DISPUTE RESOLUTION: Tort Litigation: Reforming NEPA Review of Energy Projects

by King & Spalding
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[authors: Jim Vines, Stephanie Salek, Kelsey Desloover]

The President’s re-election once again focused attention on the question of whether the Administration will grant the Presidential permit necessary for the U.S.-Canada border crossing of the Keystone XL pipeline. While Keystone XL is of high interest in its own right, the controversy also suggests equally important but much broader questions about the overall impact of National Environmental Policy Act (NEPA) review and the associated NEPA litigation frequently initiated by Non-Governmental Organizations (NGO) to challenge conventional energy projects. As might be expected, preliminary research on this issue reveals that NEPA review and related litigation tie up billions of dollars of investment and slow job growth by delaying energy projects or making them uneconomical to complete altogether.

The statutory requirements for NEPA review are clearly costly and time consuming. Once it is determined that an energy project involves a “major federal action,” NEPA requires the authorizing agency or agencies to evaluate the potential environmental effects of the project in an Environmental Assessment (EA), in which agencies must take a “hard look” at a project’s potential impact on the environment. After preparing an EA, the agency may issue a Finding of No Significant Impact (FONSI) if the environmental impacts are determined to be insignificant. Alternatively, if the agency determines the project “significantly affect[s] the quality of the human environment,” it must prepare a more detailed Environmental Impact Statement (EIS).[1]

According to a 2003 federal report, a typical EA required nine to eighteen months to prepare at a cost of $50,000 to $200,000, and a typical EIS required six years to complete at a cost of $250,000 to $2 million.[2] In total, federal agencies initiate approximately 50,000 EAs and 350 EISs per year.[3] There is no evidence that NEPA obligations have become shorter or cheaper since 2003.

But the delays and costs do not stop with an agency’s performance under the statute; once an agency prepares an EA and either an EIS or FONSI, NGOs and other stake holders can initiate litigation under NEPA to challenge the adequacy of the agency’s review. An average of 126 new NEPA cases were filed each year between 2001 and
2009.[4] Furthermore, an average of 24 Temporary Restraining Orders (TRO) and preliminary and permanent injunctions halting projects were issued each year between 2001 and 2009.[5] In general, NEPA plaintiffs succeed in winning NEPA cases more often than pro-development interests.[6] And NEPA plaintiffs have six years after a “final agency action”[7] to initiate litigation challenging the project, per the Administrative Procedure Act’s (APA) statute of limitations. In one instance, the near-certainty that a project’s permits would eventually be litigated under NEPA motivated Shell Oil Company to file a lawsuit challenging its own project in order to avoid waiting six years for adversaries to file suit before the statute of limitations expired.[8]

Discussions are afoot to explore possible resolutions to the ongoing dispute regarding obstacles posed by this use of NEPA. For instance, the U.S. Chamber of Commerce is encouraging NEPA reform. In a nationwide study of energy projects being stalled, stopped, or killed due to environmental activism, the Chamber found that the 351 projects it identified would have created 1.9 million jobs and produced a nearly $1.1 trillion boost to the economy if these projects were allowed to go forward.[9] At least 20 states have adopted NEPA-like statutes, some more stringent than NEPA itself. Additional suggestions have been made that the overlapping requirements and lengthy project delays make NEPA and its state equivalents ripe for reform. California’s Environmental Quality Act (CEQA), for example, requires agencies to go beyond NEPA’s basic requirements and not only identify significant environmental impacts, but also avoid or mitigate those impacts when possible. Some California lawmakers have asserted that that CEQA lawsuits, like NEPA lawsuits, are often filed not for the purpose of integrating environmental protection into the project development process, but rather to simply delay the project with the hope of killing it entirely.[10] Advocates of CEQA reform have expressed a goal of “preserving the law’s strengths while improving the measure to root out abuses that stifle the economy.”[11] Some of the proposed changes to CEQA could be applied to reform NEPA, as well. For example, California lawmakers suggest narrowing CEQA’s requirements and applicability, increasing exemptions, streamlining information provided for environmental reviews, and making it more difficult to use the courts to challenge projects that are found to have no significant adverse impacts on the environment.[12]

These and other reforms - such as designating a shorter statute of limitations specifically applicable to NEPA litigation - are changes that could be considered to ensure that NEPA serves its intended purpose of environmental protection, and does not operate as a blunt instrument of project elimination.
________________________________
[1] The National Environmental Policy Act of 1969, 42 USC § 4332(C).
[2] Arnold W. Reitse, The Role of NEPA in Fossil Fuel Resource Development and Use in the Western United States, 39 B.C. Envtl. Aff. L. Rev. 283, 385 (2012).
[3] NEPA: Lessons Learned and Next Steps, 109th Cong. 7-8 (2005) (statement of James L. Connaughton, Chairman, Council on Environmental Quality).
[4] CEQ records available at: ceq.hss.doe.gov/neap/NEPA[year]LitigationSurvey.pdf.
[5] Id.
[6] Judging NEPA: A "Hard Look" at Judicial Decision Making Under the National Environmental Policy Act, Environmental Law Institute (2004).
[7] What constitutes a “final agency action” under the APA can be very nuanced and is often determined on a case-by-case basis in the context of NEPA litigation. See 5 USC § 704.
[8] Statement of the U.S. Chamber of Commerce, H.R. 4377, The “Responsibility and Professionally Invigorating Development (RAPID) Act”, at 12, n.21 (2012).
[9] Steve Pociask and Joseph P. Fuhr Jr., Progress Denied: A Study on the Potential Economic Impact of Permitting Challenges Facing Proposed Energy Projects, Project No Project, at 1, 5.
[10] See CEQA Reform Moves Forward – Action Needed!, Cal. Chamber of Comm. (Aug. 22, 2012) (available at www.calchamber.com/headlines/pages/08252012-ceqareformmovesforwardactionneeded.aspx); Erin Coe, Overhaul May Be On Horizon For Calif. Environmental Law, Law360 (Nov. 14, 2012).
[11] Steinberg Sets CEQA Reform as Agenda Priority (Sept. 13, 2012) (available at sd06.senate.ca.gov/news/2012-09-13-steinberg-sets-ceqa-reform-agenda-priority).
[12] See supra note 10.


  James K. Vines
  Washington, D.C.
  +1 202 383 8921
  jvines@kslaw.com

  View Profile »

 

Stephanie L. Salek
Washington, D.C.
+1 202 626 5528
ssalek@kslaw.com

View Profile »

 
  Kelsey A. Desloover
  Washington, D.C.
  +1 202 626 5608
  kdesloover@kslaw.com

  View Profile »
       

 

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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