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CEQ Announces NEPA Modernization

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Across the energy sector, the National Environmental Policy Act (NEPA) plays a critical role in project planning and development. Enacted for the salutary purpose of ensuring a “hard look” at environmental impacts before undertaking major federal actions, “NEPA law” today – including the NEPA regulations and the resulting body of case law – has developed into a complex web of reviews and processes, and has increasingly been used in creative ways to thwart energy projects nationwide. The outdated NEPA regulations and the often inconsistent NEPA policies and practices of the various federal agencies have afforded project opponents many avenues for seeking to block construction and operation of projects. Though agency approvals are entitled to some degree of deference, federal courts have routinely agreed with project opponents that missteps in the NEPA review have occurred, often for failure to adequately consider a project’s purpose and need, alternatives, connected actions, cumulative impacts, or other concerns. Courts frequently find environmental documents insufficient to satisfy NEPA – and instead require the agency to prepare a full-blown, time-consuming, and expensive Environmental Impact Statement. As just one example, this month, a federal court ordered the shutdown of a major pipeline (which had been operational for more than three years) on the basis of an agency’s purported failure to comply with NEPA. Similar scenarios are repeated with increasing frequency across the country, posing serious hurdles to the timely, cost-effective completion of transmission lines, pipelines, and other critical infrastructure.  

Where project approvals are vacated for failure to comply with NEPA (at no fault of the project sponsor), the economic impacts can be harsh: projects are delayed without end; financing may dry up; jobs are lost; and the nation’s infrastructure is weakened.

On July 15, 2020, the President announced that the Council on Environmental Quality (CEQ) has finalized a new set of regulations to modernize the NEPA process.  Key elements include clarification of important NEPA terms (such as “Major Federal Action” and “reasonably foreseeable”), expansion of “categorical exclusions” from NEPA review, as well as streamlining efforts to reduce red-tape and speed-up reviews, all of which should help improve the regulatory landscape for energy projects going forward.  Not surprisingly, many of the same entities challenging energy projects have already announced plans to file lawsuits challenging these reforms. By all accounts, those groups intend to fight hard to roll back the reforms. Wholly apart from that threatened litigation, however, perfection in the NEPA review process for particular projects will likely remain elusive (no agency is perfect), but the perfect should not be the enemy of the good. In the months and years ahead, to the extent perfection is not achieved for particular project reviews, one of the most important questions – for federal agencies and project sponsors – is whether courts are inclined to “remand” a project approval for further NEPA review, or whether courts tend toward “vacatur” of project approvals in those situations.  The future of energy infrastructure in the United States depends, at least in part, on the answer to this question.  The NEPA modernization rule seeks to aid in this cause as well by explaining that flaws in the NEPA process “create no presumption” in favor of “injunctive relief or for a finding of irreparable harm.” 

A copy of the pre-publication version of the NEPA modernization rule is available at rule becomes effective 60 days after publication.

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