Outlook on the New Administration: Council on Environmental Quality and Environmental Reviews under the National Environmental Policy Act

Outlook on permitting reform: Likely efforts to speed up energy and infrastructure development

Background

Permitting reform is a high-priority, bipartisan issue. Members of Congress on both sides of the aisle have pushed for meaningful, comprehensive reform for several years. In 2023, Congress successfully passed modest reforms to NEPA via the Fiscal Responsibility Act. However, most stakeholders agree that additional reform is needed to speed up the permitting process, especially as some projects intending to take advantage of the benefits of the 2021 Infrastructure Investment and Jobs Act and 2022 Inflation Reduction Act have had slow starts or remain under a cloud of timing uncertainty given the prospects of burdensome environmental reviews. Despite agreeing that permitting reform is necessary, lawmakers have struggled to agree on the scope, extent, and mechanisms to achieve reform—often because many interest groups want to limit streamlined permitting to projects that satisfy certain policy preferences. Members of Congress have proposed a number of comprehensive permitting reform bills, but none have been successful.

Agency NEPA reviews can go on for years and, in some cases, cause significant project delays. Even when the NEPA review is complete and the federal agency takes final action, litigation over the agency’s review can prolong uncertainty. The current statute of limitations under the Administrative Procedure Act for opponents to challenge an agency’s NEPA review is six years. Litigation over the sufficiency of an agency’s NEPA compliance can take years to resolve and sometimes results in a court remanding the NEPA document back to the agency for additional analysis or even vacatur of permits that rely on that NEPA document. These delays have affected both fossil fuel and clean energy developments, leading to bipartisan efforts at permit reforms.

Outlook

We expect the incoming administration to prioritize engaging with Congress on permitting reform bills and to strongly support bills that focus on reducing burdens on project developers, accelerating the timelines for completing reviews, and limiting post-permitting litigation. The President-elect has long expressed support for infrastructure and fossil fuel development and has emphasized a deregulatory agenda.  Legislative permitting reform may include mandatory deadlines and page limits, broadened categories of actions that do not require full-fledged NEPA analysis, a shorter statute of limitations for judicial review of NEPA documents, and possibly even limits on relief a court may order if it finds that an agency’s analysis is deficient.

These types of measures were included in both the Energy Permitting Reform Act of 2024 proposed by Senators Joe Manchin and John Barrasso and a separate bill proposed by Senator Bruce Westerman. The Manchin-Barrasso bill would have shortened the statute of limitations for bringing a lawsuit against an environmental permit from six years to five months for an energy or mining project. The Westerman bill would have gone further by limiting that period to four months, requiring courts to resolve NEPA-related cases and appeals within 180 days, and limiting injunctions and vacaturs of agency actions under NEPA to only those cases where the court finds proximate and substantial environmental harm with no other equitable remedy available. For cases where there is no substantial environmental harm, the Westerman bill would not pause the underlying action during any required remand and would limit the remand period to 180 days. Enshrining these NEPA reforms in legislation rather than solely relying on changes to agency regulations (CEQ’s or otherwise) would limit the rulemaking pendulum that has followed each change of party control.

In addition to NEPA reforms, many proponents of comprehensive permitting reform have proposed provisions to provide greater flexibility for mineral development on federal lands, streamline the federal backstop authority for permitting electric transmission, and increasing fossil fuel leasing and renewable energy siting on federal lands. Some of these efforts, though, would face hurdles on the Republican side of the aisle, such as expanding federal power over state and property owner rights. These reform efforts, if successful, would be expected to speed up project development and result in increased investment in energy and infrastructure projects.

Outlook on the Biden administration’s Phase 1 and Phase 2 NEPA rules: Potential to be Revoked or Replaced

Background

In July 2020, the first Trump administration finalized the first significant updates to CEQ’s NEPA regulations in 40 years. The overhaul was intended to streamline federal environmental reviews by cutting down on paperwork and delays. It also redefined several key terms to incorporate existing NEPA case law, such as limiting agencies’ analysis to effects that have a “reasonably close causal relationship” to the proposed action, and requiring agencies to consider the goals of the applicant and the agency’s authority when determining the statement of purpose and need, which is then used to evaluate alternatives to the proposed action.

The Biden administration directed CEQ to revisit this overhaul in two phases, with the more expansive second phase finalized in mid-2024. Under those revisions, agencies must analyze things like foreseeable effects related to climate change, including quantifying greenhouse gas emissions and evaluating potential conflicts between a proposed action and federal or state objectives related to climate change. Agencies must also consider “disproportionate and adverse effects on communities with environmental justice concerns.”  Further, the Phase 2 rule directs agencies that base their analysis of “reasonably foreseeable” effects on the implementation of mitigation measure to ensure that those measures are properly identified as enforceable. Phase 2 also implements reforms introduced by the 2023 Fiscal Responsibility Act, including page and time limits that we’ve previously described as unlikely to meaningfully streamline agency NEPA reviews.

Outlook

The first Trump administration’s NEPA overhaul in 2020 showcased what it believed represents the appropriate standard for federal agency process and review under NEPA. Given the attention on permit reform and the increased scrutiny of longer and longer NEPA reviews—notwithstanding the 2023 Fiscal Responsibility Act’s aspirational time and page limits—it appears likely that the incoming administration would seek to undo what it sees as the Biden administration’s counterproductive expansion of NEPA reviews as reflected in the Phase 1 and Phase 2 NEPA rulemakings. And in response to many members of Congress calling for significant permitting reforms to decrease burdens on development projects and to expedite permitting, the incoming administration could take a dual approach: working with Congress to further revise the NEPA statutory language and working with CEQ and other federal agencies to revise and update their NEPA regulations. Less likely but still possible is a more fulsome retreat from CEQ regulations, with a focus on CEQ acting as the author of guidance, and agencies updating their implementing regulations to the same end.

Outlook on CEQ guidance on studying greenhouse gas emissions: The guidance will likely be rescinded

Background

In 2023, CEQ published interim guidance regarding how federal agencies should evaluate greenhouse gas (“GHG”) emissions and climate change under NEPA. President Obama’s CEQ had first published GHG-related draft guidance in 2014 that was finalized in 2016, but the first Trump administration rescinded it in 2017 and replaced it with its own draft guidance in 2019. As we discussed when it was issued, the 2023 guidance states that agencies should quantify reasonably foreseeable direct and indirect GHG emission increases or reductions and that NEPA reviews should assess annual emissions and net emissions over a project’s lifetime. It also directed agencies to consider the projected future state of the environment on a proposed action based on the best available climate change reports, as well as environmental justice considerations. Many project opponents rely on this guidance, in part, to challenge NEPA analyses and claim that NEPA requires agencies to analyze discrete climate change impacts caused by individual projects or use the Social Cost of GHG tool in their analysis.

Outlook

We expect the incoming administration to rescind this guidance and possibly reinstate the guidance issued in 2019 during the first Trump administration. Under the 2019 guidance, agencies were still directed to assess direct and indirect GHG emissions. However, it allowed agencies to use emissions as a proxy for assessing climate change impacts rather than needing to rely on independent climate change reports. It also dispensed with the need to estimate the social cost of GHGs in a NEPA analysis or to develop new NEPA procedures for evaluating the impacts of GHG emissions. Moreover, the 2019 guidance limited consideration of climate change to those situations where “the proposed action would be affected by foreseeable changes to the affected environment under a reasonable scenario.” This decreased focus on climate change and GHG emissions would reduce litigation risks associated with federal agencies’ analysis of GHG and climate change in their NEPA documents and help expedite energy development by reducing delays in permit approvals.

Outlook on CEQ’s regulatory authority: Lingering uncertainty but likely a continued effort to have a unified, government-wide approach to NEPA compliance

Background

NEPA created CEQ within the White House to review and appraise agencies’ compliance with the statute. CEQ initially issued guidelines to agencies preparing these detailed statements, and in 1977, President Carter issued an executive order empowering CEQ to develop regulations regarding how agencies implement NEPA. Since then, agencies and courts have applied CEQ’s regulations, in addition to an agency’s own NEPA implementing regulations, when preparing and reviewing NEPA documents.

In a landmark November 2024 ruling, Marin Audubon Society v. Federal Aviation Administration, the D.C. Circuit held that CEQ lacks authority to issue these binding regulations. The portion of the court’s analysis on CEQ’s authority turns on a fundamental constitutional principle about the authority of an executive agency to issue regulations, but it presents a real-world concern that federal agencies may have the latitude to implement NEPA in ways that are not consistent with how other agencies fulfill its requirements. In this respect, the decision could even further complicate the implementation of NEPA by introducing entirely new questions about the consistency of decision-making by one agency with processes used by another.

Marin Audubon centered around whether the Federal Aviation Administration complied with NEPA when it finalized its plan governing air tours over national parks. While the opinion analyzed how NEPA’s statutory requirements applied to the specific agency action at issue, it also held that CEQ does not have the authority to issue binding regulations on how agencies implement NEPA—an issue the court panel raised on its own accord, and not one that the parties had briefed.   The court said that CEQ’s claimed rulemaking authority violates separation of powers principles because it is derived from a 1977 executive order, not an act of Congress. However, the court did not vacate the CEQ’s regulations or reach the precise question of how the ruling would affect agencies whose own NEPA regulations directly adopt CEQ’s rules or incorporate them by reference.

Outlook

How long-lasting or upending the Marin Audubon decision will ultimately be remains to be seen. The case has so far been litigated by the Biden administration, which has requested a rehearing en banc arguing that the D.C. Circuit’s decision subverts the party-presentation principle and departs from the longstanding view that CEQ’s NEPA regulations are valid. Marin Audubon Society and the other petitioners in the case also requested en banc review. Given the timing for appellate reconsideration, however, it is the Trump administration that will be in position to decide what arguments the federal defendants raise in further appellate proceedings. Given the Trump administration’s general concerns with the federal workforce, in our view it seems unlikely that the government would make an argument that could decentralize control over the standards governing NEPA reviews.

If the court grants the rehearing petitions, the en banc court may ultimately remove the portion of the opinion dealing with CEQ’s rulemaking authority. Assuming the court reaches the merits, this seems probable given the makeup of the D.C. Circuit’s voting en banc members and the fact that CEQ’s rulemaking authority was neither briefed by the parties nor a necessary part of the court’s holding. Some suggested that the Supreme Court may take an early opportunity to speak to this issue as it hears an appeal in Seven County Infrastructure Coalition v. Eagle County, the most noteworthy NEPA case to go before the Court in nearly two decades. That case centers around the scope of environmental impacts an agency must consider during its NEPA review. It is possible that the Supreme Court could opine on CEQ’s rulemaking authority in that decision. There were, in fact, several amicus briefs presented to the Court arguing that CEQ lacks rulemaking authority. However, after nearly two hours of oral argument in that case on December 10, 2024, no justices asked any questions on CEQ’s rulemaking authority. We view it more likely that the Court will limit its review to arguments raised by the parties and reviewed by the lower courts in that case.

Regardless of whether the D.C. Circuit ultimately retracts the portion of the opinion on CEQ’s lack of rulemaking authority, the mere fact that this argument was adopted at the panel level means that litigants are likely to raise these points in other cases. Whether the incoming Trump administration will seek to cement the rationale presented in Marin Audubon is an open question. Although President-elect Trump has sought to trim the reach of federal bureaucrats in certain contexts, doing so here could ultimately impede some of the bipartisan goals of permitting reform. For example, the first Trump administration relied on CEQ’s rulemaking authority when it overhauled NEPA regulations in 2020 in an effort to speed up project permitting. The Biden administration reversed course in its own update of the CEQ regulations in 2024, reinserting some of the mandates for broader reviews while also directing expanded attention be given to certain impacts like climate change and environmental justice. Regardless of whether a broader or a narrower view of NEPA prevails, the White House under both political parties might prefer to have a single standardized set of baseline NEPA regulations instead of disparate NEPA regulations employed by each agency across the federal government.

In any event, the practical effect of CEQ lacking authority to issue binding regulations, if that holding survives, could be somewhat muted. First, agencies could choose to simply promulgate the latest set of CEQ regulations as the agencies’ own implementing regulations, giving them binding effect on the agencies’ NEPA reviews. Second, what CEQ views as appropriate agency procedure under NEPA will not vanish and could continue to have some persuasive force as courts grapple with NEPA issues in the future. Shortly after NEPA was enacted, CEQ published guidelines that, although advisory, were given various levels of deference in federal courts. Even if CEQ’s views are relegated back to guidance status, some courts may still consider them—among other secondary sources—when assessing an agency’s compliance with NEPA.