The National Environmental Policy Act (NEPA) was signed into law in 1970 under the Nixon administration and remained largely unchanged for decades—that is, until recently.

NEPA mandates that agencies complete environmental review processes before granting approvals, permits or licenses or distributing federal funds. However, as with many laws, the passage of time has led to the ballooning of a process that was initially intended to be streamlined and procedural. Over the three most recent administrations, significant changes to NEPA and its implementing regulations have been promulgated, with additional changes proposed and likely to be finalized soon. The recent and anticipated changes are leading to anticipation and at least some anxiety by project proponents and agencies alike over just what the future of NEPA compliance looks like.

When discussing NEPA compliance, the very first question is whether the statute applies at all. Under Section 102, NEPA applies to “major federal actions significantly affecting the quality of the human environment.” The primary hurdles, then, are whether a “major federal action” is proposed and whether its impact is significant enough to trigger application of requirements for an environmental review. In certain limited circumstances—such as statutory exemptions or projects with long-established impact data—projects or actions will fall into a categorical exclusion, such that NEPA compliance is preemptively satisfied. If an agency is unsure of whether the threshold requirements have been met or anticipates that there will be no significant impacts, it conducts an environmental assessment (EA), a relatively streamlined analysis that examines project impacts. If those impacts are found to not rise to the level of significance to trigger NEPA, then a finding of no significance (or FONSI) is issued. If, however, the agency determines that a significant impact is anticipated, then it prepares an environmental impact statement (EIS), a process involving multiple opportunities for public comment and results in a lengthy document examining the impact of the proposed project, project alternatives and the impacts of those alternatives. Once the environmental impacts have been assessed under NEPA, then the agency can move forward with granting or denying the permit, licensing or approval or awarding funds.

NEPA begins to bloat

After its introduction in 1970, NEPA created the Council on Environmental Quality (CEQ), responsible for ensuring agencies comply with obligations under NEPA, and which promulgated the first NEPA implementation regulations in 1978. Many federal agencies have their own NEPA regulations that must be consistent with CEQ’s NEPA regulations. Apart from one minor change in the mid-1980s, the CEQ regulations remained largely unchanged for more than 40 years. Without statutory or regulatory amendments, court decisions guided NEPA processes and agencies made piecemeal modifications to their practices to comply with court opinions.

The practical result of this system has been that the time to complete NEPA-prescribed assessments, as well as the sheer length of the documents, swelled to “litigation proof” projects from suits brought by interest groups to challenge NEPA analyses.

For example, guidance in the 1980s suggested an EA should be around 50 pages and an EIS around 150. But by the early 2000s, these documents reached hundreds to even thousands of pages long. Similarly, in the 1970s, the time to decide a particularly complicated EIS was around one year, with that time exploding to an average of four and a half years in the 2010s. As a result of the lengthiness of these reviews and litigation risk, NEPA reviews are seen as a major hurdle for critical energy and infrastructure projects. 

Dueling guidelines

To streamline and simplify the NEPA compliance process, the Trump administration introduced updated regulations in 2020, marking the first new guidance in decades. Attempting to replicate the procedural successes of the Department of the Interior when complying with NEPA requirements, the 2020 regulations introduced streamlined page and time limits. Specifically, the 2020 regulations mandated a 150- or 300-page and 2-year time limit for environmental impact statements; and a 75-page and 1-year time limit for environmental assessments. Another major change in the 2020 regulations: the introduction of a simplified analysis of “effects.” While the 1978 regulations mandated an agency evaluation of the direct, indirect and cumulative impacts of a project, the 2020 regulations clarified that agencies must consider only those impacts with a reasonable causal connection to the proposed action and that are reasonably foreseeable. The goal of the changes, presumably, was to provide project proponents more certainty and less cost throughout the environmental assessment process.

As expected, the Biden administration reexamined the 2020 regulations, culminating in a two-phase approach to revise the 2020 regulations. CEQ promulgated Phase I regulations in 2022 that addressed three major topics, one of which was a reversion back to the 1978 guidance on the meaning of “effects”–specifically, Phase I regulations reinstated the requirement to assess direct, indirect and cumulative impacts. Because of the limited nature of the Phase I regulations, many experts anticipated the promised Phase II regulations would be substantially more significant, especially regarding climate change and environmental justice issues. The Biden administration offered a glimpse into the planned next phase when it introduced draft regulations in January 2023, which reinvigorated Obama-era guidance on climate change that had been rolled back by the Trump administration’s 2020 regulations.

To effectuate “permitting reform,” Congress incorporated substantive changes to NEPA as part of the Fiscal Responsibility Act (FRA). The significance of this outcome is twofold: first, these amendments represent the first revisions to the statute in over 50 years; and second, Congress was able to substantively amend NEPA as part of the FRA to insert provisions aimed at streamlining NEPA reviews.

The most significant amendment to NEPA was that it codified many of the concepts and provisions found in 2020 Trump-era regulations into statute. As a result, any new regulations issued after the FRA—most notably, the Biden administration’s Phase II regulations—must comply with these statute changes. Some of the notable FRA changes to NEPA include the codification of page and time limits, a narrowed scope of review in Section 102 and an updated definition of what constitutes a major federal action. Additionally, under the updated statute, if time limits are not met by the agency, a project proponent can now bring a lawsuit in federal district court to order the agency to comply.

In the shadow of the new FRA-updated NEPA, the Council on Environmental Quality introduced Phase II regulations at the end of July 2023, with the notice and comment period ending September 2023. As anticipated, these new rules incorporate climate change and environmental justice elements into the environmental assessment process. Just exactly how these Phase II regulations will coexist with the newly amended NEPA remains to be seen, but several potential roadblocks may derail lawmakers’ attempts at streamlining and simplifying NEPA compliance.

There is some tension between the streamlining provisions of the FRA-updated NEPA and the proposed Phase II regulations. For example, the codified amendments to NEPA narrow the scope of Section 102, such that it has the potential to conflict with Phase II regulations’ return to a more expansive view of “cumulative impacts,” which seemingly requires analysis of impacts more remote in time and related to other projects. The Phase II regulations also fail to provide guidance on how the new FRA-updated NEPA provisions will be implemented, such as a lack of clarity on how project proponents’ new direct cause of action would work in practice if or when deadlines are missed by an agency. Finally, Phase II regulations’ updated provisions require the evaluation of environmental justice considerations that provide no practical concrete guidance for federal agencies on how to conduct those analyses.

As a result, if and when these proposed Phase II regulations are finalized, the potential exists for conflict with the FRA-updated statutory provisions and uncertainty, potentially leading to additional litigation. Project proponents and developers should carefully monitor the evolving NEPA landscape to gauge timelines and the likely success of their ventures.

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