On July 15, the Trump Administration issued a long-anticipated overhaul of the regulations implementing the National Environmental Policy Act (“NEPA”)—the first substantive amendment to the regulations since the 1970s. The Final Rule’s stated goal is to comprehensively update, modernize, and clarify the current regulations “to facilitate more efficient, effective, and timely NEPA reviews by federal agencies.”¹ As analyzed in our prior alert on the Proposed Rule, the rule makes significant changes to agency implementation of NEPA, and legal challenge is expected.

I. Overview of the Final Rule

The Final Rule will go into effect on September 14, 2020, 60 days after it was published in the Federal Register. To implement the Final Rule, Federal agencies have up to one year to propose revisions to their own NEPA regulations to conform to the new CEQ rules. Moreover, the Final Rule largely codifies existing case law, executive orders and agency guidance. As a result, many of the current NEPA processes will remain the same.

That said, the rule does include certain major revisions to agency implementation of NEPA, including:

• Cumulative effects analysis is eliminated, by entirely deleting “cumulative” from the definition of “effects” and by significantly limiting the scope of the required effects analysis.
• The definition of “major federal actions” is narrowed to exclude actions with “minimal Federal funding or minimal Federal involvement” and other specified categories.
• Project proponents will be allowed to prepare their own environmental impact statements.

For ongoing NEPA reviews that were commenced before the effective date, the Final Rule provides that agencies may choose whether to apply the revised NEPA procedures. The agency must make clear which set of regulations it is applying for each proposed action; agencies may not pick and choose a blend of procedures from the 1978 regulations and the Final Rule.

The final rule does not directly address one of the issues that has led to significant recent litigation—the consideration of climate change impacts in NEPA reviews. In response to comments expressing concern that NEPA review under the revised rules would no longer address climate change impacts, CEQ states that the Final Rule “does not preclude consideration of the impacts of a proposed action on any particular aspect of the human environment,” and, therefore, the “analysis of the impacts on climate change will depend on the specific circumstances of the proposed action.” This leaves broad discretion to agencies to determine whether to analyze the climate change impacts of a proposed action.

II. Key Changes in the Final Rule

As noted in WilmerHale’s prior alert and discussed below, the Final Rule includes a number of sweeping changes regarding cumulative impact analysis, the definition of “major federal action,” and the role of project proponents.

A. Elimination of Cumulative Impact Analysis and Revised Definition of Effects

In the Final Rule, CEQ eliminates the existing requirement that agencies analyze the cumulative impacts of their actions. The former NEPA regulations defined “cumulative impact” 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. The Final Rule eliminates the concept of “cumulative impacts” entirely, as CEQ takes the position that consideration of such impacts is not required by the NEPA statute and that “[c]ategorizing and determining the geographic and temporal scope of such effects has been difficult and can divert agencies from focusing their time and resources on the most significant effects.”

However, to address comments raising concerns that eliminating the definition of cumulative impact would significantly narrow the scope of a NEPA analysis because a reviewing agency could, arguably, decline to analyze the related environmental impacts, CEQ revised the definition of “effects.” The Final Rule defines effects as “changes to the human environment from the proposed action or alternatives that are reasonably foreseeable and have a reasonably close causal relationship to the proposed action or alternatives.” 40 C.F.R. § 1508.8.

In the revised definition of “effects” CEQ also clarifies that agencies should not consider effects “significant” if they are “generally . . . remote in time, geographically remote, or the product of a lengthy causal chain.” This revision in the final rule codifies the limitation on NEPA analysis set forth by the Supreme Court in Department of Transportation v. Public Citizen, 541 U.S. 752, 767–68 (2004). By adding the word “generally” to the determination of whether an effect is significant, the Final Rule reflects the fact that there may be a circumstance where an effect that is remote in time, geographically remote, or the product of a lengthy causal chain is nonetheless reasonably foreseeable and has a reasonably close causal relationship to the proposed action.

Despite the intent of the Final Rule to clarify the scope of analysis required by NEPA, the removal of “cumulative impact” and revised definition of “effects” arguably conflict with established case law in certain jurisdictions and could thus be a basis for legal challenges. Judicial interpretations of the NEPA statute—as opposed to its implementing regulations—requiring consideration of cumulative impacts will remain binding in those jurisdictions.

B. Definition of “Major Federal Action”

In the Final Rule, CEQ narrowed the definition of “major federal actions” that are subject to NEPA review to give the terms “major” and “significant” independent meaning. 40 C.F.R. § 1508.1(q). CEQ explained that this new interpretation furthers Congress’s intent that NEPA focus on major federal actions significantly affecting the quality of the human environment, rather than non-major federal actions that “simply have some degree of federal involvement.”

The Final Rule lists categories of actions that do not qualify as major federal actions, including non-federal activities that receive only a small amount of federal funding.

In response to comments, the Final Rule adds one category that was not listed in the Proposed Rule: an exclusion for extraterritorial activities or decisions, meaning activities with effects located entirely outside the United States. 40 C.F.R. § 1508.1(q)(i). This is a departure from the previous regulations. NEPA historically has been applied to agency actions in foreign jurisdictions.

As discussed in our prior client alert on the Proposed Rule, the Trump Administration’s narrower definition of “major federal action” is largely consistent with existing case law. Nonetheless, opponents may raise challenges to CEQ’s exclusion of broad categories of actions from NEPA’s scope. And agencies’ decisions that specific projects meet one of the regulations’ new exemptions may also face challenges by environmental groups and other opponents.

C. Role of the Project Proponent

The Final Rule retains a provision from the Proposed Rule that will increase the role that project proponents can play in the environmental review of their own projects. The Final Rule allows project proponents to prepare the Environmental Impact Statement (EIS) for their project or hire a contractor to do so. 40 C.F.R. § 1506.5(b). Under the previous regulations, project proponents could prepare an Environmental Assessment (EA), but not an EIS.

To increase transparency and address concerns about conflicts of interest raised by commenters on the Proposed Rule, the Final Rule requires contractors and applicants preparing an EA or EIS to submit a statement to the lead agency that discloses any financial or other interest in the outcome of the action. Id. § 1506.5(b)(4). This was mandated under the previous regulations but was proposed for elimination in the Proposed Rule. The retention of the disclosure requirement should help the Administration defend against claims that it has ceded control of the NEPA process to self-interested project proponents.

III. Congressional Review Act Challenges

The Final Rule could be vulnerable not only to a judicial challenge, but also to repeal under the Congressional Review Act (CRA). The CRA allows Congress to repeal federal rules issued within the last 60 legislative days before the previous Congress adjourns by passing a joint resolution of disapproval, which must be signed by the President. See U.S.C. §§ 801-808. Once a rule has been repealed under the CRA, the agency may not reissue a substantially similar rule. Although there is some uncertainty regarding the exact timeline of the CRA “look-back” period this year due to disruptions to the legislative schedule caused by the COVID-19 pandemic, the Final Rule has been issued in what we expect to be the last 60 legislative days of this session, and could thus be subject to repeal under the CRA in the event that Democrats control both houses of Congress in the November elections.

IV. Conclusion & Predictions

Industry generally has welcomed the new NEPA regulations for streamlining timelines and reducing the page numbers for thousands of environmental analyses performed annually. Opponents, including many environmental groups, have criticized the changes for their potential negative impacts on public health and the environment. In practice, agencies will need to modify their own respective NEPA regulations before these revisions can have an impact on future project approvals or other agency decisions. Only time will tell whether the Final Rule will “advance the original goals of the CEQ regulations to reduce paperwork and delays, and promote better decisions consistent with the national environmental policy set forth in NEPA,” as CEQ asserts. In the meantime, as noted in our prior client alert on the Proposed Rule, project proponents should be mindful of potential litigation risks in the planning stages of any projects requiring NEPA analysis. WilmerHale’s Energy, Environment and Natural Resources group is closely tracking the implementation of, and challenges to, the Final Rule and will continue to provide updates.