The Nickel Report

On June 3, 2023, President Biden signed the bipartisan Fiscal Responsibility Act of 2023 (FRA) to suspend the United States’ debt limit until January 2025. The legislation also imposes changes to the environmental review process for infrastructure projects. Most notably, the FRA amends key provisions of the National Environmental Policy Act (NEPA), a touchstone environmental statute that imposes procedural requirements for the approval of major federal actions. The amendments to NEPA are the first major changes to the statute in almost 40 years. These changes signal Congress’s intent to streamline the environmental review of projects and improve the federal permitting process for energy projects. The amendments to NEPA will likely influence (and may delay) the Council on Environmental Quality’s (CEQ) Phase 2 revisions to NEPA’s implementing regulations which are currently undergoing interagency review. The FRA also expedites the approval process for all permits for the Mountain Valley natural gas pipeline project in West Virginia.

What’s in the Act: Non-NEPA Issues

• Fast-tracks the Mountain Valley Pipeline project. The FRA requires the approval of all pending permits for the project within 21 days after its passage into law. It also removes the jurisdiction of the Fourth Circuit to review any action challenging the project, giving original and exclusive jurisdiction to the U.S. Court of Appeals for the D.C. Circuit. This 300-mile pipeline would wind through the Jefferson National Forest and cross wetlands and the Appalachian Trail to transport natural gas from West Virginia to North Carolina.
• Expands the Fast-41 program. The new law adds energy storage as one of the types of major infrastructure projects covered by Title 41 of the 2015 Fixing America’s Surface Transportation Act (FAST Act) and subject to oversight by the Federal Permitting Improvement Steering Council (FPISC). The FPISC is tasked with coordinating  the permitting of major infrastructure projects, including establishing deadlines for agency review and approval of covered projects. The federal permitting process for energy storage projects could thus be expedited under this provision.
• Requires study of transmission issues. The FRA requires the North American Electric Reliability Corporation, regional transmission organizations, and transmission utilities to study interregional transmission capacity issues and provide recommendations for addressing these challenges to Congress via the Federal Energy Regulatory Commission.

What’s in the Act: NEPA Changes

NEPA requires federal agencies to assess the environmental effects of proposed major federal actions, such as the issuance of permits, prior to making decisions. The statute itself is relatively sparse and does not provide much direction to federal agencies on how to conduct NEPA reviews. Until now, it remained largely unchanged since its enactment in 1970. However, since 1978 CEQ has issued regulations to guide agency review during the NEPA process. These regulations were significantly overhauled in 2020 during the previous administration. But the Biden administration has since partially rescinded some of those changes, advancing its own phased revisions of the regulations.  

NEPA has become the most litigated environmental statute and is often viewed as a major obstacle to federal permitting, particularly for energy transition projects. Congress now seeks to streamline the environmental review process by codifying key NEPA provisions, and drawing on, in some instances, provisions from the 2020 CEQ regulations. These amendments should help expedite the federal permitting process going forward. Importantly, the FRA:

• Limits the time for environmental reviews. An environmental impact statement (EIS) generally must be completed within two years, and an environmental assessment (EA) within one year, from the time an agency determines that one is required. Moreover, the amendments add a new provision that would allow project proponents to challenge an agency’s failure to complete its NEPA review within the statutorily prescribed period in federal court.
• Limits the definition of “major federal action.” Section 102(C) of NEPA has long been interpreted as requiring agencies to develop an EIS for “major federal actions” that “significantly affect the quality of the human environment.” Congress has qualified this requirement, exempting from review projects over which the federal government does not have “substantial” control and responsibility. Congress also specified that “major Federal action” does not include non-federal projects with no or minimal federal funding or federal involvement when the agency cannot change the outcome of the project, and activities or decisions that are non-discretionary and made in accordance with the agency’s statutory authority.
• Clarifies when an EA or EIS is not required. There are now four enumerated instances when an agency is not required to prepare an EA or EIS: (1) non-final agency actions; (2) categorical exclusions; (3) conflicts with another statute; and (4) non-discretionary federal action.
• Allows the adoption of categorical exclusions from other agencies. Agencies now have the statutory authority to adopt a categorical exclusion of another agency provided it is consistent in the amended statute.
• Limits the scope of the alternatives to be considered. Congress clarifies that agencies should consider only a “reasonable range” of alternatives “including an analysis of any negative environmental impacts of not implementing the proposed agency action in the case of a no action alternative, that are technically and economically feasible, and meet the purpose and need of the proposal.”
• Imposes a reasonable foreseeability requirement. The FRA requires the analysis to focus only on effects that are “reasonably foreseeable.”
• Clarifies agency consideration of “data.” Although agencies should use reliable data during NEPA review of projects, Congress has clarified that agencies are not required to undertake new research unless the new data is “essential” to a “reasoned choice among alternatives,” and the overall cost and time are not unreasonable.
• Clarifies the lifespan for programmatic environmental reviews. The changes also clarify that agencies may rely on programmatic environmental reviews for 5 years, and after 5 years following agency reevaluation. This will be helpful for programs and groups of related actions with long lifespans.
• Improves agency coordination. The statute specifies the procedure for improving interagency coordination for NEPA reviews, including describing the roles of the agencies working together and directing agencies to coordinate their evaluation into a single environmental document, to the extent practicable.
• Allows project sponsors to prepare an EA or EIS. Project sponsors may prepare an EA or EIS under the supervision of the lead agency. The lead agency would still be required to independently evaluate the document.
• Includes additional public comment requirement. The amendments require each notice of intent to prepare an EIS to include a request for public comment on alternatives or impacts and on relevant information, studies, or analyses with respect to the proposed agency action.
• Provides funding for e-NEPA. Congress has directed CEQ to study the use of digital online technology to reduce delay and improve the accessibility and transparency of NEPA reviews. CEQ has been given $500,000 to conduct the study and report to Congress within one year.

What Do These Changes Mean for the Proposed Phase 2 NEPA Regulations?

Upon taking office, the Biden Administration issued its first NEPA rulemaking (Phase I) in April 2022 that, among other things, restored the “effects” definitions from the 1978 regulations. The Biden Administration promised to follow up with Phase 2 changes to the NEPA regulations. It was anticipated that Phase 2 would result in a sea-change in the NEPA process, requiring more detailed analysis of climate change and environmental justice impacts. CEQ planned to use the Phase 2 rulemaking to “reform and modernize” the NEPA regulations to ensure efficiency and effectiveness in the environmental review process. The Phase 2 rulemaking is now all up in the air. To start, the proposed Phase 2 rule has yet to be released. It has been under interagency review  for close to six months. The delay could be further exacerbated by these statutory amendments because CEQ would be required to ensure that the proposed changes to NEPA’s implementing regulations are consistent with the new statutory language. It is unclear at this point the extent to which these new amendments to the statute will impact whatever CEQ has already drafted on climate change and environmental justice. What is clear, however, is that the expedited permitting reforms codified in the FRA will certainly collide with recent CEQ efforts, requiring broader analyses of climate change impacts and creating additional scrutiny during the permit review process on fossil-fuel and natural gas pipeline infrastructure projects. See 2023 Interim Guidance on Agency Consideration of GHG Emissions and Climate Change in NEPA Review, 88 Fed. Reg. 1196 (Jan. 9, 2023).

Conclusion

The amendments to NEPA are likely to expedite and streamline federal permitting for energy projects. As the full scope of the implications of these amendments on the federal permitting process becomes clearer, our team of experienced environmental lawyers and litigators will keep you apprised of any developments and how we can help. Hunton Andrew Kurth LLP has a team of environmental, regulatory, and litigation attorneys that are at the forefront of major regulatory developments. Our attorneys are well-versed in NEPA, navigating administrative processes including the preparation of comments on rulemakings, and litigating rulemakings and other agency actions.