Marco Rodriguez, Edidiong Obot, Alicia Smith, Krish Vijayaraghavan
August 13, 2024
Considerations from the National Environmental Policy Act (NEPA) Phase 2 Rule: A Balancing Act
Our experts examine recent changes to the NEPA regulation that aim to both streamline and expand environmental reviews, namely additional considerations for environmental justice (EJ) and climate change and how they may affect applicants.
As in the myth of Sisyphus, where Sisyphus eternally rolls a rock up to the top of a mountain, only to have the rock roll back down to the bottom every time he reaches the top, recent updates to the National Environmental Policy Act (NEPA) are caught in a cycle of opposing forces as regulators try to streamline the rule, but also make it more comprehensive.
On May 1, 2024, the Council on Environmental Quality (CEQ) published the final NEPA “Phase 2” Rule to codify procedural revisions in accordance with amendments required by the Fiscal Responsibility Act of 2023. This new rule went into effect on July 1, 2024. Last year, our experts presented an analysis of the anticipated changes when CEQ provided the proposed rule for public comment, which you can read here. Agencies and stakeholders have recognized the need to revise NEPA to avoid project delays. In this article, we examine CEQ’s changes to streamline NEPA regulations, including additional considerations for environmental justice (EJ) and climate change, and potential impacts on project timelines and cost.
Streamlining environmental reviews
CEQ’s goal with the NEPA Phase 2 rule is to substantially streamline environmental reviews. To achieve this, CEQ focused on three main aspects
- Increase the use of categorial exclusions (CE)
- Reliance on tiering
- Implementation of page and time limits
Categorical exclusions are “a category of actions that a federal agency has determined normally does not significantly affect the quality of the human environment (Federal Register May 1, 2024 89 FR 35442).”
CEs are encouraged because they expedite environmental reviews. The new rule encourages adoption of CEs approved by other agencies (for example, we are already seeing widespread adoption of the US DOE’s electric vehicle charging stations CE). Also, once a land-use plan is established – a decision document supported by a programmatic environmental impact statement (EIS) or environmental assessment (EA) – agencies can apply CE to future site-specific or project-level actions.
CEQ has expanded the opportunities for tiering - the reliance on an existing environmental document - in the section “Programmatic environmental documents and tiering” (§ 1501.11). CEQ also provides guidance about when tiering is appropriate and allows an agency to rely on the analysis included in a programmatic environmental document within five years of its release without additional analysis except when new and significant adverse effects are identified.
The Phase 2 rule codifies the page limits and time limits for EISs and EAs to encourage concise analyses. EIS are limited to 150 pages or 300 pages for extraordinarily complex actions. Senior agency officials can no longer approve documents longer than 300 words. Similarly, the rule sets a limit of 75 pages for EAs. Agencies must complete EAs within one year and EISs within two years unless the lead agency extends the deadline in writing. Lead agencies must submit a report to Congress annually on any missed deadlines for EAs and EISs.
Additional process changes are suggested to enable agencies to meet page limits and time limits:
- NEPA documents and procedures should facilitate efficient decision-making (§ 1500.4, § 1501.10, § 1507.3). The section “Efficient process” (§ 1500.5) provides 12 ways to improve efficiency in NEPA processes.
- Under Sec 107 § 4336a(g) (3) and the Section “Review of NEPA compliance” (40 CFR § 1500.3 (b)) a project sponsor may request a court of competent jurisdiction to obtain a judicial review if an agency does not meet the deadlines.
- The rule supports project sponsors to speed up the process and to resolve issues without taking control or authority away from the lead agency.
In the final rule, CEQ removed a section on “Innovative approaches to NEPA reviews” (Proposed Rule § 1506.12). Our previous article indicated this could allow for the use of artificial intelligence (AI) to streamline environmental reviews. However, CEQ did not receive comments with concrete examples and commenters were concerned the proposal did not include enough “guideposts.” Thus, the final rule provides “flexibility to innovate and address extreme environmental challenges.”
However, as technological advances continue, there will be opportunities to apply AI for NEPA purposes as supported by a recent report to Congress in which CEQ discussed opportunities for using AI in NEPA reviews as directed by the Fiscal Responsibility Act.
Expanding analysis and extending project schedules
As much as the revisions above aim to streamline the environmental review process, there are also additions in the Phase 2 rule that may create longer project timelines – including requirements to address EJ and climate change.
The addition of EJ and explicit public involvement requirements are intended to bolster the completeness and defensibility of a NEPA analysis. The rule defines EJ to be consistent with the Biden-Harris Administration Executive Order 14906: Revitalizing Our Nation's Commitment to Environmental Justice for All. It also defines “communities with EJ concerns” and provides guidance on how to identify them using screening tools, and expands the definition of “effects” to consider core EJ concepts. For instance, an example of “extraordinary circumstances” includes the substantial disproportionate and adverse effects on communities with EJ concerns.
Although previous NEPA statutory language acknowledged the need for public involvement, the new rule includes comprehensive requirements to better achieve this goal and asks for explicit outreach and public engagement. It should be noted that CEQ retains the term “meaningful engagement” in the definition of EJ as a core concept. Meaningful engagement should not be an afterthought, the rule requires it to be intentional and planned, with active dialogue and opportunities to contribute to the decision-making process. (Read our article: Community engagement: A cornerstone of environmental justice)
Section 1501.9 (c) lists a series of six requirements for outreach and notification that agencies are expected follow. The three most significant that could have an impact on project timelines are:
- Early participation of Federal, State, Tribal governments, and local agencies and governments
- Early engagement of members of the public affected by the action
- Appropriate outreach and notification based on the degree of public interest
The inclusion of meaningful engagement is a shift from simply informing the public to adopting intentional dialogue early in the process, so that the public can influence consequential decisions. Section § 1507.2 (a) asks agencies to designate a Chief Public Engagement Officer that facilitates community engagement between federal agencies, project applicants, and the public during environmental reviews.
The Phase 2 rule restores previous language from the 1978 regulations where the language “provided clearer and more effective and predictable direction or guidance.”
As part of the alternatives’ development process, the revised rule restores language that requires federal agencies to identify alternative actions that will avoid or minimize adverse effects and specifically cites reductions of climate change effects as an example of such an alternative. CEQ notes that addressing climate change-related effects is an example of an environmental benefit that should be considered when selecting the environmentally preferable alternative in an EIS.
The affected environment analysis needs to describe anticipated climate-related changes to the environment. CEQ clarifies that the affected environment’s baseline assessment over an action’s lifetime should incorporate forward-looking climate projections using “high-quality information, including best available science and data” rather than relying on historical data. Agencies are encouraged to use high-quality data and models to analyze climate change-related projections in the evaluation of reasonably foreseeable effects, including high-quality greenhouse gas emissions inventories and air modeling. Projections can be scaled to a targeted and localized geographic scope, like land-use projections, air emissions and modeling or used to evaluate climate change effects experienced locally.
It’s important to note that the rule updates the definition of “effects” to include climate change-related effects, including the contribution of a proposed action and its alternatives to climate change. This change is significant if a NEPA analysis is litigated and the suit claims an insufficient evaluation of effects.
In Section 1508.1(g), the definition of “effects” reverts to the 1978 language, which requires consideration of cumulative impacts and indirect effects. NEPA documents now must evaluate all environmental impacts resulting from a federal action, including climate change impacts. However, the rule also narrows agency considerations to “reasonably foreseeable environmental impacts of the proposed agency action,” “reasonably foreseeable adverse environmental effects,” and “a reasonable range of alternatives to the proposed action” that are technically and economically feasible and meet the purpose and need of the proposed action. Under the new NEPA requirements, it is important to consider the scope of the assessment and establish the reasonable range of climate change impacts.
Capitalizing on the NEPA Phase 2 Rule
Impacts from the Phase 2 revisions will depend on the type and size of the project and how agencies navigate the two opposing forces driving the revisions. Even so, it is clear that there will be impacts to required analyses, agency reviews, and the legal defensibility of actions.
In principle, the new rule applies to any project. However, the White House briefing announcing the finalization of these rules provides insight into the Administration’s main goals, the most important being to accelerate the deployment of critical infrastructure like clean energy projects.
These revisions are unlikely to expedite immediately critical infrastructure projects because they are regulatorily and technologically complex, include significant environmental and social issues, and involve many stakeholders. Large clean energy projects will require similar effort as required under the previous NEPA rules and the new streamlining requirements will only provide marginal benefits. However, the new provisions will benefit small-scale projects and over time aspects of critical infrastructure projects will become a routine part of CE approvals.
On May 21, 2024, twenty states sued the White House to challenge the new NEPA revisions and argue that CEQ is imposing regulations that stop the development of “certain projects and resources” within their jurisdictions. They believe the Administration is arbitrarily picking winners and losers in the economy. It is unclear if these challenges will block the Phase 2 rule from being implemented, therefore project applicants should be prepared to contribute significantly to the process.
As stated above, the new EJ and climate change requirements will require effort and increase the time to complete environmental reviews. Therefore, project applicants should demonstrate early in the process that their projects involve meaningful engagement. This will not only ensure that the applicant helps the agency meet their regulatory engagement requirements but allow applicants to understand community concerns early on and address them collaboratively. Ideally, projects developed through an inclusive process should see less adverse public comments.
Additionally, project applicants need to engage experts to assess their projects potential climate change impacts and rely on high-quality data and models to analyze such effects.
Another way applicants can adapt to the new rule is to manage their projects proactively through the review of agency project schedules and the ability to hold agencies accountable for schedule changes. This accountability is particularly effective when the applicant conducts early data collection to facilitate the agency’s analysis. These new levers, if used effectively, could overcome many potential barriers for environmental reviews under the revised rule.
As with Sisyphus’ perpetual challenge, impacts from the Phase 2 rule may not be impossible to avoid. But if project applicants start the process early, conduct much of the analysis, and work closely with the lead agency to achieve project authorization, they may be able to keep that boulder from tumbling down the hill.
Want to know more?
Marco Rodriguez
Managing Consultant
+1 970 237 4332
Krish Vijayaraghavan
Principal, Impact Assessment
+1 415 899 0726
Alicia Smith
Principal, Impact Assessment, Low Carbon Energy
+1 713 470 6546
Edidiong Obot
Senior Lead Consultant
+1 703 516 2039