The Fiscal Responsibility Act’s Revisions to the Iconic Statute Largely Codify Existing Interpretation and Practice
On May 31, 2023, the House of Representatives advanced the Fiscal Responsibility Act of 2023 (“FRA”), which would suspend the federal debt limit until Jan. 1, 2025. The FRA passed the Senate last night and will be signed into law by the president. Though largely focused on federal spending, the legislation also amends the National Environmental Policy Act (NEPA) of 1970. The amendments are notable because the statute has rarely been revised in its 53-year history. Because the amendments largely track existing regulations and federal case law interpreting NEPA, the modifications will not significantly change how NEPA is applied in practice. However, by codifying the current regulations, Congress entrenches the provisions, providing project proponents with greater regulatory certainty.
Parameters for the Elements of a NEPA Review
The FRA provides more specificity regarding the elements of NEPA reviews, including the following revisions to 42 U.S.C. § 4332 (emphasis added):
- Analysis limited to reasonably foreseeable environmental impacts: Clauses (C)(i) and (ii) limit a NEPA analysis to the “reasonably foreseeable environmental impacts of the proposed agency action,” rather than the universe of environmental impacts. The revision tracks the current definitions of “effects or impacts” and “reasonably foreseeable” in the CEQ regulations. 40 C.F.R. § 1508.1(g), (aa).
- Alternatives must be reasonable: Rather than simply stating that a NEPA analysis must consider “alternatives to the proposed action,” new clause (C)(iii) requires agencies to consider “a reasonable range of alternatives to the proposed agency action.” The clause further specifies the alternatives considered must be “technically and economically feasible” and “meet the purpose and need of the proposal.” This change aligns with the 2020 revision to the definition of “reasonable alternatives” in the Council on Environmental Quality (CEQ) regulations implementing NEPA, 40 C.F.R. § 1508.1(z), and previous court decisions, which generally held that agencies do not need to consider alternatives that could not realistically be implemented.
- Scope of required analysis narrowed: Rather than identifying all “irreversible and irretrievable commitments of resources” associated with the proposed action, Clause (C)(v) requires an agency to identify only the “irreversible and irretrievable commitments of Federal resources” involved.
- Data reliability: The FRA adds new paragraphs (D) and (E) requiring an agency conducting a NEPA analysis to “ensure the professional integrity, including scientific integrity, of the discussion and analysis in an environmental document” and “make use of reliable data and resources in carrying out this Act.” This will put pressure on agencies to screen data sources carefully. At the same time, new Section 106 of NEPA, discussed below, provides that the agency is not required to undertake new scientific or technical research unless it is “essential to a reasoned choice among alternatives, and the overall costs and time frame of obtaining it are not unreasonable.”
Changes to Agency Procedure for Determining When an EA rather than an EIS Is Necessary
New NEPA section 106 provides a procedure for determining whether an agency needs to prepare an environmental assessment (EA) instead of an environmental impact statement (EIS), and specifies no NEPA analysis is required when the proposed action is nondiscretionary or not a final action under the Administrative Procedure Act. This section also states that in any level of NEPA review, the agency is not required to “undertake new scientific or technical research” unless the research is necessary to make a reasoned choice among the alternatives and can be conducted within a reasonable time frame.
New section 106 is generally consistent with the current practice for determining the level of NEPA analysis required.
Timely and Unified Reviews Required
A perennial NEPA concern is that agencies provide excessively detailed analyses in an effort to ensure that their analysis will be upheld against a legal challenge. Lengthy analyses, in turn, contribute to a delay in issuing final decisions. New section 107 imposes statutory page limits and provides what some members of Congress have referred to as a “shot clock” to expedite reviews and explicitly allows project sponsors to file a petition in federal court if an agency fails to meet the deadlines.
- Section 107(e) sets into statute the same page limits as the 2020 CEQ regulations: 75 pages for EAs (see 40 C.F.R. §1501.5(f)) and 150 pages for most EISs or up to 300 pages if the project is extraordinarily complex (see 40 C.F.R. § 1502.7).
- The page limits exclude appendices. Therefore, the limits may not result in shorter documents when appendices are considered.
- Section 107(g) requires agencies to complete EAs within one year and EISs within two years, the same time limits as the 2020 CEQ regulations (40 C.F.R. §10(b)). The time limits in the FRA begin on the earlier date of the following: when the agency decides to prepare the EA or EIS (like the 2020 CEQ regulations), the date the agency notifies a right-of-way applicant their applicant is complete (new), or the date the agency issues a notice of intent to prepare the environmental document (new). The specific carve out for right-of-way applicants will speed up the process for sponsors of new transmission lines and pipelines across federal lands.
- Section 107(g)(3) permits a project sponsor to file a petition in federal court if the reviewing agency fails to adhere to the statutory deadline. If the court agrees, it may order the agency to comply with the deadline in 90 days. The statute also permits the court to extend the agency’s deadline if the court “determines a longer time period is necessary to comply with applicable law.” Litigation regarding NEPA delays is not a new concept, but the addition of a statutory requirement and explicit avenue for judicial review likely will make future challenges more successful.
- Section 107(h) requires lead agencies to file annual reports to the Senate and the House on their compliance with these deadlines.
Third-party NEPA document preparation:
- Section 107(f) requires agencies to prescribe procedures to permit project sponsors to prepare their own EAs and EISs with agency supervision.
- The 2020 CEQ regulations extended the self-prepare option to EISs (see 40 C.F.R. §1506.5(b)).
- The FRA requires the agency to “independently evaluate the environmental document and ... take responsibility for the contents” like the current CEQ regulation.
- This change further formalizes the practice of allowing project sponsors to hire consultants to prepare environmental documents in coordination with agencies. The idea is that this will speed up the process of preparing analyses by relieving agencies of the burden of preparing at least some analyses from scratch. It remains to be seen, however, whether this will permit project sponsors with the financial means to hire consultants to hop the line or whether applicants will still see bottlenecks in the agency review process, particularly as agency staff and decision-makers adapt to reviewing consultant-prepared analyses.
Lead Agencies and Notice and Comment Requirements:
- When more than one federal agency is involved in the NEPA process, subsection (a) requires the agencies to designate a “lead agency” to establish and enforce a schedule for the review. If the agencies are unable to agree on a lead, there is a process for the CEQ to appoint the lead agency. These changes generally align with the 2020 CEQ regulations, 40 C.F.R. §§ 1501.7, 1501.8.
- Subsection (c) explicitly requires agencies 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,” which adds to the requirements in 40 C.F.R. §9(d).
Programmatic Environmental Review Documents
Section 108 states an agency can rely on a final programmatic environmental document for five years without additional review so long as there are not “substantial new circumstances or information about the significance of adverse effects that bear on the analysis.” The agency may rely on the programmatic document beyond the five-year limit if it reevaluates the analysis and underlying assumptions.
Agencies already rely on programmatic reviews when available, so this change is unlikely to significantly streamline the NEPA review process.
Categorical Exclusion Borrowing Provisions
Section 109 permits agencies to adopt categorical exclusions listed in another agency’s NEPA procedures, provided the agency: (1) identifies the categorical exclusion, (2) consults with the agency that established the categorical exclusion, (3) provides notice to the public, and (4) documents adoption of the categorical exclusion. This amendment adopts the flexibility in the 2020 CEQ regulations, 40 C.F.R. § 1506.3(d). Some agencies are already promoting this concept like the Department of the Interior, which explicitly permits borrowing between its bureaus and offices within the department in its 2020 list of categorical exclusions. CEQ also published guidance on borrowing categorical exclusions in June 2022.
Section 110 directs CEQ to study and submit a report to Congress within one year of the FRA’s enactment on “the potential for online and digital technologies to address delays in reviews and improve public accessibility and transparency under [NEPA].” In particular, Congress requests CEQ to evaluate whether to develop a “unified permitting portal” that would allow applicants to submit project documents, collaborate with agencies (including on document edits), upload and display visual features like maps and videos, track the progress of applications, enhance interagency coordination in consultation, and assist in organizing and cataloging public comments. Any future E-NEPA portal could spur innovation in the NEPA process and increase transparency, and provide a way for project proponents to compare progress through the NEPA process. In reality, however, implementation would be expensive and difficult to coordinate across agencies.
Changes to NEPA Definitions, Including “Major Federal Action”
New Section 111 defines several terms, including “major federal action.” The new statutory definition largely tracks the definition in the CEQ regulations, 40 C.F.R. § 1508.1(q), but is arguably somewhat more constrained than the current definition. At the outset, Section 111 states a “major federal action” is one “subject to substantial Federal control and responsibility,” and excludes the following actions or activities from the definition, among others (emphasis added):
- “(i) a non-Federal action—(I) with no or minimal Federal funding; or (II) with no or minimal Federal involvement where a Federal agency cannot control the outcome of the project.” (query whether this is a higher bar than CEQ’s definition, which provides an exemption if “the agency does not exercise sufficient control and responsibility over the outcome of the project”);
- (ii) funding assistance when the Federal agency lacks “compliance or enforcement responsibility” over the subsequent use of such funds;
- (iii) loans or loan guarantees “where a Federal agency does not exercise sufficient control and responsibility over the subsequent use of such financial assistance or the effect of the action”;
- (iv) business loan guarantees provided by the Small Business Administration pursuant to section 7(a) or (b) and of the Small Business Act (U.S.C. 636(a)), or title V of the Small Business Investment Act of 1958 (15 U.S.C. 695 et seq.);
- (v) enforcement actions;
- (vi) agency actions that only affect extraterritorial areas; or
- (vii) activities or decisions that are nondiscretionary.
Bottom Line: The FRA’s revisions to NEPA largely codify current regulations, case law and agency practices. But with changes to the statute comes uncertainty for agencies and applicants. We expect the new and amended statutory language to prompt future legal challenges both by environmental groups and project proponents. In particular, we predict that courts will be asked to interpret what constitutes a “major federal action” in a variety of factual contexts. For example, when do agencies have “compliance or enforcement responsibility” over federally funded projects on state and private land such that NEPA is triggered? We also anticipate further clarification on the language on data reliability and what is meant by “technically and economically feasible.” For example, what level of increase in costs would render an alternative economically infeasible? We will also be watching for the first lawsuits to compel compliance with the statutory deadlines for preparation of NEPA analyses. Finally, since the FRA’s revisions to NEPA do not appear to represent a significant change from current practice, we expect continued efforts to streamline the environmental review process through legislation.