Jan. 22, 2020
Almost 50 years to the day after President Nixon signed into law the National Environmental Policy Act (NEPA), President Trump proposed revisions to the key regulations implementing that statute. The proposed regulations are designed to streamline the review process under NEPA, including reducing the timeframe to permit interstate gas and liquids pipelines. However, to date, FERC has been one of the more prompt agencies in complying with NEPA when evaluating the time to issue a final environmental document. Therefore, if the regulations are implemented, there is unlikely to be much intermediate term benefit to interstate gas pipeline project applicants, although new restrictions on the evaluation of the impact of upstream greenhouse gas emissions could mitigate a significant uncertainty. In the short term, litigation over the new regulations, once they are final, may actually create more uncertainty and longer review times.
Today, we look at some of the key changes in the proposed regulations. In particular, we look at how the changes may directly impact interstate gas pipelines and the approval process at FERC. We will follow up with a separate Insights on how the rules may help the oil and gas industry in general, including how they may limit federal review of oil pipeline border crossing projects and eliminate the need to consider climate change in fossil fuel leases on federal lands.
NEPA required federal agencies, like FERC, to adopt regulations that require the agencies to consider in a “detailed statement” the environmental impact of major federal actions significantly affecting the quality of the human environment. While the statute was enacted in 1970, the first implementing regulations were not issued until 1978, and they have essentially remained unchanged since some modifications were issued in 1986. Agencies can comply with NEPA in three ways, with increasing levels of review:
- The agency can identify certain actions that do not individually or cumulatively have a significant effect on the environment and “categorically exclude” those actions from individual review.
- The agency can prepare an Environmental Assessment (EA) and determine that the action is not likely to have a significant environmental impact.
- The agency can prepare an Environmental Impact Statement (EIS) in sufficient detail to satisfy the statutory requirement of a “detailed statement” assessing the environmental impact of the action.
NEPA has been held not to mandate any particular decision by the agency, but to impose solely procedural requirements. However, failure to satisfy the procedural requirements can result in the substantive federal decision being overturned for not being well-founded.
Key Proposed Changes
Since NEPA is a procedural regulation, all of the proposed changes are procedural in nature, but are cumulatively expected to shorten the time period needed for environmental review of projects, especially those projects requiring the preparation of an EIS.
Page and Time Goals
Two key procedural changes may end up being at cross-purposes for the agencies. As the old saying goes, “If I had more time, I would have written a shorter letter.” The proposed rules impose both a time limit and a page limit on the preparation of both EAs and EISs. EAs are to be no longer than 75 pages, not including appendices, and are to take no longer than a year to prepare. EISs are to be no longer than 150 pages, unless the project is unusually complex, in which case the EIS may run to 300 pages, but in either case, they should be completed within two years. We have looked at this standard for the FERC projects in our platform for which the environmental documents were issued after 2015. The following charts show the time period and page length for each type of document.
FERC did not meet the 150 page limit for any of the EISs issued in the last four years and, on average, has usually doubled the 300 page limit. Also, on average, FERC is right at the two-year limit for EIS preparation, but may be hard-pressed to do that if it is required to shorten its prose to a half or even a fourth of the typical length of an EIS. Similarly, FERC generally takes twice as long as the 75 page limit for EAs, but has done a far better job of meeting the one-year time limit. However, if it spends the extra three months to shorten the document to the 75-page limit, applicants may not be pleased.
Other Key Changes - GHGs, Alternatives and Appeals
We have written extensively on the dispute at FERC about the need to determine the upstream and downstream impacts from approving a pipeline project, with particular interest on the greenhouse gas impacts. As we described in The First Casualty of FERC’s Fight Over GHG , FERC has not been considering any upstream impacts from pipelines and has only considered very limited downstream impacts. A key change in the proposed regulations would strengthen this position. The regulations essentially limit the scope of an agency’s review to those effects “that are reasonably foreseeable and have a reasonably close causal relationship to the proposed action or alternatives.” In particular, the proposed rules specifically state that the agency is not required to consider cumulative impacts at all. The combination of these changes would essentially eliminate any need to consider any upstream or downstream impacts and would eliminate all greenhouse gas emission considerations because the only environmental impact of greenhouse gases is on a cumulative basis across the entire world.
Another key change included in the proposed regulations would make clear that for privately funded projects, such as a pipeline, the only alternatives that need to be considered in the NEPA analysis are those that would meet the goals of the applicant. This would greatly reduce the need for alternative analyses by eliminating any discussion of energy conservation or alternative forms of energy.
The proposed regulations also appear intended to restrict the ability of a project’s opponents to appeal the decision of the federal agency. The proposed rules provide that comments and objections to environmental analyses that are untimely submitted or not submitted are forever waived. The stated purpose of this provision is to prohibit parties from appealing to the courts any analyses based on issues they did not raise during the public comment period.
What Comes Next?
The Commission on Environmental Quality (CEQ), which issued the proposed rules, intends to hold two public hearings in February, and the formal comment period ends on March 10, 2020. After that, CEQ will need to consider and likely address the expected substantial comments it receives before issuing the final regulations. As we discussed in President Trumps All or Does He? , any regulations issued later in 2020 face a political risk of there being a change in administrations after the election. Under the Congressional Review Act, any regulations issued within 60 legislative days of the new administration taking office in January 2021 could be revoked by Congress. In addition, regulations could be replaced by a new administration.
Even if the rules become final, FERC would still have to revise its own NEPA regulations to implement them, and under the proposed rules, FERC has one year following these rules becoming effective to do that. Finally, although the administration is working through the procedures required to modify regulations, the courts are less likely to grant deference to a regulatory interpretation that runs counter to one that has been around for over 40 years. Therefore, any of these proposed rule changes or the ones adopted by FERC to implement them will undoubtedly be challenged in court. Until the courts have a chance to weigh in on the changes, the likely result will be greater uncertainty for projects seeking FERC approval.