National Environmental Policy Act Regulations: Phase 2 – Does NEPA Apply?

Nossaman eAlert

This is the second in a series of six eAlerts on the Bipartisan Permitting Reform Implementation Rule published in the Federal Register on May 1, 2024 (Final Rule) by the Council on Environmental Quality (CEQ). The Final Rule amends CEQ’s National Environmental Policy Act (NEPA) regulations (40 CFR Parts 1500-1508). We previously published an eAlert providing background and a brief overview of the Final Rule.  

NEPA requires that where a major federal action will have a significant impact on the quality of the human environment, the federal action agency must prepare a detailed statement describing, among other things, the impacts of the action, any adverse effects that cannot be avoided, alternatives to the proposed action, and any irreversible and irretrievable commitments of resources that would be involved in the proposed action. As such, the threshold determinations a federal agency must make with respect to any action is whether that action qualifies as a “major federal action” and whether the impacts of that action on the human environment will be “significant.” This eAlert discusses how the Final Rule addresses these threshold determinations.

Definition of “Major Federal Action”

Prior to 2020, NEPA implementing regulations adopted in 1978 (1978 Regulations) had remained substantively unchanged. On September 14, 2020, CEQ adopted significant changes to NEPA implementation regulations (2020 Regulations) which included changes in how to determine whether a given federal action qualified as a “major federal action.” The 2020 Regulations reflected the first substantive revision to the NEPA implementing regulations since they were first promulgated in 1978. The 2020 Regulations clarified the definition of “major federal action” first by providing a list of actions that would not qualify as a “major federal action,” and then by providing a list of generalized categories in which major federal actions tend to fall. The amendments to NEPA contained within the Fiscal Responsibility Act (FRA) codified the list of actions typically excluded from NEPA review. The Final Rule defines “major federal action” as an action carried out by an agency that the agency determines is “subject to substantial Federal control and responsibility.” The Final Rule does not elucidate how the term “substantial” should be interpreted but indicates that guidance on how to interpret the term may be issued at a later date.

Like the 2020 Regulations, the Final Rule includes lists of actions that typically would and would not qualify as “major federal actions.” These lists are similar to the 2020 Regulations with one significant exception. Unlike the 2020 Regulations, the Final Rule includes provision of “more than a minimal amount of financial assistance” as an activity that would likely be considered a “major federal action.” The Final Rule clarifies that financial assistance that could qualify as a major federal action includes providing grant monies, loans, loan guarantees, cooperative agreements, and other financial assistance where the relevant federal agency (1) has the authority to deny all or a part of the financial assistance due to environmental effects, (2) has the authority to impose conditions on the receipt of the financial assistance in order to address such effects, or (3) otherwise exercises “sufficient control and responsibility” over the use of financial assistance or the effects of the activity utilizing the funding. While some commenters on the proposed version of the Final Rule were concerned that this provision may result in certain types of federal financial assistance being subject to NEPA review where it was not before, CEQ disagreed, stating in the preamble that, as drafted, the rule will encourage consistent application.

Significance Determination

Once a federal action agency determines that it has a “major federal action,” the next question is whether that major federal action will significantly affect the quality of the human environment. This “significance” determination informs the level of review warranted under NEPA. The 1978 Regulations originally instructed agencies to examine both the “context” and “intensity” of an effect in order to determine its significance and provided a list of factors to assist in this determination. The 2020 Regulations removed this language. Through the Final Rule, CEQ restores the requirement to examine context and intensity, and provides greater detail on what “context” entails by explicitly calling for the consideration of whether the proposed action will have global, national, regional, and local effects. CEQ also provides clarity on how to consider “intensity” by offering a list of factors for agencies to consider, including the degree to which the proposed action may adversely affect communities with environmental justice concerns and the degree to which the proposed action may affect endangered or threatened species or their habitat, among other listed factors.

Finally, the Final Rule requires agencies to consider the duration of an effect and the extent to which the effect could be both adverse and beneficial depending on the circumstances. CEQ explains in the preamble to the Final Rule that in some circumstances, an effect could be overall significant due to harm experienced during one period of time even if an effect is beneficial during another period. Using habitat restoration as an example, CEQ indicates that an action could have a negative short-term effect on a species while having a positive long-term effect, or could extirpate a species from an area even though the action has long-term benefits to habitat.

Closing Thoughts

By hewing closely to the 1978 Regulations, the Final Rule is unlikely to result in substantially different application of the threshold question of whether a given federal action is subject to NEPA review and provisions concerning which actions typically are and are not “major federal actions” do little to clarify the appropriate scope of NEPA review in situations where a federal agency has control over a limited aspect of a project. Nevertheless, the explicit inclusion of federal financial assistance—including grants and loans—as an action likely to trigger NEPA review may create some degree of uncertainty for federal agencies and project proponents where federal funding would not previously have triggered NEPA review.

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