On May 1, 2024, the White House Council on Environmental Quality (CEQ) published its long-awaited final Phase 2 rule, revising the agency’s regulations implementing the National Environmental Policy Act (NEPA) (“Bipartisan Permitting Reform Implementation Final Rule”). A redline of the final rule is available here.
Below, I review three key changes in the Phase 2 rule: factors that shape agencies’ level and scope of analysis, implementation of recent amendments to NEPA, and integrating environmental justice (EJ) considerations. The summary tables in each section compare those changes to the original 1978 rule, the 2020 rollback, and the Phase 1 rule.
This summary is not comprehensive of all changes in the Phase 2 rule. For more, see CEQ’s overview presentation here.
Changes Affecting Agencies’ Level and Scope of Analysis
The final rule redefines key terms that agencies use to determine the proper level of analysis for a proposed action (e.g., a finding of no significant impact (FONSI), environmental assessment (EA), or environmental impact statement (EIS)). The final rule also expands the types of effects agencies should consider to include climate change-related effects and effects on communities with EJ concerns, among others.
Table 1: Changes Affecting Agencies’ Level and Scope of Analysis
Defining “Major Federal Actions” Subject to NEPA Review:
Under NEPA, all “major federal actions” that “significantly” affect the environment require an environmental impact statement (EIS). The Phase 2 rule redefines “major federal action” consistent with language in the FRA as an action subject to “substantial federal control and responsibility”.[1] CEQ did not define “substantial”, but stated the phrase means an agency has a “large amount” but “not complete” control over the action or its effects. The rule offers examples including “granting authorizations, including permits, licenses, rights-of-way, or other authorizations”, the adoption of official policy, formal plans, or programs, carrying out specific projects, and providing financial assistance where the agency has authority to deny, in whole or in part, the assistance or impose conditions based on environmental effects.[2] The rule 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.”[3]
Determining Which Effects Are “Significant”:
The Phase 2 rule also restores and revises the 1978 requirement that agencies assess the “context” of the proposed action and the “intensity” of its effects when deciding the level of environmental review.[4] The Phase 2 rule also clarifies that agencies should consider the duration of effects, noting only adverse effects are significant and agencies cannot offset adverse effects with other beneficial effects when determining significance.
When analyzing a proposed action’s “context”, the Phase 2 rule restores the 1978 rule’s broader geographic scope, deleting the 2020 rule’s requirement that agencies only consider the effects in the local area for a site specific action. Under the Phase 2 rule, depending on the scope of the action, agencies will now need to consider the potential “global, national, regional, and local contexts” as well as both short and long-term effects. The rule also states that agencies’ “context” analysis should consider “proximity to . . . communities with EJ concerns.”[5]
Regarding the “intensity” analysis, CEQ restored a modified version of the 1978 rule’s ten-factor “intensity” test. The Phase 2 rule’s new eight-factor test deleted or consolidated several elements in the 1978 test,[6] and added two new factors: the degree to which the action may adversely affect the rights of Tribal Nations, or communities with EJ concerns.[7] The modified test also clarifies that only adverse, not beneficial, effects contribute to the “significance” analysis.
Changes Implementing the 2023 Amendments to NEPA
The final Phase 2 rule incorporates changes made under the Fiscal Responsibility Act’s 2023 amendments to NEPA, passed June 3, 2023, which amended NEPA for the first time. These changes include clarifying when agencies can “tier” to an existing programmatic analysis, and provisions regarding agencies’ use of categorical exclusions (CEs), discussed below.
Table 2: Changes Implementing the 2023 NEPA Amendments
Relying on Programmatic Environmental Documents:
Agencies can prepare Programmatic Environmental Impact Statements (PEIS) and Environmental Assessments (PEAs) to assess the effects of policies, programs, plans, or groups of related activities.[8] An agency can incorporate, or “tier” to, an existing PEA/PEIS to minimize repetitive discussion and analysis. Agencies can tier to a PEA/PEIS as long as it was prepared within the last five years and there are no “substantial new circumstances or information” on the significance of relevant adverse effects.[9] If agencies tier to a PEA/PEIS that’s more than five years old, they must reevaluate the PEA/PEIS and explain why it remains valid considering any “new and substantial information or circumstances”.[10]
Application of Categorical Exclusions to Proposed Actions:
Categorical exclusions (CEs) are classes of actions that an agency determines generally do not have a significant effect on the environment, and therefore do not require an EA or an EIS.[11] Under President Trump, CEQ issued rules 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 are “substantially the same.”[12] Under the FRA, Congress amended Section 109 of NEPA to codify this language in the statute. CEQ’s Phase 2 rule clarifies the steps an agency must take when adopting another agency’s CE to cover a proposed action or category of actions.[13]
The Phase 2 rule allows agencies to establish CEs “individually or jointly with other agencies.”[14] CEs can be limited geographically or have a limited duration, and include mitigation measures.[15] The rule also allows agencies to establish CEs through a land use plan, decision document supported by a PEIS/PEA, or “equivalent planning or programmatic decision” subject to procedural restrictions.[16]
Changes Integrating Environmental Justice Priorities
The Phase 2 rule adds several components to ensure agencies consider, analyze, or mitigate impacts to “communities with environmental justice concerns”, including impacts on the rights of Tribal Nations, when implementing NEPA. These changes include requiring agencies to identify an “environmentally preferable alternative” among the selected alternatives; enhanced procedures to ensure meaningful engagement with impacted communities; and ensuring that mitigation is enforceable and monitored if agencies rely on that mitigation to determine whether the proposed project’s effects are significant. The rule also codifies a government-wide definition of environmental justice for the first time, consistent with President Biden’s recent executive order on Revitalizing Our Nation’s Commitment to Environmental Justice for All.
Table 3: Changes Integrating Environmental Justice (EJ) Considerations
Identifying the “Environmentally Preferable Alternative”:
One of the ways in which the Phase 2 rule considers EJ impacts is in the identification of an “environmentally preferable alternative” in the draft EIS. This alternative maximizes environmental benefits, including addressing climate change-related effects or adverse effects on communities with EJ concerns.[17] The environmentally preferable alternative can be the proposed action, no action alternative, or other reasonable alternative.
Integration of Indigenous Knowledge:
The Phase 2 rule also explicitly includes Indigenous Knowledge as an example of “high-quality information” that agencies should consider and include in their NEPA reviews.[18] However, CEQ stated it is outside the scope of the agency’s authority to direct agencies to act on Indigenous Knowledge in their NEPA rules. CEQ also declined to define “Indigenous Knowledge” to give agencies “flexibility to approach Indigenous Knowledge in a fashion that makes sense for their programs and the Tribal nations with which they work.”[19] Agencies can rely on their existing guidance and best practices, as well as CEQ’s and OSTP’s Nov. 30, 2022 guidance on Indigenous Knowledge.
Enforcing and Monitoring Certain Mitigation Measures:
The Phase 2 rule also includes protections to ensure that certain mitigation measures are implemented as proposed. Specifically, if an agency relies on mitigation to determine a proposed action’s “reasonably foreseeable” effects, that mitigation must be enforceable.[20] The rule does not prohibit agencies from approving proposed actions with unmitigated adverse environmental effects. Furthermore, mitigation does not need to be enforceable as long as the agency does not rely on that mitigation to determine the proposed action’s effects. Agencies must adopt and summarize a monitoring and enforcement program for enforceable mitigation requirements included in their record of decision (ROD).[21] Notably, the Phase 2 rule explicitly requires agencies, “where relevant and appropriate”, to mitigate “significant human health and environmental effects . . . that disproportionately and adversely affect communities with [EJ] concerns.”[22]
Defining “Environmental Justice”:
The Phase 2 rule also defines environmental justice consistent with President Biden’s executive order 14096. 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.[23]
Promoting Meaningful Engagement:
Finally, the Phase 2 rule adds a new section on public and governmental engagement.[24] Among the new provisions, agencies “should . . . conduct, as appropriate, early engagement with likely affected or interested members of the public,”[25] and “shall consider” affected people’s ability to access online resources and their primary language.[26] The rule also includes specific notification and public meetings and hearing requirements.[27] Each agency will appoint a Chief Public Engagement Officer responsible for facilitating community engagement and technical assistance where necessary; departments may also appoint Chief Public Engagement Officer for departmental subunits if desired.[28]
Additional Changes
Other notable elements of the final rule include:
- The Phase 2 rule clarifies that multiagency environmental reviews will be led by one lead agency, with other agencies serving as joint lead agencies or cooperating agencies. The rule offers additional clarity on each agency’s role in the preparation of environmental documents.
- CEQ removed the 2020 rule’s exhaustion and remedy provisions imposing exhaustion requirements on public commenters and potential litigants.
CEQ also declined to include significant provisions in the proposed rule:
- CEQ decided not to codify its 2023 NEPA guidance on GHGs and climate change as part of the final rule, though the Phase 2 rule does require agencies to quantify reasonably foreseeable greenhouse gas emissions where feasible.
- CEQ did not finalize the proposed “innovative approaches” to address “extreme environmental challenges” including sea level rise, increased wildfire risk, and water scarcity.[29]
Next Steps
The Phase 2 rule applies to any NEPA process that commences after July 1, 2024, and agencies have until July 1, 2025 to propose NEPA implementing procedures consistent with the final rule. Agencies may also apply the rules to ongoing activities and environmental documents begun before July 1, 2024.
On May 21, 2024, a coalition of 20 Republican-led states challenged the rule in the District Court for the District of North Dakota. The states argued that the rule violates NEPA, the Administrative Procedure Act, and the major questions doctrine. The states asked the district court to vacate and remand the final rule; block CEQ from implementing the rule; and to reinstate the 2020 rule. Multiple environmental and EJ organizations have intervened. State of Iowa et. al. v. Council on Envtl. Quality et al., No. 1:24-cv-00089 (D. N. Dakota). Relatedly, on June 24, 2024, the Supreme Court agreed to hear a case on whether NEPA requires agencies to assess the environmental impacts of an action if the agency does not have regulatory authority to address those impacts. Seven County Infrastructure Coalition, et al., v. Eagle County, Colorado, et al., No. 23-975 (US).
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.
[1] 40 C.F.R. § 1508.1(u).
[2] 40 C.F.R. § 1508.1(u)(1).
[3] 40 C.F.R. § 1508.1(u)(2)(ix).
[4] 40 C.F.R. § 1501.3(d)
[5] 40 C.F.R. § 1501.3(d)(1).
[6] The Phase 2 rule deleted several factors originally included in the 1978 rule’s ten-factor test, including whether the possible effects of the proposed action are “highly controversial”, and the “degree to which the action may establish a precedent for future actions with significant effects.” The Phase 2 rule moved the prohibition on “terming an action as temporary or breaking it down into small component parts” from the “intensity” test to the section on scoping. 40 C.F.R. § 1501.3(d)(2)(i)–(viii); Implementation of Procedural Provisions, 43 Fed. Reg. 55,978, 56,006 (Nov. 29, 1978).
[7] 40 C.F.R. § 1501.3(d)(2)(i)–(viii).
[8] 40 C.F.R. § 1501.11(a).
[9] 40 C.F.R. § 1501.11(c)(1).
[10] 40 C.F.R. § 1501.11(c)(2).
[11] 40 C.F.R. § 1501.4(a).
[12] 40 C.F.R. § 1506.3(d) of the 2020 Rollback.
[13] When applying another agency’s CE, the reviewing agency must identify the relevant CE, consult with the agency that established the CE, and provide public notice of the proposed action(s) to which the CE would apply. The reviewing agency must also evaluate the proposed action for extraordinary circumstances under which the CE would not apply because the action will have a significant effect. Section 1501.4(a)-(e).
[14] 40 C.F.R. § 1501.4(a).
[15] 40 C.F.R. § 1501.4(d)(2).
[16] 40 C.F.R. § 1501.4(c)
[17] 40 C.F.R. § 1502.14(f)
[18] 40 C.F.R. §§ 1502.15(b), 1506.6(b).
[19] National Environmental Policy Act Implementation Regulations Revisions Phase 2, 89 Fed. Reg. 35,442, 35,482-83 (codified at 40 C.F.R. pts 1500-08) (May 1, 2024).
[20] 40 C.F.R. § 1505.2(c).
[21] 40 C.F.R. § 1505.3.
[22] 40 C.F.R. § 1505.3(b).
[23] 40 C.F.R. § 1508.1(m)(1).
[24] 40 C.F.R. § 1501.9.
[25] 40 C.F.R. § 1501.9(c)(2).
[26] 40 C.F.R. § 1501.9(c)(3).
[27] 40 C.F.R. § 1501.9(d)–(e).
[28] 40 C.F.R. § 1507.2(a).
[29] National Environmental Policy Act Implementing Regulations Revisions Phase 2, 88 Fed. Reg. 49,924, 49,958 (proposed July 31, 2023).