The Council on Environmental Quality (CEQ) has recently finalized its Phase II rule under the National Environmental Policy Act (NEPA), claiming it will reform and simplify the federal environmental review process. However, a closer look at the rule reveals that it may actually slow down energy and infrastructure projects rather than speed them up. The rule adds new climate change analysis requirements and elevates environmental justice as a foundational principle of NEPA, potentially causing delays and added costs for project developers.
Another controversial aspect of the rule is its apparent bias towards renewable energy projects, directing agencies to identify environmentally preferable alternatives which could expedite renewable projects while distorting markets and undermining fair competition. While the White House claims the rule will speed up permitting and provide certainty for project sponsors, these benefits only apply to a select group of projects, leaving others at a disadvantage.
The NEPA implementation rule does create new methods for agencies to establish categorical exclusions that move through environmental review faster. While this could facilitate speedier development, it may result in politically connected insiders receiving carve-outs, leading to a lack of transparency and equitable treatment. The rule also accelerates reviews for projects that incorporate measures to mitigate adverse effects, shifting NEPA from a procedural statute to one aimed at achieving specific environmental objectives.
The rule’s lack of alignment with the Fiscal Responsibility Act (FRA) is seen as disconcerting, as the FRA aimed to reduce regulatory burdens. While the Phase II rule includes some page and time limits on the production of environmental assessments and impact statements, it also includes new requirements that stray from the streamlining focus of the FRA. This failure to adhere to the FRA could cause further challenges for businesses navigating the regulatory landscape.
Congress is unlikely to assert itself in the environmental review process any time soon, with Senator Chuck Schumer mentioning that a deal on permitting reform is “virtually impossible” due to disagreements on transmission line reforms. The NEPA Phase II rule represents a missed opportunity to modernize federal environmental review in a bipartisan manner consistent with the FRA. Instead, the rule has been finalized as a partisan package of changes that may be undone by a new administration, leaving businesses with added regulatory hurdles and uncertainty.
