United States: NEPA, Energy, And Infrastructure – The Times They Are A Changin'?

For energy and infrastructure project developers, investors, and market participants, the past few weeks introduced increased regulatory uncertainty around the environmental reviews required as part of federal decision-making on matters like permitting and leasing.

As the Executive Branch attempts to curtail these reviews, some in the Judicial Branch are increasingly demanding additional consideration, especially on climate change. For example, the Trump Administration marched forward on implementation of Executive Order 138071 with announcement of new policies limiting the environmental reviews required under the National Environmental Policy Act (NEPA). In contrast, recent decisions from the Tenth and D.C. Circuit Courts of Appeals gave a robust reading to NEPA's requirements and articulated an increasing skepticism about the quality of climate change analysis in NEPA reviews.

All of this comes as Congressional action to marshal significant, new federal funding resources for infrastructure remains stalled. The resulting status quo leaves project developers with greater regulatory uncertainty requiring a heightened awareness of litigation risks when engaged in federal environmental reviews and permitting.

Efforts by the Executive Branch to Streamline Environmental Reviews

On August 31, the Department of the Interior (DOI) issued Secretarial Order 3355,2 imposing limits on the NEPA reviews undertaken by DOI. The Order places time and page limits on the NEPA reviews associated with DOI's most complex decisions (i.e., environmental impact statements, EISs). The Order limits EIS preparation to one year. In addition, the Order places a 150-page limit on most EISs and a 300-page limit for "unusually complex projects." The Order marks a significant change: EIS preparation typically has taken several years and the reviews can run thousands of pages; these limits certainly will curtail the substantive consideration possible by DOI during the NEPA process.

Further, on September 14, the White House announced3 that its Council on Environmental Quality (CEQ) was taking new steps to "enhance and modernize" environmental reviews with a focus on expediting permitting of infrastructure projects. As part of the announcement, CEQ published4 a set of "initial actions" that include: development of a "framework for implementing 'One Federal Decision;"' defining of "high-priority infrastructure projects pursuant to Executive Order 13766"; commencement of a review of "existing CEQ regulations implementing the procedural provisions" of NEPA; commitment to "[i]ssue additional guidance as may be necessary . . . to simplify and accelerate the NEPA process"; and creation of a new "interagency working group to review agency regulations and policies to identify impediments to the efficient and effective processing of environmental reviews and permitting decisions."

Both DOI Order 3355 and the CEQ "initial actions" explicitly responded to direction outlined in Executive Order 13807,5 issued on August 15, 2017. That Executive Order, "Establishing Discipline and Accountability in the Environmental Review and Permitting Process for Infrastructure Projects," provided overarching direction to the Executive Branch to limit NEPA reviews – with the stated aim of leveraging that curtailment to advance infrastructure development.

In a sense, the actions also indirectly carried forward a theme the Trump Administration articulated in an earlier CEQ action: on April 5, CEQ withdrew the Obama Administration's Final Guidance for Federal Departments and Agencies on Consideration of Greenhouse Gas Emissions and the Effects of Climate Change in National Environmental Policy Act Reviews.6 Consistent with the latest actions, that action, too, sought to limit NEPA reviews, especially with regard to climate change.

Judicial Branch Requires Robust Analysis of Climate Change

On August 22, the D.C. Circuit Court of Appeals decided Sierra Club v. Federal Energy Regulatory Commission.7 In a case involving natural gas pipeline permitting decisions by the Federal Energy Regulatory Commission (FERC) and the associated NEPA reviews, the court encouraged more robust climate change analysis in NEPA reviews. Specifically, it held that FERC's EIS "did not contain enough information on the greenhouse-gas emissions that will result from burning the gas that the pipelines will carry" to be adequate. Although the court did not "hold that quantification of greenhouse-gas emissions is required every time those emissions are an indirect effect of an agency action," it demanded a "satisfactory explanation" where an agency chose to not quantify the greenhouse-gas emissions impact of an action. Furthermore, the court distinguished its decision in this case from a series of three cases involving FERC environmental review of liquefied natural gas (LNG) terminals, noting that "FERC had no legal authority to consider the environmental effects of those exports, and thus no NEPA obligation stemming from those effects."

On September 15, the Tenth Circuit of Appeals decided WildEarth Guardians v. Bureau of Land Management.8 In a case involving coal leasing decisions by DOI's Bureau of Land Management and the associated NEPA reviews, the court required more robust climate change analysis. The court held that the EIS and the subsequent decision by DOI were "arbitrary and capricious" because of deficiencies in the economic analysis DOI used to account for the climate change-related impacts of its decision. In addition, the court rejected the agency's request for "deference on the question" because the agency has previously "acknowledged that climate change is a scientifically verified reality" and "not a scientific frontier." However, this latter point provoked a concurring opinion which questioned the necessity of the court's discussion on climate science and intimated that the science remained unsettled.

Together, the two decisions give a robust reading to NEPA's requirements and articulate an increasing skepticism of the quality of climate change analysis in NEPA reviews. In both, the courts seem to be heading in the opposite direction of the Trump Administration's recent announcements and actions on NEPA reviews. This suggests that courts will be a restraining influence on the Trump Administration's attempts to curtail NEPA reviews on energy and infrastructure projects and other activities.

Conclusion

The contrasting approaches of the Executive and Judicial Branches increase regulatory uncertainty around the environmental reviews required as part of federal decision-making on matters like permitting and leasing. For energy and infrastructure project developers, investors, and market participants, skillfully navigating this uncertainty will become increasingly important to successful permitting and timely projects.

Footnotes

1 https://www.federalregister.gov/documents/2017/08/24/2017-18134/establishing-discipline-and-accountability-in-the-environmental-review-and-permitting-process-for

2 https://elips.doi.gov/elips/0/doc/4581/Page1.aspx (registration required).

3 https://www.whitehouse.gov/sites/whitehouse.gov/files/ceq/CEQ-Fact%20Sheet_FRNotice_9-8-17.pdf

4 https://www.federalregister.gov/documents/2017/09/14/2017-19425/initial-list-of-actions-to-enhance-and-modernize-the-federal-environmental-review-and-authorization

5 https://www.federalregister.gov/documents/2017/08/24/2017-18134/establishing-discipline-and-accountability-in-the-environmental-review-and-permitting-process-for

6 https://www.federalregister.gov/documents/2017/04/05/2017-06770/withdrawal-of-final-guidance-for-federal-departments-and-agencies-on-consideration-of-greenhouse-gas

7 https://www.cadc.uscourts.gov/internet/opinions.nsf/2747D72C97BE12E285258184004D1D5F/$file/16-1329-1689670.pdf

8 https://www.ca10.uscourts.gov/opinions/15/15-8109.pdf

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

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