08/23/2023 - Federal Policy Analysis

Key Changes in CEQ’s Proposed Phase 2 Regulations Implementing NEPA

by Hannah Perls

On July 31, 2023, the White House Council on Environmental Quality (CEQ) published its long-awaited proposed Phase 2 Revisions to its regulations implementing the National Environmental Policy Act (NEPA). A redline of the proposal compared to the current regulations is available here. Comments on the proposal are due Sep. 29 and can be submitted at federalregister.gov. View the complete rulemaking docket, including posted comments, at regulations.gov (Docket CEQ-2023-0003).

The slides below summarize key changes in CEQ’s Phase 2 proposal and compare those changes to the original 1978 regulations, the 2020 rollback, and the Phase 1 rule. The slides also show which changes in the Phase 2 proposal are required under the Fiscal Responsibility Act (i.e., the FRA or debt ceiling bill), passed earlier this year, which amended NEPA for the first time. Key changes in the proposal include:

  • Threshold Determinations: The proposal redefines several key terms that affect agencies’ threshold determination regarding the proper level of analysis under NEPA for the proposed action (e.g., a finding of no significant impact (FONSI), environmental assessment (EA), or environmental impact statement (EIS)).
  • Recent NEPA Amendments: The proposal includes and builds upon new provisions added to NEPA under the FRA, including timelines for when agencies can “tier” to an existing programmatic analysis and provisions regarding agencies’ use of categorical exclusions (CEs).
  • Environmental Justice (EJ): The proposal includes several requirements that agencies consider, analyze, or mitigate impacts to “communities with environmental justice concerns”, including impacts on the rights of Tribal Nations, when implementing NEPA. The proposal would also adopt a definition of environmental justice consistent with President Biden’s recent executive order on Revitalizing Our Nation’s Commitment to Environmental Justice for All, and strengthen community consultation and engagement processes.

This review is not comprehensive of all changes in the Phase 2 proposal.

Table 1: Threshold Determinations

“Major federal action”: the Phase 2 proposal redefines “major federal action” consistent with language in the FRA as an action subject to “substantial” federal control. Section 1508.1(u). While the proposal does not define “substantial”, CEQ has requested comments on whether it should offer a definition in the final rule.

Under the proposal, such actions “generally include . . . providing financial assistance, including through grants, cooperative agreements, loans, loan guarantees, or other forms of financial assistance” where the agency has authority to deny, in whole or in part, the assistance or impose conditions based on environmental effects. Section 1508.1(u)(1)(vi). The proposal explicitly exempts “activities or decisions for projects approved by a Tribal Nation that occur on or involve land held in trust or restricted status by the United States for the benefit of that Tribal Nation or by the Tribal Nation when such activities or decisions involve no Federal funding or other Federal involvement.” Section 1508.1(u)(2)(ix). 

Table 2: Implementing Recent NEPA Amendments

Agencies can “borrow” CEs: Under the Phase 2 proposal, categorical exclusions (CEs) are categories of actions that “normally do not have a significant effect on the human environment, individually or in the aggregate” and therefore do not require preparation of an EA or EIS. Section 1501.4(a). Under President Trump, CEQ issued regulations amending NEPA for the first time since 1978 (redline of the 2020 Rollback compared to the 1978 regulations available here). Those rules included a provision allowing an agency to “adopt another agency’s determination that a categorical exclusion applies to a proposed action” if the proposed action and the action covered by the categorical exclusion as “substantially the same.” Section 1506.3(d) of the 2020 Rollback. Under the FRA, Congress amended Section 109 of NEPA to codify this language in the statute.

Consistent with the FRA, CEQ’s Phase 2 proposal preserves and builds upon this provision. The proposal allows agencies to adopt another agency’s determination that a CE applies to a proposed action, Section 1506.3(d), and allows an agency to apply a CE listed in another agency’s NEPA procedures, subject to procedural restrictions, Section 1501.4(e). Agencies can also establish CEs “individually or jointly with other agencies.” Section 1501.4(a). The proposal also adds language clarifying that there may be “extraordinary circumstances” that make application of the CE “inappropriate” because the proposed action will have a significant effect. Section 1501.4(a). CEs can be limited geographically or have a limited duration, and include mitigation measures. Section 1501.4 (2)(d). The proposal also allows agencies to establish CEs through a land use plan, decision document supported by a programmatic EIS or EA, or “equivalent planning or programmatic decision” subject to procedural restrictions. Section 1501.4(2)(c).

Table 3: Environmental Justice (EJ) Considerations

“Environmentally preferable alternative”: the Phase 2 proposal adds the requirement that when an agency prepares an EIS, it must identify the “environmentally preferable alternative or alternatives” to the proposed action. Section 1502.12. The proposal defines these alternatives as those that “maximiz[e] environmental benefits, such as addressing climate change-related effects or disproportionate and adverse effects on communities with environmental justice concerns; protecting, preserving, or enhancing historical, cultural, Tribal, and natural resources, including rights of Tribal Nations . . . or causing the least damage to the biological and physical environment.” Section 1502.14(f). The environmentally preferable alternative can be the proposed action, no action alternative, or a reasonable alternative.

The proposal also adopts the definition of environmental justice offered in President Biden’s executive order 14096, Revitalizing Our Nation’s Commitment to Environmental Justice for All“. That definition affirms that the result of achieving environmental justice is that all people are “fully protected” from impacts related to “the legacy of racism and other structural or systemic barriers,” among other provisions.

The proposal also incorporates EJ considerations into the revised 10-factor test agencies undergo to make a “significance determination” and decide whether to prepare an EIS (discussed above in Table 1). In deciding whether the effects of a proposed action are “significant,” agencies must examine both the action’s “context” and the “intensity” of the action’s anticipated effects. Section 1501.3(d). The 2020 Rollback deleted the ten-factor “intensity” test included in the 1978 regulations. The Phase 2 proposal would restore a revised version that test, incorporating new considerations of “Tribal sacred sites” and other ecological resources, Section 1501.3(d)(2)(iii), and “the degree to which the action may have disproportionate and adverse effects on communities with environmental justice concerns,” Section 1501.3(d)(2)(ix). The proposal also states that agencies’ “context” analysis should consider “proximity to . . . vulnerable communities.” Section 1501.3(d)(1).

Finally, the proposal adds a new section on public and governmental engagement. Section 1501.9. Among the new provisions, agencies “should . . . conduct early engagement with likely affected or interested members of the public,” Section 1501.9(c)(2), and “shall consider” impacted people’s ability to access online resources and their primary language. The proposal also includes specific notification requirements, Section 1501.9(d), and public meetings and hearing requirements, Section 1501.9(e).

Issues for Public Comment

In addition to seeking comment on the Phase 2 proposal as a whole, CEQ seeks comment on specific issues including:

  • Whether CEQ should codify its 2023 NEPA guidance on GHGs and climate change as part of the final rule;
  • Whether CEQ should provide additional guidance on the “no action” alternative;
  • CEQ’s definition of “environmental justice”;
  • Comments from Tribes on requiring agencies to consider effects of proposed projects on the rights of Tribal Nations; and
  • Further clarifying when something is a “major federal action.”

For more background information, click here for EELP’s NEPA Overview and Regulatory Tracker page on NEPA Environmental Review Requirements. For more on the FRA’s amendments to NEPA, listen to EELP’s QuickTake on the Debt Ceiling Bill and NEPA Permitting Reform.