On October 7, 2021, the Council on Environmental Quality ("CEQ") published a proposed rule ("Proposed Rule") announcing intentions to modify certain aspects of the National Environmental Policy Act ("NEPA") regulations published in July 2020 under the Trump administration ("2020 Rule"). As discussed in our prior article, the 2020 Rule was the first comprehensive update to CEQ's NEPA regulations since 1978, and it had the potential to reduce NEPA costs and delays for projects requiring federal action, as well as to reduce the extent to which federal agencies consider climate change impacts. In the Proposed Rule, CEQ is now recommending to generally restore its NEPA regulations that were in effect before being modified in the 2020 Rule. The Proposed Rule will therefore likely decrease the potential for reduced costs and delays associated with the 2020 Rule. The extent to which climate change impacts must be factored into NEPA reviews remains uncertain, but it is likely to be a central focus of proposed regulations in the near future.

In the preamble to the Proposed Rule, CEQ explains that it intends to reconsider and revise the 2020 Rule using a phased approach. Under Phase 1, CEQ is focusing on a discrete set of provisions. Specifically, CEQ is proposing to give agencies discretion to base the purpose and need of proposed actions subject to NEPA on a variety of factors, unlike the 2020 Rule, which largely limited that assessment to the goals of the applicant. CEQ is also proposing to clarify that, while agency NEPA procedures need to be consistent with CEQ regulations, agencies have the discretion and flexibility to develop procedures beyond the CEQ regulatory requirements. In addition, CEQ is looking to restore the pre-2020 Rule definition of "effects" by reinstating the requirement that agencies must assess the direct, indirect, and cumulative effects of their actions. CEQ is also proposing to remove the 2020 Rule's provision that a "but for" causal relationship is insufficient to make an agency responsible for a particular effect under NEPA. According to CEQ, these revisions will "ensure that agencies consider the full range of reasonably foreseeable effects in the NEPA process," which may include greenhouse gas emissions and climate change impacts.

While Phase 1 does touch on issues related to climate change, Phase 2 will likely bring greater clarity regarding how CEQ will require agencies to assess climate change impacts in NEPA reviews. Under Phase 2, CEQ intends to more broadly revisit the 2020 Rule and propose further revisions to ensure that the NEPA process is consistent with the statute's text and purpose, provides regulatory certainty, and meets environmental, climate change, and environmental justice objectives. Therefore, unlike Phase 1, which proposes to reinstate provisions of CEQ's NEPA regulations that were in effect before the 2020 Rule, Phase 2 could involve new, more stringent requirements for how climate change effects must be assessed in the NEPA process. This possibility was underscored by comments made by CEQ Chair Brenda Mallory, in a keynote address to the American Bar Association on October 13, 2021, in which she noted that "[t]he scope of what I think is necessary in order to meet the climate crisis makes NEPA, in some ways, even more important."

It is yet to be determined how CEQ's Proposed Rule will affect ongoing litigation challenging the 2020 Rule, which we covered in the previous edition of The Climate Report. Most of those cases were stayed pending CEQ's rulemaking, although because the Proposed Rule is not a full rollback of the 2020 Rule, those cases may not be moot as of yet.

Written comments on the Proposed Rule are due on or before November 22, 2021. Companies with interests in federally approved or funded projects are wise to submit public comments and monitor CEQ's pending Phase 2 rulemaking, which will likely include new NEPA requirements specifically related to the climate change effects of proposed projects.