA and other permitting processes to facilitate infrastructure development.¹ Indeed, during his January 9 White House press conference, President Trump commented that "most critical infrastructure projects have been tied up and bogged down by an outrageously slow and burdensome federal approval process."

If finalized, the President's proposed changes would cover all major federal actions, from approving mining projects on federal lands or waters to granting permits or financial assistance for major renewable energy and transportation projects. CEQ is proposing revisions to almost every section of the regulations, including each of the key definitions that determine when NEPA applies and the scope of review. The proposed changes are intended to "facilitate more efficient, effective, and timely NEPA review" by simplifying its requirements and codifying case law, CEQ guidance and current agency practice. Here's what you need to know:

Top Ten List of Changes

Revise the Definition of Major Federal Action. CEQ proposes to revise the definition of "major federal action," which triggers NEPA's requirements. In a significant change, CEQ proposes to depart from longstanding precedent by giving the terms "major" and "significant" independent meaning. Under this revision, a federal project that is not "major" is not subject to NEPA review, even if the project has "significant" environmental impacts. By contrast, in a move that CEQ claims largely codifies case law, CEQ also proposes to find that "major federal actions" do not include "non-discretionary decisions" or federal projects with minimal Federal funding involvement, or control and responsibility. This provision also clarifies the meaning of "control and responsibility" and its applicability to financial assistance programs.

Refine the Range of Reasonable Alternatives. The current regulations provide little direction on determining the reasonableness of alternatives, so the courts have filled in the gaps. Again, here, CEQ's proposed revisions arguably codify relevant case law. CEQ proposes to no longer require agencies to consider alternatives that are outside their jurisdiction or not "technically or economically feasible." CEQ also proposes that, where applicable, the alternatives must meet the goals of the applicant.

Restrict the Scope of Effects. Perhaps most far-reaching are CEQ's proposed revamping of the definition of "effects." Currently, the CEQ regulations require agencies to consider three types of effects—direct, indirect and cumulative. CEQ is proposing to remove the terms "direct" and "indirect," though the concepts arguably remain.

In addition, CEQ is proposing a significant change by no longer requiring consideration of cumulative effects. Accordingly, some have speculated that this will mean the end of climate change and greenhouse gas (GHG) analysis in NEPA. However, beyond the deletion of cumulative effects, CEQ claims that the new definition codifies the Supreme Court's holdings in Department of Transportation v. Public Citizen² and Metropolitan Edison Co. v. People Against Nuclear Energy.³ It also arguably leaves intact the holding in Sierra Club v. FERC,⁴ in which the DC Circuit held that NEPA, in some circumstances, requires an agency to review downstream GHGs as "indirect" effects.⁵ Under the newly proposed definition:

• Effects include those that are "reasonably foreseeable," have a "reasonably close causal relationship to the proposed action or alternatives."
• Effects include those that "occur at the same time and place" (i.e., "direct effects," as currently defined) and "are later in time or farther removed in distance" (i.e., "indirect effects," as currently defined).
• Effects do not include those that the agency has no authority to prevent.

These changes to the definition of effects may significantly narrow the scope of NEPA reviews, if promulgated.

Encourage Joint EISs and Environmental Assessments (EAs). Multiple administrations have pushed for more coordinated federal analyses to shorten the NEPA process, in order to "fast track" certain projects. CEQ proposes to adopt and build on the "One Federal Decision" framework by requiring agencies to prepare joint EISs/Records of Decision (RODs) and EAs/Findings of No Significant Impact (FONSIs). To date, the "One Federal Decision" framework has focused on EISs/RODs, so applying this framework to EAs/FONSIs will be new territory.

Establish Presumptive Time Limits for EAs and EISs. CEQ proposes that EAs and EISs should be completed in one year and two years, respectively, unless the time limit is modified by a senior agency official. The senior agency official may consider a number of factors when extending the time limits, including, for example, the potential for environmental harm, the degree of public need for the proposed action, and the availability of relevant information. Though the time limits are ambitious, the proposed changes also include a number of provisions that will assist agencies in meeting them, including:

• Giving agencies the flexibility to initiate the NEPA process only once they have sufficient information about the proposal;
• Allowing agencies to begin scoping before issuance of the Notice of Intent (NOI), which starts of the two-year clock for EISs;
• Requiring adherence to schedules developed by lead agencies; and
• Allowing an agency to publish a notice when it pauses an EIS or withdraws an NOI. Though not specified in the proposed regulations, this may allow agencies to suspend (at least temporarily) the presumptive time limits.

Again, many observers would agree that the NEPA process takes too long. While the proposed time limits are aggressive, it is still the case that an agency must conduct a careful and thorough analysis. If an agency cuts corners in order to complete such an analysis in two years, it risks having a court send it back to the drawing board, exacerbating delay.

Expand the Use of Categorical Exclusions. The Government Accountability Office estimated in an April 2014 Report that 95% of NEPA reviews rely on a Categorial Exclusion (CE), which is a category of actions that an agency determines normally does not have a significant effect on the human environment. CEQ proposes a number of changes that could significantly expand that practice. CEQ proposes to allow mitigation when applying a CE to a proposed action, such that even where "extraordinary circumstances" are present (e.g., effects to federally-listed threatened and endangered species), agencies would be allowed to consider "mitigating circumstances" to bring the action under a CE. CEQ also proposes to allow agencies to adopt other agencies' CE determinations and apply a CE category from another agency's NEPA procedures.

Increase Flexibility for Applicants. Currently, both agencies and applicants are restricted from taking actions that will have an adverse environmental impact or limit the choice of reasonable alternatives. CEQ proposes to exempt applicants from this restriction and allow them, for example, to acquire interests in land while the NEPA process is underway. Though this change would allow applicants to more quickly implement projects following agency approvals, it would also create opportunities for risk and conflict—as demonstrated in recent natural gas pipeline disputes where applicants have attempted to exercise eminent domain under Section 7 of the Natural Gas Act before states have issued permits (e.g., Constitution Pipeline and PennEast Pipeline).

Narrow Commenting. CEQ proposes to find that comments that are not specific and timely will be deemed "unexhausted and forfeited." CEQ also proposes revisions intended to help commenters quickly review NEPA documents (e.g., requiring summaries of alternatives and analyses). However, the pressure to achieve the presumptive time limits will likely drive agencies to shorten public comment periods.

Establish Conclusive Regulatory Presumptions. CEQ proposes a number of changes intended to address the delays resulting from frequent litigation. Of note is the proposal to establish a conclusive presumption that the agency has considered information submitted by the public upon certification by the lead agency decisionmaker.

Require Revision of Agency NEPA Procedures. CEQ proposes to make the CEQ Regulations a ceiling rather than a floor as they relate to agency NEPA procedures. Agencies currently have the flexibility to add procedures to the process established in the CEQ NEPA regulations by, for example, requiring enhanced public involvement. CEQ proposes to restrict agencies from imposing "additional procedures or requirements beyond those set forth in the CEQ regulations" unless they are otherwise required by law or facilitate efficiency. These changes will have to be made within a year of when CEQ finalizes its regulations.

Invitations for Comments

In addition to the proposed changes, CEQ invites comments on a number of controversial issues including, but not limited to, whether to:

• address the "small handle problem" by establishing per se categories of primarily private or non-federal actions that do not qualify as major federal actions;
• establish government-wide categorical exclusion categories;
• establish a presumptive maximum number of alternatives; and
• codify some or all of CEQ's proposed GHG guidance in the regulation.⁶

Next Steps

CEQ announced that it will be will be accepting comments for 60 days—until March 10, 2020. Upon close of the comment period, CEQ must review, consider, and respond to the comments. CEQ may then finalize the rule. However, given the significant number of comments on the June 2018 advance notice of proposed rulemaking (more than 12,500) and the likelihood that CEQ will receive even more comments on the proposed regulations, it may be difficult to achieve this goal before the upcoming election. If a new administration is elected in November, controversial provisions of the proposed rules will likely be reversed, either by withdrawing the proposal if it isn't finalized or by initiating another rulemaking.

Once the rule is finalized, it is highly likely that environmental groups and other interested parties will attempt to challenge the rule in the courts. There are a number of questions about the viability of these claims, including but not limited to:

• Standing. Will any parties have standing to challenge the regulations, or will litigants have to await application of the regulations—either to a specific project or to the finalization of an individual agency's procedures.
• Grounds. Given NEPA's broad and open-ended statutory language, arguments that the CEQ has exceeded the scope of its authority under NEPA may be difficult. On the other hand, challengers will argue that many of these changes are incompatible with judicial precedents construing NEPA. Challengers will likely also focus on the relevant factual record to argue that the agency was arbitrary and capricious in its revision of the rule.

If you have questions or concerns about these and other proposed changes to the CEQ regulations, please contact a member of Arnold & Porter's experienced Infrastructure, Environmental Review and Permitting team.

© Arnold & Porter Kaye Scholer LLP 2020 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.