Environmental Permitting Narrowed As Part Of Debt Ceiling Deal

As part of the Fiscal Responsibility Act (FRA), House Speaker Kevin McCarthy’s deal with President Joe Biden’s White House to extend the federal debt ceiling, Biden’s administration agreed to significant permitting reforms under the National Environmental Policy Act (NEPA). The new restrictions and definitions will take effect immediately and will affect every federal agency. The deal also revokes some provisions of the Inflation Reduction Act.

The Hill newspaper described the reforms as “[t]he biggest changes to the landmark law [NEPA] in roughly four decades” and called them “a major win for the fossil fuel industry and pro-industry lawmakers like Sen. Joe Manchin” (D-W.Va.). Among other things, the bill fast-tracks the Mountain Valley Pipeline, a 300-mile project that will transport natural gas between West Virginia and southern Virginia. The pipeline has long been a priority for Manchin, whose state depends on the energy industry.

Major Federal Action

The most important change involves what counts as a “major federal action.”

“The Fiscal Responsibility Act defines, for the first time, the concept of ‘major federal action,’ a critical term of art as NEPA only applies to major federal actions,” according to law firm K&L Gates in a June 5 policy alert. “The term as currently defined in the Council on Environmental Quality’s (CEQ) NEPA regulations provides federal agencies liberal discretion to assert federal jurisdiction and apply NEPA regulations to projects that are potentially subject to federal control and responsibility.”

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The CEQ is a White House body, created by NEPA in 1969, that coordinates environmental policy among all federal agencies. K&L Gates noted that while the FRA changes the threshold for what is considered a major federal action, the decision is still within agency discretion, albeit with a higher bar.

The act also gives specific, measurable definitions of projects that are not subject to NEPA as major federal actions. They include:

1. actions with no or minimal federal funding;

2. actions with no or little federal involvement where the federal agency cannot control the outcome of the project,

3. bringing judicial or administrative enforcement actions;

4. loans and guarantees where a federal agency does not exercise “sufficient control and responsibility” over the use of the assistance or the effect of the action;

5. business loan guarantees provided by the Small Business Administration (among others); and

6. activities or decisions that are non-discretionary (such as studying a project’s effect on endangered species, where mandated).

Endre Szalay, a partner in the Environment, Land and Natural Resources group in the Seattle office of K&L Gates, told The Waterways Journal that the permitting reform measures had been brought up in negotiations over the Inflation Reduction Act but did not make it to the floor of Congress.

The FRA also mandates having a single federal agency act as lead in any project involving more than one agency. If agencies cannot agree on a lead, the CEQ gets to pick one. This restores a Trump administration policy.

It limits environmental assessments (EA) to 75 pages and environmental impact studies (EIS) to 150 pages, or 300 pages for those of “extraordinary complexity,” although that doesn’t include footnotes and attachments.

It also imposes a time limit of two years for an EIS and one year for an EA after the date on which their necessity is determined. “Given [that] the NEPA process can often take many years and produce documents that are hundreds, even thousands, of pages long, these reforms promise to significantly expedite the current environmental review process,” according to law firm Beveridge & Diamond.

Energy storage was added to the types of major infrastructure projects subject to FAST 41 rules that permit the Federal Permitting Improvement Steering Council to oversee the permitting process. The Fix America’s Surface Transportation Act was passed in 2015 to speed up infrastructure projects and coordinate permitting actions though the council, but participation is voluntary.

The law also amends a core requirement of NEPA itself. Before the FRA, NEPA required that agencies consider the “environmental impacts” of a proposed action—a broad mandate that could be stretched out indefinitely. The changes require that agencies consider only “reasonably foreseeable” environmental impacts and list a “reasonable range” of alternatives that are “technically and economically feasible.”

The FRA gives the CEQ $500,000 to conduct a study and submit a report to Congress within one year to set up an online “portal” to consolidate information on projects and to expedite environmental reviews.

According to law firm Akin Gump, “The majority of the permitting reforms in the debt limit deal were part of the House-approved provisions in H.R. 1 championed by Rep. Garrett Graves (R-La.).” Many of them had been included in Graves’ Building United States Infrastructure Through Limited Delays and Efficient Reviews (BUILDER) Act that was aimed at reforming NEPA.

Permitting reform has been a signature issue for Graves. In 2021, when he was promoting the BUILDER Act, he wrote, “The National Environment Policy Act was enacted in 1970 to ensure the productive coexistence between the environment and the American people, but after 50 years of bureaucratic desk-jockeying, it has become an unproductive obstacle that is failing the very people and resources it is supposed to be serving. NEPA review is project purgatory, taking orders of magnitude longer to study projects than the time needed to complete them.”