The Trump Administration recently proposed amendments to the regulations implementing the National Environmental Policy Act (NEPA)—the most significant of which are likely to face legal challenge. The proposed regulations aim to “modernize and clarify” the current regulations “to facilitate more efficient, effective, and timely NEPA reviews by federal agencies in connection with proposals for agency action.”1 NEPA regulatory reform has been a topic of discussion for several decades, and calls for reform have come from Congress, multiple presidential administrations and affected industries. The proposed regulations, which would be the first comprehensive update to the NEPA regulations since 1978, incorporate a mixture of responses to case law, executive orders, previous administrative guidance and agency practices. Much has already been written detailing the proposed changes and their potential impacts. This alert focuses on an under-explored issue: how and why the proposed regulations might be delayed, stayed or overturned by the courts. We have identified three specific grounds on which the regulations could face legal challenge: the elimination of cumulative effects analysis, the revised definition of “major federal action” and the expanded role of project proponents in the NEPA process. We analyze whether those provisions are consistent with existing case law and offer recommendations for project proponents to minimize the risk of project delay or denial of necessary permits as a result of potential legal challenges to those provisions.
I. Background
On January 10, 2020, the Council on Environmental Quality (CEQ) issued a notice of proposed rulemaking for revised NEPA regulations. CEQ is accepting public comments on the proposed regulations until March 10, 2020.2 At the close of the comment period, CEQ will revise the proposed regulations to the extent necessary to incorporate the rulemaking record, including pertinent data, expert opinions and public comments. CEQ will then publish the final rule in the Federal Register, which would go into effect 60 days later. Federal agencies would then have up to one year to revise their own NEPA regulations to correspond with the new CEQ rules. The agency-specific regulations may not impose additional procedures or requirements beyond those proposed by CEQ. 85 Fed. Reg. 1684, 1693.
Because NEPA reform is one of President Trump’s priorities, we expect the Administration to complete rulemaking before the end of the term. Regardless of when it is finalized, however, the final rule will likely be subject to both facial and as-applied legal challenges, especially lawsuits brought by environmental organizations and possibly by some states. Challengers would likely seek to enjoin the final rule from going into effect while the litigation is pending, which may delay implementation of the final rule. And, because CEQ is an administrative branch of the White House, challenges to its rules are not automatically heard in the US Court of Appeals for the District of Columbia Circuit. This means that lawsuits challenging the new rule, and future NEPA reviews based on the revised policies, could be filed in district courts across the country, ultimately creating a patchwork of conflicting rulings. Additionally, congressional Democrats have already expressed their intention to utilize the Congressional Review Act to bar implementation of the final rule if Democrats were to gain control of the White House and Congress in 2020.3
II. Anticipated Challenges to the Proposed Regulations
Three provisions of the proposed regulations that are potentially subject to challenge include: elimination of cumulative effects analysis, the revised definition of “major federal action” and the expanded role of project proponents.
A. Elimination of Cumulative Effects Analysis
In perhaps the most significant change, CEQ would no longer require an analysis of cumulative effects under NEPA. 85 Fed. Reg. 1684, 1708. The current NEPA regulations require an evaluation of cumulative effects, which are defined as “the impact on the environment which results from the incremental impact of the action when added to other past, present, and reasonably foreseeable future actions . . . .” 40 C.F.R. § 1508.7; see also 42 U.S.C. § 4332. The proposed regulations would eliminate this definition, and with it the requirement to analyze cumulative impacts. 85 Fed. Reg. 1684, 1708. Opponents would take the position that this change significantly narrows the scope of an environmental analysis because a reviewing agency could, arguably, decline to analyze the impacts of related, reasonably foreseeable environmental impacts.
In addition, opponents would likely argue that this provision of the proposed regulations conflicts with established case law in certain jurisdictions. To the extent courts have interpreted the NEPA statute as requiring consideration of cumulative impacts, those decisions would remain binding on agencies in those jurisdictions, notwithstanding the proposed changes in CEQ’s regulations. For example, several federal courts have held that in order to satisfy NEPA’s requisite “hard look,” an environmental analysis must consider cumulative impacts of a project. See, e.g., Twp. of Bordentown, New Jersey v. Fed. Energy Regulatory Comm’n, 903 F.3d 234, 258 (3d Cir. 2018) (holding that “[u]nder NEPA and its implementing regulations” an agency must analyze cumulative impacts to determine whether the major action will significantly affect the human environment). Challengers to the final rule would thus be expected to argue that this precedent requires agencies to conduct cumulative effects analysis. Similarly, where courts have interpreted the NEPA regulations only—not the statute—to require cumulative effects analysis, we would expect opponents to argue that NEPA’s statutory language requires all projects to consider cumulative effects, regardless of whether the regulations require such analysis. See, e.g., Dine Citizens Against Ruining Our Env’t v. Bernhardt, 923 F.3d 831, 857 (10th Cir. 2019) (holding that, under the NEPA regulations, an Environmental Impact Statement must assess the cumulative impacts of a proposed federal action).
B. Definition of “Major Federal Action”
NEPA requires a “detailed statement” for major federal actions significantly affecting the quality of the environment and which are “potentially subject to Federal control and responsibility.” 40 C.F.R. § 1508.18. Under current NEPA regulations, agency policies (including rules, regulations and interpretations), plans, programs and project permits can constitute “major” federal actions. Id.
Under the proposed regulations, CEQ gives the terms “major” and “significant” independent meaning. 85 Fed. Reg. 1684, 1729. CEQ proposes to change the definition of a major federal action to “an action subject to Federal control and responsibility with effects that may be significant.” Id. (Emphasis added). An action under the proposed rule is not “subject to Federal control” if it is a “non-Federal project[] with minimal Federal funding or minimal Federal involvement where the agency cannot control the outcome of the project.” As a result, even if such a project has a significant environmental impact, it would not qualify as a “major federal action” and thus would not be subject to NEPA review.
CEQ offers by way of example an infrastructure project primarily funded through private or local sources with a small amount of federal funding. In that scenario, the NEPA review would be confined to that portion of the project that is federally funded or requires a federal permit. This proposed change would limit the number of projects that undergo NEPA review by excluding major projects where the agency does not have a significant role and/or cannot control the outcome of the project through NEPA review. For example, this streamlined definition could mean a shorter pathway for the construction of pipelines that minimally cross federal land or waters but are otherwise on state or private land. For example, the Dakota Access Pipeline and other projects have been subject to delay from challengers seeking to block projects that extract, transport or burn fossil fuels linked to climate change.
The proposed definition of what constitutes a “major federal action” is consistent with existing case law that considers (1) the amount and nature of federal funding, and (2) the level of federal involvement or control in considering whether an action constitutes a “major federal action.” See, e.g., Rattlesnake Coalition v. U.S. E.P.A., 509 F.3d 1095, 1101 (9th Cir. 2007) (holding that a plan for which federal funds comprised less than 6% of the total estimated budget did not constitute a federal action); Touret v. National Aeronautics and Space Admin., 485 F. Supp. 2d 38, 42–43 (D.R.I. 2007) (holding that, in order for a project to be deemed a major federal action, there must be more than mere approval by the federal government of private party action, and agency involvement in the project must be more than minimal, incidental or marginal). The proposed regulations expressly exclude from the definition of “major federal action” nondiscretionary decisions made under statutory authority, those which do not require a final agency action, and nonfederal, privately funded projects with (undefined) minimal federal funding, involvement or responsibility. 85 Fed. Reg. 1684, 1729. The established precedent should aid agencies’ ability to embrace the new rule. But given the new regulations’ better-defined exclusion of proposed projects lacking federal dollars or control, proponents should expect environmental groups to challenge agency decisions to forgo NEPA review of even minor federal actions. In instances where the agency determines no environmental review or an abbreviated review is necessary under the new rule, challengers will likely argue that an analysis is still required under the NEPA statute—despite the new rule’s exclusion of certain projects—particularly for actions that have significant environmental impacts regardless of the level of federal control.
C. Role of Project Proponent
The proposed regulations also seek to expand the role of the project proponent, with the intent of making the NEPA process more efficient and flexible. 85 Fed. Reg. 1684, 1704. Both the current and proposed regulations allow a project proponent to provide information to the agency for use in the agency’s analysis and allow project proponents to prepare an Environmental Assessment. But the proposed regulations differ significantly as to who may prepare an Environmental Impact Statement (EIS).
Under the current regulations, project proponents may not prepare an EIS or select the contractor to do so. 40 C.F.R. § 1506.5(c). An EIS may be prepared only by the lead agency, a cooperating agency, or a contractor selected by the lead or a cooperating agency. Id. Contractors must certify in writing that they have no “financial or other interest in the outcome of the project.” Id. The proposed regulations would eliminate the restriction on who may prepare an EIS and the requirement that contractors certify that they do not have a conflict of interest. 85 Fed. Reg. 1684, 1704. Under the proposed rule, a project proponent could be directly involved in the preparation of the EIS—and would even be permitted to prepare the EIS itself—subject to the guidance, oversight and ultimate review of the relevant federal agencies. Id. Notably, though, the proposed regulations retain the existing requirement that the federal agency “independently evaluate” any analysis prepared by a contractor or project proponent and “take responsibility for its scope and contents.” Id. at 1725.
Case law regarding the role of the project proponent and NEPA contractor selection interpret the current regulations, not the statute itself, so arguably those cases may not be binding on proponents. See, e.g., Communities Against Runway Expansion, Inc. v. F.A.A., 355 F.3d 678, 686 (D.C. Cir. 2004); Citizens Against Burlington, Inc. v. Busey, 938 F.2d 190, 202 (D.C. Cir. 1991). These cases look at whether the preparation of an EIS compromises the objectivity and integrity of the NEPA process. See, e.g., Associations Working for Aurora’s Residential Env’t v. Colorado Dep’t of Transp., 153 F.3d 1122, 1129 (10th Cir. 1998).
Nonetheless, project proponents who wish to conduct their own NEPA analysis or be involved in the selection of a NEPA contractor should seek to avoid any interaction that could give the appearance of a conflict of interest. Even under the new rule, courts may continue to focus on whether the proponent’s involvement compromised the “objectivity and integrity” of the NEPA process. For instance, we would expect challengers to argue that an EIS prepared by a project proponent or self-interested contractor cannot provide the basis for the lead agency to take a “hard look” at the environmental consequences of the proposed action, as NEPA requires. See, e.g., Robertson v. Methow Valley Citizens Council, 490 U.S. 332, 350 (1989). And even under the new rules, courts will continue to scrutinize whether the agency conducted the requisite independent evaluation of NEPA documents prepared by a contractor or project proponent. See 85 Fed. Reg. 1684, 1725. Thus, to withstand challenge, the federal agency must “not reflexively rubber stamp a statement prepared by others,” but must build a record that demonstrates that the agency has “carefully reviewed it and verified its data.” Save Our Wetlands, Inc. v. Sands, 711 F.2d 634, 642-43 (5th Cir. 1983).
III. Conclusion and Predictions
While the proposed regulations have been alternately lauded (by the Administration and industry generally) and criticized (by environmentalists) as a complete overhaul of the NEPA regulations, to the extent they codify existing case law, executive orders and agency guidance, many of the current NEPA processes would remain the same under the proposed regulations. However, to the extent the provisions depart from the current regulations and conflict with case law interpreting NEPA, there will likely be legal challenges to the final rule.
Ultimately, if upheld, the proposed regulations could streamline federal environmental review. Nonetheless, project proponents should be mindful of potential litigation risks in the planning stages of any projects requiring federal approval. If an agency relies on a provision of the final rule in its environmental analysis of a project and opponents challenge that provision in court, the resulting litigation could delay the permitting process, costing the project proponent significant resources.
