CEQ Finalizes Overhaul of NEPA Regulations and Narrows Consideration of Climate Change Effects

On July 16, 2020, the White House Council on Environmental Quality ("CEQ") finalized the first major overhaul of its regulations implementing the National Environmental Policy Act ("NEPA") in nearly 40 years. The final amendments are largely consistent with the CEQ's proposal issued January 10, 2020. As discussed in our earlier publication, the amendments have the potential to reduce NEPA costs and delays for all energy and infrastructure projects that require federal agency action, including ones for renewable energy. See Trump Administration Plans Overhaul of NEPA Review Process, The Climate Report, First Quarter 2020. For projects involving fossil fuels, the amendments are likely to reduce the extent to which federal agencies consider climate change impacts. Companies with significant interests in projects subject to NEPA should prepare for challenges to the CEQ's amendments.

As expected, the CEQ has removed the provisions on "direct," "indirect," and "cumulative" impacts from the scope of environmental effects that federal agencies must consider under the new regulations. Drawing language from U.S. Supreme Court decisions in NEPA cases, the CEQ will now require federal agencies to assess only environmental effects that are "reasonably foreseeable" and have a "reasonably close causal relationship" to the proposed action. This standard is analogous to proximate cause in tort law and requires more than a "but for" causal link. The amended regulations specify that effects "generally" should not be considered if they are "remote in time, geographically remote, or the product of a lengthy causal chain" relative to the proposed action.

The CEQ denies that the amendments will always preclude consideration of a project's contribution to climate change. In fact, the addition of the word "generally" when addressing remoteness in time, geography, or relationship is a change from the CEQ's proposal and is intended to "reflect the fact that there may occasionally be a circumstance where an effect that is remote in time, geographically remote, or the product of a lengthy causal chain is reasonably foreseeable and has a reasonably close causal relationship to the proposed action." Thus, the CEQ is allowing agencies to consider climate change effects, if they can articulate a close causal relationship to a proposed action, but expects such cases to be rare.

Federal agencies applying the amended regulations will likely encounter arguments that effects formerly characterized as "indirect"―such as upstream or downstream increases in greenhouse gas emissions―do have a "close causal relationship" to fossil fuel production or transportation projects. It remains to be seen how other agencies and courts will define a "close causal connection" in those instances. With the CEQ's analogy to proximate causation, the amendments likely narrow the window of success for arguments based on upstream or downstream emissions. Furthermore, the repeal of "cumulative impacts" from the CEQ's regulations removes what has been the other major framework for considering and litigating climate change effects under NEPA. Opponents will likely argue that NEPA case law and the statute require consideration of cumulative impacts even when the CEQ's regulations do not. Proponents will likely counter that the term "cumulative impacts" is absent from the NEPA statute and that the CEQ regulations promulgated under NEPA have long received substantial deference from courts.

Federal agencies must apply the CEQ's amended regulations to NEPA project reviews commencing after September 14, 2020. For project reviews already underway by that date, agencies have discretion on whether to apply the amended regulations. All federal agencies must develop or revise their NEPA procedures to conform to the CEQ's amendments by September 14, 2021. 

Predictably, the amendments are sure to be challenged in court, either on their face or as applied to individual projects, or more likely both. In addition, the next U.S. Congress will have an opportunity to nullify the amendments under the Congressional Review Act. Other federal agencies may add their own spin to the amendments, including the meaning of a "close causal relationship," when developing or revising their NEPA procedures. Furthermore, the CEQ itself is still working to revise the Draft Environmental Policy Act Guidance on Consideration of Greenhouse Gas Emissions, issued July 21, 2019, for consistency with the regulatory amendments. Companies with significant NEPA exposure are well served to take an active role and represent their interests in each of these processes moving forward.

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