Debt Ceiling Legislation Includes First NEPA Reform in Over 50 Years

On June 3, 2023, President Biden signed a legislative package, formally known as the Fiscal Responsibility Act of 2023, that raises the nation’s debt ceiling, narrowly avoiding a default on the federal government payment obligations as of June 5. Importantly, the negotiated package includes reforms to the National Environmental Policy Act (“NEPA”) that are intended to expedite the process for obtaining federal approvals. While the reforms are far less ambitious than the permitting reforms originally proposed by the House, they still modify a statute that has not been modified since its enactment in 1970. 

Background

NEPA directs Federal agencies to “use all practicable means and measures . . . to create and maintain conditions under which man and nature can exist in productive harmony, and fulfill the social, economic, and other requirements of present and future generations of Americans.” 42 U.S.C. 4331(a). In pursuit of that directive, NEPA requires Federal agencies to prepare an environmental impact statement for “major Federal actions significantly affecting the quality of the human environment.” 42 U.S.C. 4332(2)(C). NEPA also established the Council on Environmental Quality (“CEQ”) in the Executive Office of the President, which oversees Federal agency implementation of NEPA.

In 1977, CEQ was directed by Executive Order 11991 to issue regulations that govern implementation of NEPA and require that Federal agencies comply with those regulations. In 1978, CEQ promulgated implementing regulations and Federal agencies, in turn, issued their own implementing procedures to supplement the CEQ regulations and integrate the NEPA process into the agencies' specific programs and processes. Until 2020, the CEQ regulations remained largely unchanged. In 2020, CEQ issued a final rule substantially revising its NEPA implementing regulations (“CEQ 2020 Rule”) and agencies were required to propose their own regulations to implement the new Rule. 

In January 2021, CEQ engaged in a comprehensive review of the CEQ 2020 Rule pursuant to Executive Order 13990 “to ensure that they provide for sound and efficient environmental review of Federal actions, including those actions integral to tackling the climate crisis, in a manner that enables meaningful public participation, advances environmental justice, respects Tribal sovereignty, protects our Nation’s resources, and promotes better environmental and community outcomes.” 87 Fed. Reg. at 23,455. In its regulatory agenda, CEQ announced a phased approach to reviewing and modifying its NEPA regulations. On April 20, 2022, CEQ issued the Phase 1 Final Rule, which finalized a narrow set of changes to the CEQ 2020 Rule. Separately, CEQ is developing a Phase 2 rulemaking to propose comprehensive revisions to the CEQ 2020 Rule. 

Summary of NEPA Reforms 

As described in more detail below, many of the reforms are consistent with and similar to the CEQ 2020 Rule, some of which have already been modified by the Biden Administration’s ongoing process to review and revise the CEQ 2020 Rule. As such, while these are new statutory changes, they have been largely seen in recent CEQ regulatory changes but not implemented by all Federal agencies.¹

Most notably, the Fiscal Responsibility Act of 2023 makes the following NEPA reforms: 

• Revises the Scope of the NEPA Mandate – Prior to this legislation, NEPA included a generalized requirement that federal agencies consider the environmental impacts of a proposed action and alternatives to that proposed action. The legislation narrows this NEPA mandate by only requiring that Federal agencies consider the “reasonably foreseeable” environmental impacts and a “reasonable range” of alternatives that are “technically and economically feasible.” These legislative changes are similar to, but don’t go as far as, the causation standard that was included in the CEQ 2020 Rule. In the CEQ 2020 Rule, CEQ clarified that “effects” must be “reasonably foreseeable and have a reasonably close causal relationship to the proposed action or alternatives.” This definition of “effects” was largely reverted to its original meaning in the April 2022 regulatory change. The House was originally pushing for the NEPA mandate to closely parallel the CEQ 2020 Rule by requiring an agency to only consider environmental impacts that have “reasonably foreseeable environmental effects with a reasonably close causal relationship to the proposed agency action.” However, the legislative changes were ultimately limited to “reasonably foreseeable” environmental impacts.
• Imposes Time and Page Limits and an Enforcement Mechanism – It mandates that agencies complete Environmental Impact Statements (“EIS”) within two years of a determination that a proposal would have major environmental impacts requiring a full EIS and imposing page limits on EISs of 150 pages (300 pages for EISs involving issues of “extraordinary complexity”). For Environmental Assessments (“EAs”), it imposes limits of one year and a page limit of 75 pages. These page limits do not include appendices or attachments, which are known to be rather lengthy and may become longer with the imposition of the page limits. This reform codifies into NEPA the time and page limits included in the CEQ 2020 Rule. See 85 Fed. Reg. 43,304, 43,326 (July 16, 2020); 40 CFR 1501.10. Agencies, such as the U.S. Department of the Interior, have imposed similar, if not more stringent, time and page limits via Secretarial Orders and internal guidance documents. For example, in Secretarial Order 3355, Secretary Bernhardt imposed one-year time limits for EISs and a 150-page limit, unless unusually complex. Historically, imposing such time limits have been difficult to enforce. To add some teeth to the time limits, the legislation allows applicants to petition a court for failure of any agency to meet applicable deadlines. If the court finds that an agency failed to act, the court must set a deadline for the agency to act within 90 days unless a longer timeline is determined to be necessary.
• Allows Applicants to Prepare the EIS or EA – The legislation authorizes a lead agency to prescribe procedures to allow an applicant or its contractor to prepare an EIS or EA under the supervision of the agency. The lead agency is required to independently evaluate the EIS or EA and take ultimate responsibility for the contents. This reform is also consistent with the CEQ 2020 Rule, which provided applicants and contractors with more flexibility to prepare NEPA documents, subject to a disclosure statement specifying any financial interest in the action. See 85 Fed. Reg. at 43,323, 43,371 (July 16, 2020); 40 CFR 1501.5, 1506.5. Due to the resource and time intensive nature of environmental reviews, these reforms may provide useful means to expedite the review process.
• Revises the Threshold Determination – The legislation enumerates threshold determinations to help federal agencies identify when preparation of an environmental document is not necessary. They include actions where (1) the effort is not a final agency action; (2) the effort is excluded under the agency’s or certain other agencies’ categorical exclusions; (3) the preparation of the document would conflict with requirements of another provision of law; or (4) the effort is a nondiscretionary action under which an agency does not have authority to consider environmental factors when implementing the proposed action. These additions overlap and supplement the NEPA threshold determinations included in the CEQ 2020 Rule. See 85 Fed. Reg. at 43,321; 40 CFR 1501.1. Such threshold determinations were deemed necessary by CEQ to recognize that the application of NEPA by Congress and the courts has evolved over the last four decades in light of numerous other statutory requirements implemented by Federal agencies.
• Allows Agencies to Adopt Categorical Exclusions of Other Agencies – The legislation allows agencies to adopt a categorical exclusion listed in other agencies’ NEPA procedures. CEQ has developed a comprehensive list of the Federal agencies’ categorical exclusions. Historically, each agency would establish a class of actions that do not individually or cumulatively have a significant effect on the human environment and for which, therefore, neither an environmental assessment nor an environmental impact statement is normally required. CEQ would review each agency’s list of categorical exclusions, and the agencies were limited to the use of their approved categorical exclusions. This legislation expanded the use of categorical exclusions to allow agencies to adopt other agencies’ categorical exclusions as long as they follow the enumerated process (i.e., identify, consult with other agency, disclose to public, document).
• Clarifies Designation and Role of a Lead Agency – Consistent with the One Federal Decision Policy and the CEQ 2020 Rule, the legislation requires that if more than one federal agency is involved in a project, the agencies must use certain criteria to pick a lead agency and produce one environmental document, if possible. The criteria include (1) the magnitude of involvement; (2) project approval or disapproval authority; (3) expertise regarding the project’s environmental effects; (4) duration of involvement; and (5) sequence of involvement. The lead agency shall, among other things, supervise the preparation of the environmental review and document; coordinate and consider analysis from cooperating agencies; and develop a reasonable schedule. If the agencies cannot determine a lead agency within a set timeframe, the legislation tasks CEQ with overseeing a process to determine a lead agency. The roles of lead and cooperating agencies were created in the 1978 CEQ regulations, but they have been continually refined and redefined with the CEQ 2020 Rule, policy decisions, and now this new legislation.

Next Steps 

As the agency in charge of implementing NEPA, CEQ will issue guidance and/or a formal rulemaking to instruct Federal agencies on how the NEPA changes shall be implemented. Undoubtedly, this new legislation will require that CEQ adjust its phased approach to reviewing and revising the 2020 CEQ Rule to now ensure that its NEPA regulations are consistent with the new NEPA reforms. As we have seen in the past, Federal agencies will then likely be tasked with proposing their own regulations to implement the updated CEQ regulations. As we saw with the CEQ 2020 Rule, any new NEPA rules will likely generate controversy and spur numerous lawsuits that seek to invalidate the new rules.  

Potential Implications for Project Development 

While some of the legislative reforms will provide much needed clarity, others will create additional ambiguities. Considering the new NEPA reforms and the need for CEQ and Federal agencies to update their NEPA regulations, there may be substantial near-term uncertainty related to how agencies conduct a NEPA review for ongoing and upcoming projects. As CEQ and Federal agencies’ approaches to NEPA reviews continue to evolve with the changing statutory and regulatory landscape, applicants should take proactive steps to ensure a thorough NEPA analysis that is likely to withstand legal scrutiny. Applicants should take proactive steps to ensure that the NEPA analysis for their projects comply with the new NEPA reforms and sufficiently identifies and analyzes the ongoing hot button issues, such as climate change and environmental justice issues. Applicants should also prepare for the likelihood that new CEQ or Federal agency regulations could include more prescriptive requirements that are consistent with but go beyond the new NEPA reforms. 

¹ For example, on April 16, 2021, Secretary Haaland issued a Secretarial Order directing the U.S. Department of the Interior to not apply CEQ’s 2020 NEPA regulations “in a manner that would change the application or level of NEPA that would have been applied to a proposed action before the 2020 Rule went into effect on September 14, 2020.” Secretarial Order 3399 (April 16, 2021).