Top 10 Changes in the Debt Ceiling Deal’s NEPA Reforms

The first amendments to the National Environmental Policy Act (NEPA) in decades might materially narrow NEPA reviews and streamline federal permitting of oil, gas, and renewable energy projects, leasing on federal lands, and reviews for roads, bridges, and other infrastructure projects, including the extent to which federal agencies must consider greenhouse gas emissions said to impact climate change. President Biden recently signed the Fiscal Responsibility Act of 2023 into law, which raised the U.S. debt ceiling. Included among the spending provisions is Section 321, known as the Builder Act. These congressional amendments to NEPA codify past regulatory reforms, and could impact the pending effort of the White House Council on Environmental Quality (CEQ) to promulgate a “Phase 2” set of regulatory amendments to the current NEPA rules. We explore primary changes to the statute and potential implications.

Setting the Stage

NEPA requires federal agencies to incorporate environmental considerations into their planning and decision-making. Subject to certain exclusions and exceptions, federal agencies must assess the environmental impact of “major federal actions” significantly affecting the environment.^[i] This generally requires an environmental assessment (EA), and then an environmental impact statement (EIS), which consider and document the potential environmental effects of a proposed action and alternatives to mitigate those effects.

The CEQ NEPA regulations^[ii] historically provided the framework for implementing the statute. Prior to the Trump and Biden administrations, the CEQ last comprehensively revised its NEPA regulations in 1978. In 2020, CEQ amended the pre-2020 NEPA regulations, seeking to streamline the NEPA process to promote infrastructure development. As we previously reported, key changes in the 2020 regulations included a revised definition of “major federal action,” a narrowed definition of “effects,” removing the express requirement that agencies consider cumulative and indirect effects in favor of an inquiry into the closeness of causal connection, and an introduction of presumptive time limits for completing EISs and EAs and various litigation reforms.

The Biden administration announced a reconsideration of the amendments introduced by the Trump administration with a two-part plan. In May 2022, Phase 1 went into effect.^[iii] These regulations restored the express requirement to assess both indirect and cumulative impacts, revised the requirement for a purpose-and-need statement in an EIS, and clarified that federal agencies can develop their own programs that go beyond the review required by the CEQ NEPA regulations. The Biden administration’s Phase 2 of the NEPA revisions was announced to provide “further improvements to the efficiency and effectiveness of environmental review processes and reflect the Administration’s commitment to achieving environmental justice and confronting climate change,”^[iv] but it has not yet been proposed.

In March 2023, the Republican majority in the House introduced H.R. 1335 – the Transparency, Accountability, Permitting and Production of American Resources Act.^[v] The bill included scores of provisions intended to “restart onshore and offshore oil, gas, and coal leasing” and “streamline permitting for energy infrastructure.”^[vi] The bill sought to codify into NEPA Section 102 many of the regulatory changes from the Trump administration’s 2020 “Update to the Regulations Implementing the Procedural Provisions of NEPA.”

During negotiations over the nation’s debt limit, Congress incorporated a number of these “Builder Act” changes in Section 321 of the Fiscal Responsibility Act (FRA). President Biden signed the FRA into law on June 3, 2023. Unlike other provisions of the broader FRA, Section 321 contained no provision delaying or otherwise forestalling the immediate effect of the statutory changes to NEPA.

Changes to NEPA Included in the FRA

With that backdrop in mind, regulated entities and proponents of projects, permits, and other approvals requiring potential NEPA reviews should be aware of the following key changes. The significance of these amendments is subject to debate. The import and effectiveness of these changes may only be settled in time, after litigation. Nevertheless, Congress’s decision to incorporate regulatory changes from the Trump-era NEPA regulation reforms directly into the NEPA statute—along with a new provision for judicial review by project proponents—could materially streamline environmental reviews.

1. Codifying Definition of “Major Federal Action”: NEPA applies to “major Federal actions.” The CEQ regulations historically defined “major Federal action,” not the statute. The Builder Act codifies a definition into the statue for the first time. Under the Builder Act, the term “major Federal action” means “an action that the agency carrying out such action determines is subject to substantial Federal control and responsibility.”^[vii] This differs from the pre-2020 CEQ NEPA regulations, which stated that “Major Federal action includes actions with effects that may be major and which are potentially subject to Federal control and responsibility. Major reinforces but does not have a meaning independent of significantly.”^[viii] The decision to drop the “may be” and “potentially subject to” phrases from the pre-2020 definition in favor of adding a direct requirement for a “substantial” control and responsibility qualifier could be consequential in practice. Agencies still have discretion to determine whether an action is “major.” This change nevertheless establishes a textually narrower standard for what qualifies as a “major Federal action” requiring NEPA.
2. “Reasonably Foreseeable” Effects: The Builder Act modifies NEPA Section 102(2)(C) to now specify that study should be of the “reasonably foreseeable environmental effects of the proposed agency action.”^[ix] NEPA previously required assessment of any “environmental impact of the proposed action.” An agency’s obligation only to assess “reasonably foreseeable” effects was instead expressed in the CEQ NEPA regulations. The Builder Act formally codifies the concept of “reasonabl[e] foresseeabl[ility]” into the statute. This textually incorporates and implements the “rule of reason” for application of NEPA recognized by the Supreme Court in its seminal decision in Department of Transportation v. Public Citizen.^[x] There, the Court confirmed that where an agency has no ability to prevent an environmental effect due to the agency’s limited statutory authority over the relevant action, an agency cannot be considered a legally relevant cause of a putative environmental effect. An agency need not consider such effects in its NEPA analyses.
3. Actual Versus “Likely” Significant Effects: The Builder Act adds a new Section 106 to NEPA. For the first time, this articulates in the statute a “procedure for determination of level of review.” Until now, CEQ’s regulations provided this procedure at 40 C.F.R. § 1501.3. That called “for an environmental impact statement” when a proposed action “[i]s likely to have significant effects.” (emphasis added). Congress did not use this broad language in the revised statute. An EIS is instead required for a proposed agency action “that has a reasonably foreseeable significant effect on the quality of the human environment”—not just “likely” to have. This is a textually narrower standard than previously articulated in the regulation.  
4. Narrowed Consideration of “Cumulative” Effects: The modifications to Section 102(2)(C)—narrowing the scope of NEPA review to “reasonably foreseeable” effects “of the proposed action”—also appear to impact CEQ’s existing regulatory definition of “cumulative effects.”^[xi] Particularly when combined with the aforementioned elimination of the word “likely” for an EIS, this could affect the scope of agency obligation to assess potential climate change effects from greenhouse gas emissions upstream or downstream of a specific “proposed action” under agency review.
   The requirement that federal agencies consider the “cumulative” effects of a proposed action—in combination with and by further consideration of the reasonably foreseeable effects of other agency actions, even by other persons and agencies—was a feature of the pre-2020 CEQ regulations, reinstated by the Biden administration’s Phase 1 NEPA reconsideration. Again, NEPA § 102(2)(C) previously required assessment of any “environmental impact of the proposed action.” Current CEQ regulations then defined “[c]umulative effects” as “effects on the environment that result from the incremental effects of the action when added to the effects of other past, present, and reasonably foreseeable actions regardless of what agency (Federal or non-Federal) or person undertakes such other actions. Cumulative effects can result from individually minor but collectively significant actions taking place over a period of time.”^[xii] The revised text of Section 102(2)(C) now narrows and directs agencies to study only those “reasonably foreseeable” effects coming from “the proposed action.” Congress did not incorporate the current regulatory definition of “cumulative” effects—requiring consideration of “other actions” by other agencies and persons, federal or nonfederal—into NEPA’s narrowed statutory text.
5. Technically and Economically Feasible Reasonable Alternatives: Part of the NEPA process is considering alternatives to a proposed action that might mitigate environmental effects. Section 321 amends NEPA to clarify that only those “reasonable” alternatives that are “technically and economically feasible, and meet the purpose and need of the proposal” warrant consideration and discussion. Historically, ambiguity around the appropriate scope of the alternatives analysis, and what constituted an appropriate alternative for study and consideration, was a source of debate and litigation. The requirement that alternatives be “technically and economically feasible” was not part of the pre-2020 CEQ regulations but was incorporated into the CEQ amendments of 2020. It is unclear whether this narrowing of NEPA’s alternatives analysis might have been reconsidered during Phase 2 of CEQ’s reconsideration of the 2020 regulations. Regardless, the narrowed specification of appropriate alternatives for consideration is now codified in NEPA.
6. Categorical Exclusions: The Builder Act expressly incorporates into NEPA the concept of categorical exclusions. Categorical exclusions are a class of actions that CEQ has determined do not require an EIS or an EA because they do not have a significant effect on the environment. In addition, the statutory revisions provide for use and sharing of exclusions across agencies. This feature from the 2020 CEQ regulations, now incorporated into the statute, should streamline the process for creating categorical exclusions and allow broader agency use.
7. Sources of Information: The amendments to NEPA state that agencies are generally “not required to undertake new scientific or technical research” to conduct an environmental assessment. An agency is only required to undertake new scientific or technical research where such research is “essential to reasonable choice among alternatives, and the overall costs and time frame of obtaining it are not unreasonable.” Agencies have often taken the time to commission such research in the past, putatively adding months and years to the review of certain agency actions and projects.
8. Lead Agency: The Builder Act revisions expressly incorporate the concept of lead agencies for coordinating reviews in NEPA. Where there are two or more federal agencies involved in a proposed action, a lead agency is selected. This role includes supervising the preparation of the EIS, coordinating participation of cooperating agencies, and developing and implementing a schedule for completion of required review.
9. Page Limits and Deadlines: The statute now imposes page limits and deadlines for EAs and EISs. Generally, an EIS cannot exceed 150 pages and must be completed within two years. For the less comprehensive EA, there is a 75-page limit, and it must be completed within one year. The effect and significance of such changes to NEPA are debatable. Nevertheless, given NEPA Section 102(2)(C)’s narrowed focus on studying only the “reasonably foreseeable environmental effects of the proposed action,” such limits may prove to be material over time. To the extent an agency proposes to voluntarily undertake more environmental study than required by the amended statute—and thereby run afoul of the page or time limits—the proponents of proposed agency actions or projects might now challenge such “voluntary” belt-and-suspenders reviews as unnecessary, arbitrary, and capricious, if not ultra vires.
10. Right to Petition Delays: Congress’s decision to streamline NEPA reviews, both substantively and procedurally, is now backstopped by judicial review. The statutory revisions add a petition process for project sponsors to challenge agencies alleged to have improperly failed to meet their deadlines. If the applicable court finds that the agency has failed to meet its deadline, the court must set a new schedule for the agency, with the revised deadline no later than 90 days from the court’s order unless the court finds “a longer time period is necessary to comply with applicable law.”

Key Takeaways

• Congress has made the first material revisions to NEPA in four decades. While the effect of these amendments may not be fully appreciated until after several years of revised agency practice and litigation about their proper interpretation, the amendments have the potential to help streamline federal permitting of oil, gas, and renewable energy projects, leasing on federal lands, and permitting of roads, bridges, and other infrastructure projects.
• Changes to narrow the scope of NEPA Section 102(2)(C) and add Section 106 appear to require a close causal connection to justify an EIS, and abrogate existing NEPA regulations broadly defining “cumulative effects” to include assessments of other actions of an agency—and even “other actions” of other agencies or persons, federal or nonfederal—when conducting a NEPA review.
• Proponents of projects and permits requiring NEPA analyses should assess whether and how these changes—now immediately effective—may impact the scope of existing NEPA reviews already under way. Litigation using the new petition process created by Congress may be an option to enforce the new limitations in the statute.

For more information on the recent amendments to NEPA, please contact Jonathan D. Brightbill (Partner, Government Investigations, Enforcement, and Compliance/Environmental Litigation), Madalyn B. Feiger (Associate, Environmental), or your Winston relationship attorney.

* Jonathan D. Brightbill served at the U.S. Department of Justice’s Environmental and Natural Resources Division (ENRD) from 2017 to 2021, including as Acting Assistant Attorney General of ENRD, and litigated the defense of the 2020 CEQ Regulations.

---

_{[i] 42 U.S.C. § 4332(2)(C).}

_{[ii] 40 C.F.R. Parts 1500–1508.}

_{[iii] 87 Fed. Reg. 23453 (April 20, 2022).}

_{[iv] CEQ Restores Three Key Community Safeguards during Federal Environmental Reviews (April 19, 2022), available at https://www.whitehouse.gov/ceq/news-updates/2022/04/19/ceq-restores-three-key-community-safeguards-during-federal-environmental-reviews/.}

_{[v] H.R. 1335 – 118th Congress (2023–2024), introduced on March 3, 2023.}

_{[vi] Id.}

_{[vii] Fiscal Responsibility Act § 321(b) (emphasis added).}

_{[viii] 40 C.F.R. § 1508.18 (2010) (emphases added).}

_{[ix] Fiscal Responsibility Act § 321(a)(3).}

_{[x] 541 U.S. 752 (2004).}

_{[xi] 40 C.F.R. 1508.1(g)(3).}

_{[xii] Id. (emphases added).}