President Biden Signs Modest Permitting Reforms Into Law with the Debt Ceiling Bill

1. Project Sponsors Can Now Prepare Environmental Impact Statements

The environmental review process may speed up for some projects, as agencies will have another option to overcome the hurdles of limited agency resources and cumbersome federal contracting: applicant-prepared environmental reviews. Current regulations allow project sponsors to directly prepare environmental assessments (“EAs”) for the lead agency’s review, but do not allow project sponsors to similarly prepare environmental impact statements (“EISs”).¹ An EIS is a comparatively more robust analysis and is required for major federal actions that the agency believes may have significant environmental effects. An EA, on the other hand, is a more streamlined environmental review that an agency may prepare when it believes that the proposed action is not likely to be significant. If the EA confirms this, the agency may end the environmental review process by making a finding of no significant impact, also known as a FONSI. If impacts may be significant, the agency must prepare an EIS before making a final decision on the proposed action.

Because current regulations specify that only agencies may prepare or oversee the preparation of EISs, agencies with limited resources often complete the environmental review process unnecessarily slowly. Even when agencies have programs in place to use third-party contractors to prepare the EIS, project sponsors often have to go through a complex and time-consuming process with lead agencies to secure and pay for the third-party contractor, and then spend additional time and money coordinating with the agency and contractor for the document’s actual preparation. The Act now allows a project sponsor to prepare both EAs and EISs, which the federal agency then independently evaluates before adopting it. This change may substantially reduce the time and money project sponsors have to spend to prepare the EISs.

2. New Default Deadlines and Page Limits for EISs and EAs

The Act places a soft two-year completion deadline for EISs and a one-year completion deadline for EAs. These soft caps are meant to alleviate some of the years-long delays some project sponsors have experienced due to slow-moving EISs or EAs. But while the new statutory deadlines may reduce the time for some environmental reviews, the Act allows agencies to extend deadlines in consultation with (but not necessarily with the concurrence of) the project applicant. Moreover, the Act leaves untouched agencies’ substantive responsibilities to fully examine and consider the project’s potential impacts. Thus, while the statutory deadlines may be an improvement for some projects, such as those that have historically taken much longer than two years to complete their environmental reviews, the new deadlines may not meaningfully change the timelines for most projects. Moreover, applicants may often acquiesce to deadline extensions to ensure the lead agency develops a thorough and defensible environmental document for purposes of defending the review in subsequent litigation. Given the time and expense of litigation, and the potentially ruinous effects of a preliminary injunction or temporary restraining order, it is often better to spend more time on the front end to develop a more defensible permit than to rush the process only to be stalled by the courts.

The Act also imposes new page limits on EISs (150 or 300 pages, depending on the level of complexity of the project) and EAs (75 pages), but excludes appendices from these page limits. Agencies are thus still able to include significant amounts of information in these documents. In theory, these page limits may help to shorten the timelines of these reviews and encourage agencies to prepare less repetitious and more readable environmental documents. However, project sponsors will need to be careful to ensure that an agency’s adherence to these page limits does not result in the agency giving short shrift to issues that may be the focus of litigation. As a practical matter, the ultimate heft of an environmental document may end up being the same, with the main report becoming more of an executive summary and more material being relegated to appendices. However, this is unlikely to affect the agency’s obligation to thoroughly document its analysis and reasoning in the main report.

3. Project sponsors may now challenge agency delays in court

The Act now allows project sponsors to obtain court review of, and seek a court order to rectify, an agency’s alleged failure to timely prepare an EIS or EA. If a court finds that an agency has failed to act in accordance with an applicable deadline, the court must set a schedule and deadline for the agency to act as soon as practicable. The Act provides that an agency shall not take longer than 90 days from the date on which the court issues its order. However, the court may determine a longer time period is necessary to comply with NEPA or other applicable laws. As a practical matter, this may frequently be the case, especially when there are additional procedural requirements and consultations under other statutes, such as consultations under section 7 of the Endangered Species Act and section 106 of the National Historic Preservation Act.

This new cause of action to challenge agency delays may provide some relief for project sponsors who otherwise have no recourse to compel an agency to wrap up its environmental review. However, it would require time and expense to petition a court to review the alleged failure to act, resulting in potentially more litigation expenses at the front-end of project development. The court’s relief is also limited to issues with the timeline to complete the environmental review, and not on the substantive result of any agency action.

What the Fiscal Responsibility Act of 2023 Does Not Do

Beyond the three notable modifications described above, the Act does not otherwise import any major modifications to NEPA (though other changes may be coming, as the White House Council of Environmental Quality (“CEQ”) has long been preparing more substantive changes with Phase 2 of its NEPA Regulatory Revisions).² For example, the Act does not substantively amend the definition of “major federal action,” but instead codifies the regulatory definition. Additionally, while the Act now limits agencies’ environmental analyses to only “reasonably foreseeable” environmental effects of the proposed action and a “reasonable range of alternatives” for the proposed action, these amendments merely align the statutory text with existing case law, which already requires a “reasonableness” standard for defining the scope of “effects” in a NEPA review.³ The Act also neither codifies nor specifies whether a project must proximately cause an environmental effect in order for the agency to consider it during its environmental review, which lies within CEQ’s own regulatory definition of environmental effects⁴ and Supreme Court case law. Finally, the Act does not address transmission siting or cost-recovery issues in transmission siting, both of which are critical to the continued reliability of the electric grid and the Biden administration’s renewable energy goals.

Takeaways

The Act’s modest modifications to NEPA reflect the emerging, bipartisan momentum on Capitol Hill⁵ to address permitting reform for energy and infrastructure projects. However, the Act ultimately does little to transform NEPA or address the legal and practical deficiencies that many have identified as barriers to project development. The most significant change, from a process efficiency standpoint, is likely to be the new authority for project proponents to prepare (or select contractors to prepare) EISs. That will hopefully reduce the time and expense of the environmental review process and allow needed new infrastructure to be planned and permitted in a timely manner.

¹ See 40 C.F.R. § 1501.5(e).

² Although originally expected sometime this summer, it is possible that these further changes may be delayed as CEQ adjusts its Phase 2 and NEPA Regulatory Revisions to accommodate the changes from the Act.

³ See, e.g., Dep’t of Transp. v. Public Citizen, 541 U.S. 752 (2004).

⁴ 40 C.F.R. § 1508.1(g).

⁵ Congress has several permitting reform bills under consideration, including (1) Senator Manchin’s “Building American Energy Security Act of 2023”; (2) Senator Barrasso’s “Spur Permitting of Underdeveloped Resources (SPUR) Act”; (3) Senator Capito’s “Revitalizing the Economy by Simplifying Timelines and Assuring Regulatory Transparency (RESTART) Act”; and (4) Senator Carper’s “Promoting Efficient and Engaged Reviews (PEER) Act.”  The U.S. House of Representatives has also passed an energy permitting reform bill titled “Lower Energy Costs Act.”