40 Years Later: NEPA Regulation Update

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On July 16, 2020, the White House Council on Environmental Quality published the long-awaited revision to its regulation of the National Environmental Policy Act (NEPA) as a final rule (85 Fed. Reg. 43304). NEPA requires agencies to study the environmental impacts of major actions that could significantly impact the environment. But does the new rule make the environmental review process significantly more synchronized and predictable? Does it address the Trump's administration's "One Federal Decision" policy? It clarifies key terms where the original 1978 regulation, and subsequent federal court decisions, have significantly expanded the burdens and litigation risks of the NEPA process, but will new provisions on exhaustion of objections during comment periods reduce litigation risk for agencies and uncertainties for project applicants and other stakeholders? Together with the Trump administration's other major infrastructure reform initiatives, will the new rule help pave the way for significant expansion and modernization of America's infrastructure? Mario Loyola, formerly associate director of the White House Council on Environmental Quality, was intimately involved in President Trump's infrastructure efforts, and will review some of the most significant changes of the new NEPA regulation.  


Mario Loyola, Senior Fellow, Competitive Enterprise Institute



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Greg Walsh:   Welcome to The Federalist Society’s Teleforum conference call. This afternoon’s topic is titled “40 Years Later: NEPA Regulation Update.” My name is Greg Walsh, and I am Assistant Director of Practice Groups at The Federalist Society.


      As always, please note that all expressions of opinion are those of the expert on today’s call.


Today we are fortunate to have with us Mario Loyola, a Senior Fellow at the Competitive Enterprise Institute. Before joining CEI, Mario worked at the White House as the Associate Director for Regulatory Reform at the Council on Environmental Quality and as a presidential speech writer. After our speaker gives his opening remarks, we will go to audience Q&A. Thank you for sharing with us today. Mr. Loyola, the floor is yours.


Mario Loyola:  Thank you and thanks to everyone for joining the call. So I’m going to spend some time giving the highlights of the final changes in the rule that was published last week, I guess -- last Wednesday or Thursday in the federal register. You can find the text of the rule at 85 Federal Register 43304. And I just want to highlight some of the most important sort of technical changes, and then I look forward to any questions that people might have.


I want to open up with some general just sort of background and big picture takeaways. The Trump administration has published a new set of rules to implement the National Environmental Policy Act, or NEPA. NEPA requires federal agencies to study the potential environmental impacts of major actions, including infrastructure projects, that may have a significant effect on the environment. The law was adopted at the beginning of the ‘70s. In 1978, the Carter administration published a formal set of regulations on NEPA that have been, with only one exception, basically not amended since then up until now.


One can argue that the 1978 regulation opened up the field for a lot of litigation, and it’s valance—to use a term from chemistry—was generally to expand the reach of NEPA, to expand its burdens, and expand the uncertainty of litigation risks associated --


Greg Walsh:  I’m sorry. I think we may have lost Mr. Loyola, and I believe he’s coming back. Mr. Loyola, you are live.


Mario Loyola:  Sorry. Sorry, everyone. I don’t know what happened there. But as I was saying, so the 1978 regulation, whether it intended to or not, had a sort of valance of increasing the footprint of NEPA, if you like, at every step in the process. And I’ll go through some of the changes in the new regulation, which I think is fair to say restore that valance to something more closely faithful to the original statute.


Now, one important point to make at the outset is what the status of this regulation is. This is not the typical regulation in the sense that it’s not an exercise of an explicit grant of rulemaking authority to an agency from Congress. But as the Supreme Court has recognized in, for example, Public Citizen -- Department of Transportation v. Public Citizen, the Supreme Court said in that case the CEQ was created by NEPA with authority to interpret NEPA. So there is, at least according to the Supreme Court, an implicit grant of rulemaking authority. And, because it’s a legal interpretation, the courts should be granting Chevron deference generally to this regulation or a kind of Chevron deference to this regulation.


Now, the regulation itself was called for by a Carter era amendment to a Nixon era executive order. So this all distends from a series of executive orders. The Carter era executive order instructed CEQ to adopt regulations that would reduce the burdens and reduce the delays of the NEPA process. I think everyone can agree that it did not achieve that objective and that, therefore, one could argue that CEQ remains subject to an ongoing, continuing mandate from that executive order, which is still in effect, to reduce the burdens and delays of NEPA.


And for those who may think that improvements to the NEPA process are not a sufficient justification for a change in a longstanding agency interpretation of statute as required by State Farm, I think the administration will be able to argue with considerable evidence that the failure to rein in the delays and uncertainties and paperwork burdens of NEPA amply demonstrate the need for a correction in the regulation -- some corrective action in the regulation of NEPA.


So with that, I’ll do what my contract law case book did and start with damages and remedies. Right up front in part 1500 of the regulation, there are several important changes that will effect the litigation landscape for, particularly, environmental impact statements, which have a nearly 100 percent litigation risk. And it’s very important to begin with the understanding that one of the real problems that has arisen is that courts have bent over backwards to dismantle the protections that litigants -- that defendants normally have -- that agency defendants would normally have in a litigation context when the plaintiff is seeking an injunction.


Typically, there are requirements of standing that are a very high threshold. Typically, there are bonding requirements to protect the defendant against losses that may be suffered by the agency. And there are demonstrations of irreparable harm. These are all high hurdles to be able to get an injunction against a defendant such as an agency.


And in the case of environmental advocacy groups that bring lawsuits under the Administrative Procedure Act related to NEPA, courts have sort of systematically dismantled all of these protections for the defendants. You can establish standing if you claim that a particular project is going to interrupt the pleasantness of your view. Very rarely are plaintiffs held to any sort of bonding requirement to discover the potential -- to protect the potential losses due to the halt in agency action, potential losses not just to the agency but obviously to the project proponents in the case of infrastructure. And courts have been very lax with plaintiffs when it comes to establishing irreparable harm under a statute that does not give rise to a substantive right of action.


The right of action under NEPA is procedural. And so even under Administrative Procedure Act, the plaintiff’s claim is limited to the zone of interest protected by the procedure that’s in place. And the purpose of that procedure is to inform the decisionmaker and, secondarily, to inform the public about the potential consequences of a major federal action that can significantly impact the environment.


And so it’s very important to be able to focus on the remedy -- the proper remedy under NEPA turns on whether the agency decision has been properly informed by a study of potential impacts. And because you can always find something that’s missing: some butterfly species that wasn’t taken into account or some particular thing that’s missing in an otherwise perfect 1,000 page environmental impact statement, courts have been able -- courts and plaintiffs have been able to stop major projects by just coming up with something that the agency didn’t consider in the entire universe of things that it tried to consider. And courts have been lax about requiring plaintiffs to be able to demonstrate that the omission of that particular impact had any effect whatsoever or would have had any effect whatsoever on the agency decision making.


So these changes address that set of problems in litigation in a number of ways. One of them is—and chiefly I would say, chiefly of note—is the concept of exhaustion of objections. When the notice of intent is published—the notice of intent to publish an environmental impact statement—the agency is required to ask for comments, comments related to alternatives to the action, impacts of the action and its alternatives, and other issues that bear on the agency’s decision making. Litigants have often been able to raise objections in litigation that they did not raise for the awareness of the agency during the NEPA process itself, which is when those issues have to come to light. And so now the regulation says that if some future litigant did not raise a particular objection during the NEPA process itself -- during the requested -- during the period during which comments are requested, then those objections will be deemed unexhausted and forfeited.


Another important provision is that agencies will be able to establish bonding requirements as part of their rules implementing NEPA. Every agency has to have a set of NEPA implementing procedures, and agencies will now be able to establish bonding requirements when their actions are challenged. So those are a couple of ways.


Another important element is that the original regulation—1978 regulation provided—had some sort of weird language that said that trivial violations shouldn’t give rise to an independent cause of actions. Courts looked at that and said, “Well, what’s a trivial violation? That must be something like harmless error under the Administrative Procedure Act.” That was arguably not the right result for courts to reach because, of course, harmless error under the Administrative Procedure Act already applies as a result of the Administrative Procedure Act.


So there was an argument to be made that CEQ intended something more when it used the term “trivial violation” instead of referring to harmless error. And here, CEQ has gone back to the concept of harmless error to make clear that within what courts should consider harmless error for purposes of the Administrative Procedure Act are minor, non-substantive errors, which is not -- harmless error under the Administrative Procedure Act is often a very, very -- it’s truly harmless error. It’s a decimal place in the wrong place or something like that.


Here, I think the idea is to make sure that these small harmless errors that can be fixed by compliance with the NEPA procedures themselves, in other words by an addendum to the environmental impact statement, that that should be the proper remedy as opposed to injuring -- as opposed to leaving the public without its basic interest in effective agency action. And the new CEQ regulation also makes clear that CEQ’s intention is that any such harms be addressed through compliance with the NEPA procedures and not necessarily by vacating the agency action or halting the agency action. Okay.


So now let’s go into the major changes related to the NEPA process itself. This particular regulation, as I said -- it’s under the continuing mandate of Carter era and Nixon era executive orders. To those are added another source of authority, which was Executive Order 13807, which was signed by President Trump on August 15 of 2017.


That executive order created a policy called “One Federal Decision.” It called for CEQ and the Office of Management and Budget to work together to come up with a system that would make for a more synchronized process among the agencies that might have to issue permits in a particular case. And according to various metrics of performance that they had to meet -- a maximum of a two-year timetable for an environmental impact statement, page limits and so forth -- these have all been codified in the regulation. For example, federal agencies are required to agree on a joint project schedule at the outset. EISs and EAs have to be completed in no more-- environmental impact statements have to be completed in no more than two years. And environmental assessments, which are much more common, have to be completed in no more than one year.


EISs are held to 300 pages maximum. EAs are held to 75 pages maximum, except where the senior agency official approves longer limits. And the lead agency has to determine the purpose and need and alternatives and project schedule in consultation with cooperating agencies.


Now, these process changes have already -- are already in some stage of implementation under the April 2018 memorandum of understanding implementing “One Federal Decision” that was worked out as one of the other to-do list elements of Executive Order 13807. And we’ve seen in the implementation of that MOU on the ground that agencies are gaming the accountability system. The two years are measured from the publication of the notice of intent to the issuance of the final EIS and the record of decision.


Agencies have, on the ground, been gaming that system by delaying the publication of the notice of intent. That becomes a little more difficult here because agencies have to publish the notice of intent as soon as the project is sufficiently finalized -- as soon as the application is sufficiently final for agency consideration and public comment. But there is one issue that is of concern, which is that the notice of intent will have to have several elements that are normally parts of the NEPA process itself and that normally come from interagency coordination in the course of the NEPA process and that, to some extent, depend on scoping with public comment.


For example, a definition of purpose at need -- for example, a preliminary list of alternatives: these elements are elements that typically emerge in the course of the NEPA process itself. And if they’re required to be in the notice of intent, then agencies will have to do a significant amount of the coordination that would normally have happened during the NEPA process before the NEPA process even starts. So one thing that practitioners should look for to test this -- I mean, the canary in the coalmine is project applicants, project developers who start complaining that the agencies are not giving them the notice of intent even months or potentially years after their application is complete. So that’s something that may need to be corrected down the road.


The regulation calls for enhanced coordination with states, tribes, and localities. It reduces duplication by facilitating use of documents required under other statutes or prepared by state/tribal/local agencies. It ensures appropriate consultation with affected tribal governments and agencies. It eliminates provisions in the current regulation that limit tribal interests to reservations, and it makes use of modern technology -- modern internet communications technology to create a flatter and more inclusive system of public engagement that will be able to give stakeholders a lot more scope for input that won’t ride, as the NEPA process has for several decades, on townhall type meetings that may be scheduled only once or twice during the life of a NEPA process.


Another very important change is that under the 1978 regulation project proponents are not allowed to prepare their own environmental impact statements -- their own NEPA documents. And because the agencies themselves often don’t have the capacity to prepare the environmental impact statement, they don’t have the staff resources to prepare the environmental impact statements that might be required depending on the number of applications that they’ve received, the 1978 regulation came up with a way for the project proponents to pay for a third party contractor to prepare the environmental impact statement. But that third-party contractor has to be chosen by the agency, and it’s responsible to the agency.


So basically you have this very weird way of addressing a straightforward conflict-of-interest-type problem with the proponent paying often millions of dollars to a contractor that is under no obligation to even pick up the phone if the project proponent calls to ask for an update. And actually, a lot of these third-party contractors take the position that they’re not supposed to talk to the project proponent at all, even though the project proponent is the one paying their bills.


The law, obviously, is full of ways of dealing with potential conflicts of interest. And this was a particularly abstruse and burdensome one. I think CEQ took the position that all we really needed to do to deal with the conflict of interest problem is to make sure that the agency has verified the voracity of the impact statement and the completeness of its analysis of alternatives and impacts and so forth. The key thing is for the agency to be able to supervise every step in the preparation of the EIS.


So one major reform that will give project proponents considerably more control over the clock and allow things to happen much more quickly and potentially even much more complete in terms of a NEPA analysis is the fact that now project proponents can prepare the draft environmental impact statement for review by the agency and in coordination with the agency. Or it can hire contractors that are responsible to them to prepare those documents. This will be a major change in the way in which business has been done in the preparation of EISs and much more fair to the project proponent and hopefully will produce better outcomes in terms of environmental analysis.


Finally, there are several key definitional changes, not just in the definition section at the end, but throughout the document there are key NEPA terms where the ’78 regulation arguably did not correctly interpret the statute or introduced some ambiguity into the statutory language, which led to major problems that were -- have been revealed in the hundreds and thousands of pieces of litigation -- of cases that have arisen under NEPA over the years. One of these is—to start at the very beginning of the inquiry—is whether you have a major federal action with potentially significant impacts on the environment. Recall that a key provision of NEPA, Section 1022C, says that, if there is a major federal action with potentially significant impacts on the environment, then the responsible agency official has to prepare a statement analyzing impacts, alternatives, and so forth.


So what does major federal action mean and what does significantly impacting the environment mean? There was disagreement among the courts in the 1970s about whether -- about what major federal action meant and whether it meant anything separate -- anything different than an action that had a significant impact on the environment. Most circuits held these to be two separate standards that needed to be met before the NEPA requirement of an EIS was triggered.


One circuit embraced what was called the unitary standard, which said that if there is a significant impact on the environment than, ipso facto, it’s a major federal action. This was adopted in the 1978 regulation as CEQ’s position, even though CEQ guidance during the ‘70s had adopted the dual standard. And the unitary standard is open to the basic objection that it violates a basic cannon of statutory construction, which is that a word put into a statute by Congress cannot be presumed to mean nothing.


And if the unitary standard were correct, then the statute should have read just any action -- any federal action with a significant impact on the environment. But that’s not what the statute said. The statute requires that it be a major federal actions.


Now, that’s a difficult term to interpret, and CEQ does not attempt a definition of major federal action in this rule. It tells us somethings that don’t constitute federal action, such as actions where the federal contribution is in some funding, but the federal government doesn’t control the outcome of the project or can’t control the impacts. Those things will not be considered -- those are carveouts that will not be considered major federal action. But CEQ properly has left it to the courts to continue developing the meaning of the dual standard and the meaning of major federal action. So that’s something to watch in the years ahead.


Another important change is the change related to purpose and need and reasonable alternatives. The statute requires agencies to consider not just the impacts of the proposed action but also to consider alternatives to the proposed action and potential impacts of those alternatives. Now, when you use -- the term “purpose and need” is often confused with, for example, public convenience.


Purpose and need is used in a lot of different contexts when agencies have to decide whether the public has a particular interest -- whether it serves the purpose and need -- whether the purpose and need of a particular project serves the public interest. That is not what the statute contemplates. The alternatives that the statute requires the agency to consider are alternatives to the federal action. They are not alternatives to the underlying proposal.


And so the definition of purpose and need in the 1978 regulation had this sort of very problematic ambiguity because it invited agencies to consider the purpose and need of the federal -- consider the purpose and need of the project and not just of the decision that was before them, whether to grant a permit or not to grant a permit. And so that lead to all sorts of agencies expending huge amounts of time and energy studying the potential impacts of alternatives to the project that the project proponent had absolutely no interest in exploring for business reasons.


And so what the CEQ regulation now does is it clarifies that the alternatives to be studied are alternatives to the action and that the purpose and need is -- the purpose and need that needs to be defined in the environmental impact statement is the purpose and need for the federal action. Normally, in the case of a permit application for a pipeline or whatever -- funding for a bridge or whatever it is, the purpose and need for the federal action is the statutory requirement that the agency act on a permit application. And so therefore the alternative to -- in a permit context, where you’re permitting an infrastructure project, the alternative to the proposed agency action will often be simply to not grant the permit.


Now, there are other sources of law. The Clean Water Act has a concept of least environmentally damaging practicable alternative. FERC has to issue tickets of public convenience. There are different sorts of situations where, outside of NEPA -- for statutory reasons outside of NEPA -- forest management plan, for example -- the agency will have to consider different routings, different configurations for the project.


But the CEQ regulation properly gets back to the core statutory requirement of NEPA, which is that the agency consider alternatives to its decisions -- to its proposed action. And that will help to significantly rein in the number of alternatives that agencies spend time studying. Remember that each alternative is a whole new gamut of impacts that have to be studied in detail. So every alternative adds 100, 200, hundreds of pages to the typical EIS. So this will help rein that in and focus the agency decisionmaker on the decision that’s actually before him or her under the relevant authorities.


Finally—and I hope we have left the best for the last here—is the significant changes to the definition of “effects.” This is where climate change has cropped into NEPA review and where significant projects have been halted, most significant and most notably, for example, in Sierra Club v. FERC in the D.C. Circuit back in August of 2017,where the project has been halted because the agency did not consider climate change impact sufficiently. So under the 1978 regulation there were, quote/unquote, “”three kinds of effects. There were direct effects, indirect effects, and what was called -- a third impact -- a third category called cumulative impacts.


Now, of course, all effects are either direct or indirect. And unless we’re going to get into quantum physics, there can’t be a third category effects that’s not either direct or indirect. What cumulative impacts was going to was making sure -- so far as I can figure. I’m not super certain about this because, after asking 150 times for somebody to help me understand cumulative impacts over the course of several years at CEQ, I was never given a reproduceable definition that I could understand and articulate to somebody else. But as far as I can figure, the definition of cumulative impacts had to do with making sure that the agency’s consideration of effected environment was not just a snapshot in time but rather that the agency was taking into account how the impacts of its proposed action would combine with the impacts of other unrelated actions or of other environmental trends so that you were considering impacts in the future -- in the environment as it might exist in the future and not just the environment as it exists today.


Now, that was arguably unnecessary because a proper definition of effected environments -- the environmental baseline against which we’re studying impacts should have allowed the agency to consider all of those dynamic kinds of trends. And the CEQ regulation has properly amended the provision on effected environment to include precisely that concept of future trend and future impacts of unrelated actions and so forth so that, when the agency considers the effective environment as a baseline, it is taking into account the fact that there may be climate change or whatever. And so then it has to measure the impacts of its action against that.


Now, the key change in the definition of effects—and arguably maybe the most important change in this entire set of regulations—is the incorporation of approximate cause type of analysis in the definition of effects. So it’s clear now that it’s not just a but-for cause, which can make the agency responsible for effects very far down the causal chain—very far down stream or very far upstream—but rather that is has to be a reasonably foreseeable and proximate cause in addition to be a but-for cause. And so that’s a very important clarification which will help discipline the entire process because now, if a litigant wants to say that the agency didn’t take, for example, climate change into account, it will have to make the case that climate impacts are both reasonably -- are a reasonably foreseeable result of the action and that they are significant results of the action.


So that properly makes it a more than nominal burden on the part of a plaintiff to be able to say that these downstream effects, which are as infinite as alternatives to a project, are ones that the agency should have taken into account. So I think with that I will stop there. There’s obviously other important issues I didn’t cover. But with that, I’ll stop there, and I’m happy to take any questions.


Greg Walsh:  Perfect. Let’s go to audience questions. Mario, it doesn’t look like we have any callers in the queue so far, so let me sort of exercise my host’s prerogative and ask you touched on the looseness of the definition for considering and analyzing new environmental impact statements. Even though this project was meant as an effort to streamline environmental regulations and practices, is there still a potential for abuse and overreach given the sort of lack of clarity on the definition?


Mario Loyola:  Are you talking about specifically the definition of effects or in general with respect to the regulation?


Greg Walsh:  I guess both, whichever is more accessible.


Mario Loyola:  So let me just say that NEPA has given rise to an astonishing amount of litigation. There are hundreds and hundreds and hundreds of cases at any given time the Environment and Natural Resources division of the Department of Justice is litigating. A significant fraction of all of its case arise under NEPA. And it’s not at all clear that the Congress that passed the statute intended there to be really any cases under NEPA. NEPA doesn’t create a right of action.


So this has been a creation of common law, and courts have bent over backwards in many cases to accommodate environmental advocacy groups and to pave the way for them to use NEPA as a way to stop otherwise important projects, often environmentally beneficial projects. And there’s another even larger point to be made which is that many Americans don’t realize that many infrastructure projects don’t happen at all -- that infrastructure projects that are necessary for communities to have better environmental outcomes, necessary for the economy to create more jobs, and these infrastructure projects don’t happen at all because investors are not willing to take the enormous risks and uncertainties that NEPA entails.


Those risks and uncertainties will continue. That sort of baseline approach that courts and environmental advocacy groups have to infrastructure projects and to halting development of infrastructure is the system that we’ve inherited after decades of courts interpreting the 1978 regulation. This is not going to sweep that system away.


What it hopefully will do is address a more -- is address a really exacerbating factor, which is that, because under the current system anything that the agency omits to consider in a 1,000-page EIS can be used as an excuse to stop the agency project. And keep in mind this is not -- this is a situation where the agencies have spent millions of dollars of taxpayer money and have taken years and years and years and imposed costs on the project proponent that often exceed the cost of actually constructing these mega projects themselves. And the reason they have put everyone to this great expense and great expenditure of time and money is to make sure that they’re complying with NEPA.


That’s the only reason they’re doing it. And yet, when they publish the final EIS after this gargantuan effort to comply with the law, they have no earthly idea if they have complied with the law. They have no way of knowing if they have complied with the law. They have not way of knowing what they’re going to get blindsided with in litigation. And that’s a very serious problem. That’s a very serious problem among other things because, if the law is totally unpredictable, you have to wonder whether it’s really a sound system of law at all.


And so that -- so that exacerbates the entire problem of agencies -- sorry, of environmental advocacy groups in courts using NEPA and figuring out how to manipulate NEPA to create 1,000 targets of opportunity in every EIS. The CEQ regulation doesn’t sweep the system away, but it does address that exacerbating factor by giving more clarity and by using brighter lines to define the key terms and by creating a system in which the agency is held to specific time limits and page limits and so forth so that people can predict when the process is going to come to a conclusion, even if they can’t predict what the agency decision will be. And so hopefully, that’s where this whole set of regulations is going to make the biggest difference.


Greg Walsh:  The line is wide open right now. Oh, perfect. We just have -- let’s now go to our first caller.


Diane Katz:  Hello, Mario. This is Diane Katz from Heritage. I appreciate your presentation quite a bit. I wanted to talk a little bit more about global warming and consideration of effects. As you now, the CEQ a year ago in June issued a proposed rulemaking, I think it was, relative to how agencies ought to consider global warming in NEPA analysis. Now, the latest final rule seems to conflict with, at least to my reading, some of the ability of agencies to consider global warming as it was presented in that proposal last year. Is that your reading as well?


Mario Loyola:  Yeah. I think that’s -- so let me just take a step back and start with the greenhouse gas guidance of the Obama administration that was withdrawn, I believe it was, just a few months into the administration by sometime in the summer of 2017. When we withdrew the -- when CEQ withdrew the greenhouse gas guidance, it was the intention at that time to reissue a new greenhouse gas guidance that would be more rational and closer to what the statute required. But then the President issued the executive order that I mentioned, 13807, in August of 2017. And that executive order, among other things, required CEQ to study a potential revision of the entire regulation of NEPA.


Now, the situation that that created was that if CEQ issued a new greenhouse gas guidance -- and of course, this is guidance on how to account for potential climate effects through the proxy of measurable greenhouse gas emissions -- if it issued that guidance before issuing a revision of the NEPA regulation that might completely redefine the definition of effects and impacts, then it would be getting the cart before the horse. And potentially the guidance would be immediately sort of obsolete under the new regulation. So properly, I think CEQ proposed this -- it was a guidance. CEQ proposed the greenhouse gas guidance for comment but then held back from proposing the final until the final new rule under NEPA was issued.


Now, this is -- so this is important for people to understand that the way that climate change crept into all of this was the definition of cumulative impacts had a lot to do with it. Now, the definition of cumulative impacts has been repealed. But as I said, the basic concern, which is a quite justifiable concern with making sure that the agency is studying baseline dynamic and future effects as part of its study of effected environment -- that has still be preserved. So the real essence of cumulative impacts has still been preserved.


However, it doesn’t really impact the climate change issue that much because, already under court interpretations and the Obama era guidance, climate change impacts—and especially the proxy of measurable, predictable, foreseeable carbon emissions—were considered a category of indirect effects, not necessarily cumulative impacts. And so now there will be a lot of attention -- there’s a lot, frankly, riding on what CEQ does with the greenhouse gas guidance. And people should not be surprised if it goes -- I have no way of knowing this. I don’t have any inside knowledge.


But people should not be surprised just exactly on the reading of the regulation that you just alluded to if the greenhouse gas guidance in the end has to go in a quite different direction than what was proposed and circulated.


Diane Katz:  If I may, is there a way that they would just simply not -- okay. Let me start over. I’m sorry. Given where the final rule -- how it treats cumulative impacts and, as I read it, as effectively removes consideration of global warming as a potential effect, why would there need to be a guidance then, other than one that involves how to treat climate change in baseline -- in creating a baseline as opposed to how to treat climate change in analyzing effects?


Mario Loyola:  So let me say if this new—just as a general matter, unrelated to climate change and the issue—the precise issue we’re discussing, a successful revision to the NEPA regulation would lessen the need for guidance, right -- would lessen the overall need for guidance so that we’ll be able to do exactly what you just suggested, which is leave prior guidance repealed or repealed prior guidance and then let people just rest on the clear language of the regulation itself. How I would qualify that in this case is by saying that the problem of which upstream and downstream effects to take into account is a difficult one because, if the major change in this area is proximate causation -- is to introduce a concept of proximate causation into impact, proximate causation is a somewhat -- it will have to be up to courts to develop a body of common law clarifying just what that means.


And for example, let’s take the situation facing the D.C. Circuit in the Sable Trail case in Sierra Club v. FERC from August of 2017. In that situation you had a pipeline that was already in operation that was supplying natural gas to a powerplant in Florida. It was a combined cycle powerplant, so natural gas wasn’t necessarily the only power source that the plant could use. And the operation of the plant was subject entirely to regulation by the state of Florida.


So the question arose whether a downstream impact that’s entirely within the control of another governmental entity that’s not even a federal agency is something that should be reasonably foreseeable for purposes of impact and that the agency would have to study. The agency had taken the position based on prior precedence of the D.C. Circuit that it didn’t have to take those impacts into account. But the D.C. Circuit stepped in and a decision that I think was arguably woefully misguided and said that nope.


We’re going to suspend the operation of an existing pipeline on which people are depending already for electricity in their homes because the agency had data on the reasonably foreseeable carbon emissions that could be expected if the natural gas that it was delivering in the pipeline -- if the natural gas that the project proponent was delivering in the pipeline to the powerplant could be estimated, then it had an obligation to furnish those, even though, as you alluded to, the impact on climate change is not only not significant but negligible and even though the administration had already withdrawn the greenhouse gas guidance that established greenhouse gas emissions as a proxy for climate impacts. So would that case have come out differently if the new definition had been in place? It’s quite likely that the court would not have ruled in the plaintiff’s favor on the basis of what the plaintiff argued in that case.


But it is also likely that if the plaintiff spent more time and energy establishing the foreseeability of the climate impacts and why it’s within proximate cause and so forth then it could convince a court to agree with it that these carbon emissions need to be accounted for as part of potentially significant effects. And so I’m sorry if that’s a longwinded way of not giving a clear answer, but I think that it just reinforces the point that courts are going to have to figure out in close cases what these new definitions mean. But it certainly means that downstream impacts all the way to the ends of the Earth are not ones that the agency should have to consider.


Greg Walsh:  Well, there are two callers in the queue, so let’s go directly to them.


Caller 2:  Hi, I was wondering if you could speak a little more to the situation with the Dakota Access pipeline and whether you foresee that ever getting reopened or not?


Mario Loyola:  Oh, well, I would say there that the Dakota Access pipeline is a great example of where this entire federal process for permits and environmental reviews really breaks down and has really become, I would say, a major international competitive disadvantage for the United States because other countries—Australia, for example—don’t burden their major strategic type infrastructure projects with a situation where anywhere along the line of a nearly 2,000 mile pipeline -- any mistake with respect to a single stream crossing or building under a particular lake can halt the entire project. And so I would say these changes apply -- the changes in the new CEQ regulation apply to projects that began the NEPA process 60 days after the effective date of the regulation. So this will be projects as to which a notice of intent to prepare an EIS is issued after the middle of September are the ones that will be required to be subject -- obligatorily subject to this regulation.


Agencies can apply the regulations to projects that are already under NEPA review. In the case of Dakota Access pipeline it’s difficult to say because the project is almost sui generis. It’s so big. It involves so many different licenses, so many different impacts that there’s -- you can get -- it will always be subject to potentially some district court coming in and issuing an injunction to stop the whole thing.


So I don’t have any way of predicting what will happen with Dakota Access pipeline, but I can predict with some confidence that these bigger projects like Dakota Access pipeline will remain vulnerable to a process that allows courts to stop the entire project on the basis of omissions or corrective action that is really comparatively quite minor.


Greg Walsh:  Let’s go to our final caller.


Caller 3:  Hi. Three quick questions. First, what is the effect of this on pending cases, if at all? And secondly, are there any challenges to it already? And third, you said there’s no right of action in the statute, and the Supreme Court has narrowed dramatically the right of action idea. And I wondered if it’s been recently challenged that there is no right of action under NEPA?


Mario Loyola:  Well, so in reverse order, the right of action -- it’s long been recognized that there’s no right of action under NEPA and that the right of action is one that arises under the Administrative Procedure Act, particularly the prohibition on agency action that is arbitrary and capricious. And so from that has arisen -- to that has been added the 1970s era cases that require the agency to take a hard look at every relevant factor in order to avoid a court finding that it’s action was arbitrary and capricious. The way to fix that is by making clear, as I think the CEQ regulation does both in the text of the regulation and in the very valuable preamble—which I’m confident will be used by courts and by litigants also in reaching their conclusions and which everyone should read—that the right of action that litigants can pursue in connection with NEPA is very much a procedural one.


It’s not substantive. They don’t have any particular right to anything other than the agency properly observing NEPA in the consideration of the impacts that are supposed to inform its decision making. So that’s you’re last question.


I think your second to last question is are there any challenges. I don’t know if there are any challenges. I wouldn’t be surprised if there’s a challenge soon. Off the top of my head it wouldn’t seem to me like a challenge would be ripe until you have a published final environmental impact statement for the agency -- for a litigant to challenge, which is a couple of years down the road if we’re going to apply it only to those NEPA processes that began after the middle of September of this year.


But however, it could be that, if an agency, for example, takes advantage of the ability to apply the new NEPA regulation voluntarily to an ongoing review and, therefore, it takes some step -- scoping or, for example, applicant preparation of their own environmental document -- if it takes some step that courts have recognized as giving rise to some ability to get an injunction during the NEPA process itself, then it might not take long at all for a challenge to the rule to materialize. I don’t think that a facial challenge to the rule could be established without standing, so it will have to arrive in some particular NEPA review. And then, finally, I think your first question was whether the new regulation applies to ongoing projects. Is that correct?


Greg Walsh: I believe that is correct.


Mario Loyola:  Yeah. So again, as I mentioned, the regulation applies to -- it goes into effect 60 days after its publication in the federal register, which was last Thursday. So halfway through September, we should start seeing -- any notice of intent published after the middle of September will supposedly be subject to this EIS. If agencies choice, the regulation specifically allows agencies to apply this voluntarily to NEPA reviews.


It’s not completely clear whether they can apply parts of it or apply it as a whole. But if that is the case, then you could see lots of NEPA reviews getting impacted that are already ongoing as soon as the regulation goes into effect. There’s a good reason to believe that agencies will avail themselves of this provision. And that is that the new NEPA regulation is really just another layer of the various layers of reforms to the federal permitting and environmental review process that were launched by President Trump in Executive Order 13807.


So, for example, the “One Federal Decision” elements that are codified in the new rule were already, many of them, in the interagency memorandum of understanding that was signed in April of 2018 in which I know from personal knowledge the agencies have been busy implementing very carefully all the way down to regional and district office levels. And so this leads to another sort of wrinkle that I didn’t mention in my remarks today, which is people have said and environmental groups said, if there’s a change in administration, this will all be pulled back. I seriously doubt that that’s true.


And one reason is that everybody benefits from this, including renewable energy projects and other projects favored by the previous administration. And the other one is that the agencies have already been implementing all of this for several years, and they’ve already developed procedures, quite extensive procedures, not just internal to the agency, but also interagency working arrangements to implement the “One Federal Decision” policy. And to that extent, it has become a new way of doing business. And reversing that is likely to run into the same resistance that, perhaps, the “One Federal Decision” push itself ran into -- or any reform would run into at the outset.


So we’ve already got a vested interest at the agencies and in the stakeholder community for all of these changes. And so for that reason, because it will potentially make the task of implementing “One Federal Decision” easier and because stakeholders are likely to call for it, including project proponents, it’s quite likely -- I wouldn’t be at all surprised, I should say, if the agencies start applying the new regulations to lots of projects that are already outstanding.


Greg Walsh:  Mr. Loyola, do you want to add anything before we conclude?


Mario Loyola:  Nope. I think that’s great. I mean, I’d just say in addition that this infrastructure reform has been enormously important. A lot more work needs to be done. It’s important to protect the environment, but there is no reason on Earth why holding fast to America’s environmental protections requires a systems of permits and environmental reviews that imposes levels of risk on capital formation and investment that are ones that you would expect to see in a poor, underdeveloped country.


And this is going to be a big disadvantage to the United States in the long run if you compare to China and to other countries that are developing this gleaming modern new infrastructure. And it’s one that every responsible stakeholder should have an interest in helping to reform.


Greg Walsh:  On behalf of The Federalist Society, I want to thank our speaker for the benefit of his valuable time and expertise today. We welcome listener feedback by email at info@fedsoc.org. Thank you all for joining us. We are adjourned.




Dean Reuter:  Thank you for listening to this episode of Teleforum, a podcast of The Federalist Society’s practice groups. For more information about The Federalist Society, the practice groups, and to become a Federalist Society member, please visit our website at fedsoc.org.