D.C. Circuit Rules CEQ Lacks Authority to Issue NEPA Regulations

On November 12, 2024, the U.S. Court of Appeals for the District of Columbia (the “Court”) issued an opinion that may reshape how federal agencies implement environmental reviews under the National Environmental Policy Act (“NEPA”). The Court issued a 2-1 decision in Marin Audubon Society, et al., v. Federal Aviation Administration, et al. (the “Decision”), invalidating a plan jointly developed by the Federal Aviation Administration and the National Park Service (together, the “Agencies”) that regulated tourist flights over national parks due to failure to comply with NEPA and the National Parks Air Tour Management Act of 2000. 

While the Court ultimately held that the Agencies acted arbitrarily in analyzing the environmental impact of the Bay Area Parks Air Tour Management Plan (the “Plan”), the most notable aspect of the Decision was unrelated to any particular facts of the Plan. It was rather in the fact that the Court sua sponte chose to address the White House Council on Environmental Quality’s (“CEQ”) rulemaking authority and ultimately held that the CEQ – an entity within the Executive Office of the President that has overseen NEPA policy and implementation for over five decades – has no statutory authority under NEPA to promulgate binding regulations. Notably, as Chief Judge Srinivasan explained in his partial dissent, no party challenged the CEQ’s authority to issue binding NEPA regulations. The Court nevertheless determined that it has the independent power to “identify and apply the proper construction of governing law” and held that the question of CEQ’s authority is a separation of powers issue. See the Decision, at 9.

Background of the Case

In this case, petitioners challenged the Plan, which governed tourist flights over four national parks in the Bay Area of California, on the basis that the Agencies had not complied with the CEQ’s NEPA regulations. More specifically, the petitioners claimed that the Agencies had erroneously relied on a NEPA “categorical exclusion” in lieu of preparing a detailed statement assessing the Plan’s environmental impacts.

NEPA mandates that federal agencies prepare detailed assessments of the environmental impacts of major projects they undertake, fund, or permit, typically through Environmental Impact Statements (“EIS”) or Environmental Assessments (“EA”). The assessment customarily involves an analysis of the environmental impact of the proposed action, identification of any unavoidable adverse environmental effects, and consideration of potential alternatives. The regulations that outline the contents and structure of these detailed assessments are established by the CEQ, which form the basis for the NEPA regulations issued by other federal agencies, ensuring consistency across the federal government and streamlining the process.

For instance, under CEQ’s NEPA regulations, federal agencies can prepare an EA in lieu of an EIS if the proposed action is not likely to have significant environmental effects or the significance of the effects is unknown. An EA is a shorter alternative to the EIS through which the federal agency can determine if the action will have significant environmental impacts of a kind requiring an EIS or that it will have no significant impact, in which case no EIS would be required. Additionally, CEQ provides a “categorical exclusion” for certain proposed actions that normally do not have significant effects on the human environment, meaning that neither an EIS nor an EA are required.

The Agencies, when conducting their NEPA review, used the existing air tours as the baseline for assessing the Plan’s impact and concluded that the Plan’s effects were minimal enough, and ultimately beneficial to the environment as compared to current conditions in light of the prescribed mitigation measures. Therefore, the Agencies granted the Plan a “categorical exclusion” and thereby bypassed the need for an EIS or EA. However, the existing air tours the Agencies used as the baseline were conducted under interim operating authority, which meant that the Agencies never conducted a proper NEPA review for the baseline.

The Ruling

The Agencies’ decision to circumvent the NEPA assessment requirements by relying on an improper baseline of existing air tours was deemed arbitrary by all three judges, but the majority opinion, joined by Judge Henderson and Senior Judge Randolph, did not address whether the Plan should receive a “categorical exclusion” under CEQ’s NEPA regulations. In a surprising turn of events, the Court instead ruled that CEQ lacked authority to issue binding regulations implementing NEPA despite, as Chief Judge Srinivasan pointed out in his partial dissent, none of the parties having ever raised any challenges to CEQ’s NEPA regulations.

Indeed, CEQ was initially established by NEPA to “review and appraise” compliance with NEPA and to make recommendations to the Executive Office of the President on achieving NEPA’s goals. However, President Carter issued Executive Order 11991, 42 Fed. Reg. 26,967 (May 25, 1977), which was meant to empower CEQ to issue regulations rather than guidelines and required all federal agencies to comply with the regulations issued by CEQ unless doing so would violate federal law. 

But the Court stated that the President cannot grant rulemaking power through an executive order; rather, it requires some delegation of the requisite legislative authority by Congress. The Court found no language in NEPA or any other federal legislation that conferred rulemaking authority to CEQ. The Court also dismissed the idea that the CEQ’s NEPA regulations are a mere delegation of the President’s authority under the Take Care Clause, explaining that “[i]f all federal agencies are bound by the CEQ regulations and must follow them in carrying out their obligations under NEPA, and if the regulations are enforceable by courts, then those regulations cannot be justified solely as an exercise in a President’s oversight of his Administration.” See the Decision, at 18.

Lastly, despite previous assertions by the U.S. Supreme Court that CEQ’s NEPA regulations deserve substantial deference, the Court dismissed such assertions, noting that the regulations lacked any accompanying legal analysis and would not withstand the U.S. Supreme Court’s recent Loper Bright decision overturning Chevron deference.

Implications and Next Steps                   

Undoubtedly, the Decision will create significant uncertainty about the scope of federal agencies’ NEPA obligations as they assess the environmental impacts of proposed “major Federal actions” (as used in NEPA), such as those for infrastructure projects, onshore and offshore oil and gas, offshore wind, and onshore solar and wind. To the extent that the Fiscal Responsibility Act of 2023, signed into law by President Biden on June 3, 2023, adopted and codified principles from CEQ’s NEPA regulations, such requirements will still be binding and enforceable through NEPA itself. However, the timing of the Decision raises questions regarding the implementation of CEQ’s recent NEPA Phase 2 regulations, which went into effect on June 30, 2024 and codify substantial reforms, including that environmental effects include climate change-related effects, disproportionate and adverse effects on communities with environmental justice concerns, and effects on tribal resources. 

For at least the near term, the Decision will likely further slow the permitting process down and increase litigation risk. It remains to be seen how the federal agencies that rely on the CEQ’s NEPA regulations will react. Many federal agencies have issued their own NEPA regulations. The Decision poses the question, “If an agency adopts CEQ’s rules or incorporates them by reference into its NEPA regulations, would that be a permissible exercise of its own rulemaking authority?” See the Decision, at 20. Since the Agencies in question did not adopt the content of the CEQ’s NEPA regulations nor incorporate those rules by reference, the Decision leaves the question unanswered. Instead, the Decision focuses on the Agencies’ acceptance of the CEQ’s NEPA regulations as a stand-alone body of law that they must obey and the courts must enforce. This part of the Decision’s analysis and unanswered question will require federal agencies to review their own NEPA regulations to determine how they utilized the CEQ’s NEPA regulations and whether it may be considered a permissible exercise of rulemaking authority. 

If the Decision stands, some individual federal agencies might independently adopt regulations that align with those of CEQ, thereby keeping the current system. However, it is more likely that federal agencies will end up adopting a diverse range of NEPA practices as they decide how best to implement NEPA for specific actions. Without the CEQ’s NEPA regulations, developers will likely have to deal with different NEPA practices applied across the various federal agencies, which will be particularly problematic for multi-agency NEPA reviews.

Notably, the Decision also has implications far beyond NEPA. The Decision appears to only allow federal agencies to issue self-binding regulations governing their own procedures, and, thus, may limit the commissions that have been recently announced for the incoming administration, such as the Department of Government Efficiency, from issuing binding directives to federal agencies absent specific Congressional approval. 

It remains to be seen whether the parties file petitions for rehearing before the full Court or for certiorari to the U.S. Supreme Court. The three-judge panel was divided, with Chief Judge Srinivasan writing a strong partial dissent arguing that the Court overreached by addressing CEQ’s authority when no party had challenged it. A rehearing before the full Court could well reach a different conclusion.

With a similar NEPA case, Seven County Infrastructure Coalition v. Eagle County, Colorado, currently scheduled to be argued before the U.S. Supreme Court on December 10, 2024, it will be interesting to see whether the decision in that case addresses the issue regarding CEQ’s rulemaking authority. While the parties have not raised any challenges to CEQ’s NEPA regulations, questions regarding CEQ’s rulemaking authority have been raised as amici by Richard Epstein, James Coleman, and Mario Loyola.

Special thank you to Shun Iwamitsu, Law Clerk in the Energy & Infrastructure Group, for his assistance in preparing this alert.