6 minute read | January.20.2026
In an action widely anticipated by the regulated community, on January 6, 2026, the Council on Environmental Quality (CEQ) published in the Federal Register a rule (Final Rule) adopting, without changes, the interim final rule (IFR) previously published on February 2, 2025, that rescinded all CEQ regulations implementing the National Environmental Policy Act (NEPA).
The Final Rule marks the culmination of the most significant year of developments since NEPA—often dubbed the “Magna Carta” of environmental law—was enacted during the Nixon administration in 1970. Reflecting a growing consensus on the need to streamline regulatory review of energy, infrastructure, and other key projects, permitting-reform advocates scored a “hat trick” in 2025: all three branches of the U.S. government took action to limit environmental reviews under NEPA. While the details of NEPA reform will play out on an agency-by-agency and case-by-case basis in the upcoming months and years, it is increasingly clear that NEPA reviews will be more circumscribed and streamlined, and that federal courts will defer to agencies’ NEPA determinations. That said, NEPA reform is an incomplete solution to the issue of making project development more predictable and streamlined. Indeed, a growing state and local backlash to energy and infrastructure projects, including data centers, is creating a new wave of challenges and uncertainty for sponsors.
The Final Rule comes on the heels of an unprecedented year of NEPA reform involving all three branches of the federal government.
On January 20, 2025, President Trump signed Executive Order (E.O.) 14154, Unleashing American Energy, which directed CEQ to propose rescinding its NEPA regulations. CEQ quickly acted, issuing the IFR rescinding all CEQ NEPA regulations on February 25, 2025.
On September 29, 2025, CEQ issued guidance for federal agencies on implementing NEPA (CEQ NEPA Guidance). The guidance directs federal agencies to revise their NEPA implementing procedures (or establish such procedures if they do not yet have any) to expedite permitting approvals and ensure consistency with NEPA, including the review deadlines established in NEPA.
The CEQ NEPA Guidance highlighted, as support for measures to promote streamlined and efficient NEPA review, recent changes in federal law and the U.S. Supreme Court’s decision in Seven County Infrastructure Coalition v. Eagle County, Colorado (issued May 29, 2025).
The CEQ NEPA Guidance notes that the Seven County decision underscores NEPA’s procedural nature, advocating for “substantial deference” to reasonable agency decisions and limiting the scope of judicial review. The guidance highlights, among other things, that Seven County provides that, “when determining the scope of its action that is subject to NEPA review, agencies must consider the proposed action at hand and that action’s effects. As the Court recognized, an agency is not required by NEPA to analyze environmental effects from other projects separate in time, or separate in place, or that fall outside of the agency’s regulatory authority, or that would have to be initiated by a third party.”
Recent legislative changes enacted by Congress, including certain provisions in the One Big Beautiful Bill Act (OBBB Act), signed into law on July 4, 2025, refined NEPA requirements and emphasized efficient environmental reviews, for example by establishing optional sponsor-paid opt-in fees for shorter review timeframes. The OBBB Act built upon legislative changes enacted by Congress in 2023 that established deadlines and page limits for Environmental Impact Statements and Environmental Assessments.
The CEQ NEPA Guidance lays out a road map for federal agencies, setting the stage for a generational change in NEPA review. With the CEQ NEPA regulations rescinded, individual federal agency rules, guidance and policies—informed by the CEQ NEPA Guidance—will establish the parameters for NEPA review. The overall result will likely be NEPA review that is more streamlined, efficient and circumscribed—and that will receive significant judicial deference from federal courts. However, each agency must establish its own NEPA procedures, and the timeline for doing so remains unclear and could be delayed by factors including limited agency staffing, resources or litigation. In the meantime, agencies and project sponsors must navigate NEPA review under an evolving and uncertain framework of law and regulation, requiring a case-by-case assessment of the proper scope of NEPA review.
While for now, permitting-reform advocates appear to have won the battle over NEPA reform, other permitting and project development obligations remain hotly contested. As project sponsors are keenly aware, federal, state and local environmental laws and regulations besides NEPA can present permitting challenges. At the federal level, developers must navigate the Endangered Species Act and the National Historic Preservation Act, among other laws. Furthermore, a wide range of state and local environmental and land use laws impose permitting obligations. Notably, certain state and local groups and individuals have become increasingly opposed to energy and infrastructure projects, including data centers. According to a report by Data Center Watch, a research organization that tracks grassroots data center opposition, $64 billion of data center projects have been blocked or delayed.
Project sponsors and those who rely on them, including hyperscalers leasing data center capacity, should closely monitor these developments in federal and state legislatures, regulatory agencies and courts.