CEQ’s Phase I NEPA Revisions: a Partial Rollback of 2020 Rules

On April 20, 2022, the Council on Environmental Quality (“CEQ”) published a final rule revising the primary regulations implementing the National Environmental Policy Act (“NEPA”). The final rule largely restored provisions that were effective prior to amendments adopted by the Trump Administration’s CEQ in 2020.[1] CEQ’s final rule, effective May 20, 2022, is directed toward three central issues under NEPA: (i) revising “purpose and need” requirements to clearly include factors beyond the needs of the applicant; (ii) returning CEQ’s regulations to a regulatory floor (not ceiling) to NEPA procedure; and (iii) reincluding indirect and cumulative effects within the required scope of consideration. The net effect of these changes is to reverse limitations and restrictions imposed on federal agencies by the Trump administration with respect to agency review of projects subject to NEPA. Notwithstanding this rollback, the rules also reemphasize the need for efficiency and timeliness in NEPA administration by federal agencies.

I. Background

NEPA is a federal statute, effective January 1, 1970, that requires federal agencies to review the environmental impacts of major federal actions and reach determinations on the significance of environmental impacts of such actions. The statute is procedural; it is intended to require agencies to take a “hard look” at the environmental impacts of agency decisions. A major federal action is one that could have a significant adverse impact upon the environment. For large infrastructure projects that are funded in part by federal funds, the NEPA review process can be time consuming and expensive. It also may give rise to lawsuits challenging projects on the basis that the relevant agency performed an inadequate environmental review. The CEQ is the primary agency responsible for administering NEPA, although each agency is required to adopt its own regulations for administering NEPA. CEQ’s regulations provide a framework intended to form the basis for other agencies’ regulatory process and are therefore important to the implementation of NEPA by other federal agencies.

II. CEQ 2022 Revisions:

The 2022 final rule addresses three key concepts in the CEQ’s regulations and the implementation of NEPA: defining the purpose of a need for the subject project; establishing CEQ’s regulations as a regulatory minimum; and including in the review cumulative and indirect effects of agency actions.

1. Broadening Purpose and Need

   • The 1978 NEPA regulations^[2] (40 CFR § 1502.13) required agencies to include a purpose and need section in each Environmental Impact Statement (“EIS”), which are issued for agency actions that may have a significant environmental impact. This section was required to identify a project and explain the benefits of a project within the context of environmental review.
   • The 2020 rule modified the purpose and need requirement by adding language to § 1502.13 requiring agencies to base the purpose and need statement on the agency’s authority and the goals of an applicant. The 2020 regulations also added a conforming definition to § 1508.1(z), defining “reasonable alternatives” to mean “a reasonable range of alternatives that are technically and economically feasible, meet the purpose and need for the proposed action, and, where applicable, meet the goals of the applicant.” The intent of these changes was to shift the focus to a review that accomplished the goals of the project sponsor, which had the effect of limiting the range of considerations that an agency would be required to review in performing its NEPA review. The revisions also limited the agency to consideration of issues that it could regulate or control, which excluded the review of some impacts that would be regulated by agencies other than the agency performing the NEPA review.
   • CEQ’s 2022 rule reverts § 1502.13 to the 1978 language, removing the requirement for agencies to base the purpose and need on the goals of the applicant and the agency’s authority. It also deletes the reference to the “goals of the applicant” from the definition of reasonable alternatives in § 1508.1(z). Under the revised regulations, agencies have the discretion to consider a variety of factors and environmental impacts and need not prioritize an applicant’s goals over other relevant environmental impact factors. CEQ’s view is that this change will promote environmentally sound decision-making by allowing considerations which best meet the stated goals of NEPA and the agency’s empowering statute. 87 FR 23459 (Apr. 20, 2022).

2. Regulatory Ceiling to Regulatory Floor

   • Under the 1978 NEPA regulations, CEQ’s regulations established a basic framework that other agencies’ NEPA procedures must meet. Other agencies could establish regulatory requirements above and beyond those mandated by the CEQ framework but could not adopt regulations less restrictive.
   • The 2020 rule reversed this hierarchy of regulations to establish CEQ’s regulations as the maximum allowable requirements for NEPA procedures, rather than the minimum that federal agencies were required to meet. This “ceiling provision” was implemented by providing that CEQ’s regulations override inconsistent agency-made NEPA procedures absent a fundamental statutory conflict. The 2020 regulations (§ 1507.3(a)) instructed agencies not to impose requirements beyond those imposed by the CEQ regulations and to eliminate any inconsistencies (§ 1507.3(b)) with CEQ regulations Thus, the 2020 regulations were evidently aimed at making NEPA regulations more consistent across federal agencies and requiring them to conform to the requirements set forth by CEQ
   • CEQ’s 2022 rule revises §§ 1507.3(a)-(b), removing the consistency requirement of § 1507.3(a), extending the deadline for agencies to revise their regulations pursuant to § 1507, such as to “adopt, as necessary, agency NEPA procedures to improve agency efficiency,” by two years. Furthermore, those agency revisions need no longer eliminate inconsistencies with CEQ regulations and may once again impose procedures beyond CEQ regulations. CEQ explains that this revision “allows agencies to exercise their discretion to develop and implement procedures beyond the CEQ regulatory requirements. ...” Nonetheless, “agency procedures cannot conflict with current CEQ regulations” effectively creating a regulatory floor on NEPA procedure.

3. Including Indirect and Cumulative Effects

   • The 1978 NEPA regulations defined environmental impacts in terms of three types of effects: (1) “direct effects” caused by and occurring at the same time and place as an action, (2) “indirect effects,” reasonably foreseeable effects caused by the action “later in time” or “farther removed in distance,” and (3) “cumulative impact[s]” which looked at the effect of an action “when added to other past, present and reasonably foreseeable future actions,” which could be “individually minor but collectively significant . . . over a period of time.” The definitions of these three categories have been the source of significant uncertainty and litigation because of the difficulty in drawing boundaries on the effects of any given project.
   • The 2020 rule removed cumulative impacts, made indirect effects optional, and increased the causation standard, all of which had the effect of reducing the scope of possible environmental impacts considered in agency NEPA reviews. The rule deleted the three 1978 definitions, defining “effects or impacts” singularly as changes that are “reasonably foreseeable and have a reasonably close causal relationship” to an agency decision. The 2020 regulations also excluded effects with mere “but for” causation and instructed agencies to generally not consider effects “remote in time, geographically remote, or the product of a lengthy causal chain” or those the agency “has no ability to prevent” in § 1508.1(g)(2). In the notice of the 2022 final rule CEQ highlights that the limited scope of the 2020 rule could result in omission of many climate effects, undercounting climate benefits of renewable projects and costs of fossil fuel combustion. See 87 FR 23467.
   • CEQ’s 2022 rule substantively restores the old definitions as subsections (1)-(3) of § 1508.1(g), renaming “cumulative impacts” as “cumulative effects.” It also revokes the 2020 rule’s guidance to not consider effects with mere “but for” causation and to generally exclude from consideration effects that are remote, the product of a lengthy causal chain, or that the agency has no ability to prevent. Note that the 2022 final rule retains the language defining all “effects or impacts” as “changes ... that are reasonably foreseeable,” thus retaining some limitation on the scope of eligible effects.

III. Possible Future Developments

The 2022 final rule generally restores much of the pre-2020 framework for NEPA review originally set forth in CEQ’s regulations. However, the 2022 final rule retained the retention of efficiency-promoting language in §1507.3(c) and definition of effects as “reasonably foreseeable” in § 1508.1(g), possibly reflecting CEQ’s “continuing goal” that the NEPA process could be “efficient and effective.” See 87 FR 23467. These changes will have more prospective than immediate impact given that the 2020 rule was immediately tied up in litigation and President Biden instructed CEQ to review the regulation mere months after it became effective. See 87 FR 2344-45.

CEQ described the 2022 final rule as “Phase 1” of a two-phase process. CEQ has indicated that Phase 2 will be geared specifically towards “achieving environmental justice and confronting climate change,”^[3] both of which are priorities for the Biden Administration and are likely to be politically contentious. CEQ has indicated that proposed regulations to implement Phase 2 are under active consideration and are likely to be published within the coming months.^[4]

Please reach out to Bob Lawrence, Matthew Neuringer or the rest of our team should you have questions regarding how these changes may impact existing and future projects that are subject to NEPA review.