Seismic Changes in Federal Environmental Reviews: CEQ to Rescind NEPA Regulations

In an effort to "expedite permitting approvals," the Council on Environmental Quality (CEQ) on Feb. 19, 2025, issued an interim final rule and corresponding memorandum to heads of federal departments and agencies indicating its intent to rescind prior National Environmental Policy Act (NEPA) regulations consistent with President Donald Trump's Executive Order (EO) 14154, Unleashing American Energy, dated Jan. 20, 2025.

This Holland & Knight alert provides an overview of:

• the relevant historical context of NEPA, including a summary of recent judicial and executive actions that questioned the validity of the existing NEPA framework
• the interim final rule and memorandum that propose to rescind CEQ's NEPA regulations as directed by EO 14154 and direct agencies to, among other things, promulgate amendments to their own NEPA regulations within 12 months
• a discussion of the implications of the interim final rule and memorandum on past, pending and future projects potentially subject to NEPA review

NEPA Overview

NEPA requires federal agencies to create a "detailed statement" for "major Federal actions significantly affecting the quality of the human environment."¹ As originally enacted by the Nixon Administration, NEPA creates the CEQ and directs the agency to "assist and advise the President."² Subsequently, President Jimmy Carter issued EO 11991 on May 24, 1977, which directed CEQ to "issue regulations [regarding NEPA] to Federal agencies" and further directed agencies to "comply with regulations issued by the Council." Under this authority, CEQ promulgated the 1978 CEQ regulations,³ which established the sliding-scale approach to NEPA compliance still in use today. Specifically, proposed actions with the potential for "significant" environmental effects normally require an Environmental Impact Statement (EIS), while projects with lesser potential effects can be addressed through an Environmental Assessment (EA). If an EA determines that impacts can be avoided or mitigated, the agency issues a Finding of No Significant Impact (FONSI) along with the EA. The third type of NEPA review is a Categorical Exclusion (CatEx), which is a category of actions that the reviewing agency has determined would not normally, individually or cumulatively have potential for significant environmental impacts absent extraordinary circumstances. The 1978 CEQ regulations set forth requirements for public notice and comment, as well as specific topics agencies must analyze. Federal agencies also adopted their own implementing of NEPA regulations, which are mostly based upon and incorporate (in whole or in part) CEQ's regulations by reference.

Evolution of NEPA

In an effort to provide further guidance, CEQ in 1981 issued a memorandum titled "The Forty Most Asked Questions Concerning CEQ's National Environmental Policy Act Regulations" (Forty Questions Document).⁴ Notably, the Forty Questions Document provided guidance on the scope and length of time that should be spent on EAs and EISs to adequately satisfy NEPA requirements. With the exception of one question (No. 20 – Worst Case Analysis), which was withdrawn in 1986,⁵ the Forty Questions Document and CEQ's 1978 regulations served as the basis for NEPA review for more than 40 years, until CEQ's NEPA regulations were amended in 2020.

On Aug. 15, 2017, President Trump issued EO 13807, Establishing Discipline and Accountability in the Environmental Review and Permitting Process for Infrastructure Projects, which directed CEQ to establish and lead an interagency working group to identify and propose changes to the NEPA regulations. In response, CEQ initiated a rulemaking process in 2018 to clarify its NEPA regulations and modernize the process, which had become increasingly burdensome and time-consuming, often resulting in the issuance of 100-plus-page EAs and EISs that took years to complete. Ultimately, the amendments that CEQ adopted in 2020 streamlined the NEPA process by, among other things, modifying the definitions of "direct," "indirect" and "cumulative" impacts and imposing time and page limits for NEPA documents (2020 Amendments).⁶

Under the Biden Administration, CEQ revisited the 2020 Amendments in two phases. In April 2022, the Phase 1 amendments made minor changes, including a reversion back to the prior definitions of "direct," "indirect" and "cumulative" impacts.⁷ However, before CEQ released the proposed Phase 2 changes for comment, Congress amended NEPA's statutory language through the Fiscal Responsibility Act of 2023 (FRA), incorporating the time and page limits from the 2020 regulations and other trends in NEPA case law into the statute itself.⁸ Shortly thereafter, CEQ released the proposed Phase 2 changes for public comment and finalized those changes in May 2024. At the time, CEQ asserted that the Phase 2 regulations addressed the FRA amendments and provided "for an effective environmental review process; ensur[ed] full and fair public engagement; enhance[ed] efficiency and regulatory certainty; and promote[d] sound Federal agency decision making that is grounded in science, including consideration of relevant environmental, climate change, and environmental justice effects" (2024 Amendments).⁹ (See Holland & Knight's previous alert that examined the 2024 amendments, "Council on Environmental Quality Substantially Rewrites NEPA Regulations," June 6, 2024.)

Recent Litigation and Executive Action

Given this history, the question of whether CEQ has authority to issue binding regulations has been a lingering issue for decades. Last November, the U.S. Court of Appeals for the District of Columbia issued a decision in Marin Audubon Soc'y v. Fed. Aviation Admin., No. 23-1067, 2024 WL 4745044, at *5 (D.C. Cir. Nov. 12, 2024), pertaining to a challenge under NEPA of air tour management over national parks in the San Francisco Bay Area. (See Holland & Knight's previous alert, "Adding Fuel to the Fires Calling for Permitting Reform," Nov. 26, 2024.) Though CEQ's authority was not directly at issue in the case, the majority opinion stated that CEQ, as an advisory body, has no statutory basis to issue binding regulations. In doing so, the court questioned whether President Carter's 1977 EO improperly attempted to convert CEQ from an advisory body to a regulatory agency.

The Biden Administration and environmental groups promptly sought en banc review of the Marin Audubon decision, but on Jan. 31, 2024, the D.C. Circuit declined the request to review the decision. (See Holland & Knight's previous alert, "Court's Denial of Review Leaves Open Questions of CEQ Authority," Feb. 3, 2025.) Shortly thereafter, a second federal court held that CEQ's promulgation of the 2024 Amendments was ultra vires and that the 2024 Amendments were, therefore, invalid. Iowa v. Council on Env. Quality, Case No. 1:24-cv-00089 (D.N.D., Feb. 3, 2025). Without ruling either way, the court also suggested that all CEQ regulations were promulgated ultra vires and, therefore, also called into question the validity of the original 1978 regulations and 2020 Amendments.

Meanwhile, on day one of his second term, Jan. 20, 2025, President Trump issued EO 14154. This EO doubled down on the D.C. Circuit's Marin Audubon decision by directing CEQ to consider rescission of the 2024 Amendments, issue nonbinding guidance to agencies and form a NEPA task force to coordinate revisions of each federal agency's NEPA implementing regulations.

Looming in the background of all this recent activity is a pending U.S. Supreme Court case, Seven County Infrastructure Coalition v. Eagle County (Docket No. 23-975). The question before the Supreme Court is whether NEPA requires an agency to evaluate environmental impacts beyond the proximate effects of the action over which the agency has regulatory authority. This issue seems intimately connected to these questions regarding the validity of CEQ's regulations given that the evaluation may differ based on which version of CEQ regulations (if any) prevails. Oral argument was held in December 2024, and a decision is expected in the next few months.

CEQ's Interim Final Rule

On Feb. 19, 2025, CEQ issued a prepublication version of an interim final rule that will revoke all of CEQ's NEPA regulations. The interim final rule provides for a 30-day public comment period after the date of publication in the Federal Register and, in an unusual twist for an interim final rule, it will not become effective until 45 days after publication. The interim final rule explains that the revocation is intended to comply with President Trump's EO 14154 and that CEQ may lack the authority to issue binding rules on agencies. Specifically, while noting past case law precedent recognizing that CEQ's NEPA regulations were entitled to deference, CEQ nonetheless concludes that it could not identify another source of authority for CEQ to bind other agencies in the absence of President Carter's EO 11991, which was revoked in EO 14154.

Given the potential lack of authority as recognized by CEQ, it begs the question as to whether CEQ even has the authority to issue this interim final rule revoking its regulations. To address this, CEQ expresses its concern that "agencies and the public are confused as to the status and legitimacy of its NEPA regulations" and that the best way to both comply with EO 14154, which directed CEQ to rescind the regulations, and expeditiously address the confusion is to issue the interim final rule. As explained by CEQ, the interim final rule is not an exercise of regulatory authority, but merely a procedural and ministerial step – or, alternatively, it may be characterized as an interpretive rule or general statement of policy, none of which constitutes notice and comment rulemaking. The 30-day comment period is included to accommodate the possibility that the public may be able to provide CEQ legal authority to make a different choice. However, given that it is not required, CEQ may or may not address the comments before the interim final rule becomes effective.

CEQ's Guidance to Federal Agencies

In tandem with the interim final rule, and to address EO 14154 that directed CEQ to issue guidance within 30 days, CEQ issued a memorandum to the heads of all federal departments and agencies regarding NEPA implementation (NEPA Guidance). The NEPA Guidance reiterates much of the interim final rule while focusing more directly on the effects of the recent changes on the agencies themselves.

In general, the NEPA Guidance makes clear that agencies are to prioritize "efficiency and certainty over any other policy objectives that could add delays and ambiguity to the permitting process." CEQ advises agencies to voluntarily follow the prior CEQ regulations despite their rescission, encouraging agencies to consider the 2020 Amendments as the preferred version.¹⁰ In no uncertain terms, CEQ specifies that agencies "should not delay pending or ongoing analyses."

CEQ directs agencies to revise their own NEPA regulations within 12 months to expedite permitting approvals and remain consistent with the FRA amendments. In particular, the NEPA Guidance highlights consideration of the following:

• the new FRA definitions, including for a "major Federal action" and its exclusions
• reasonably foreseeable environmental effects of the proposed agency action, noting that NEPA does not employ the term "cumulative effects"
• reasonably foreseeable environmental effects of the proposed agency action and any reasonably foreseeable adverse environmental effects that cannot be avoided should the proposal be implemented
• a reasonable range of alternatives to the proposed agency action, including an analysis of any negative environmental impacts of not implementing the proposed agency action in the case of a no-action alternative, which are technically and economically feasible, and meet the purpose and need of the proposal
• the relationship between local short-term uses of the environment and maintenance and enhancement of long-term productivity
• any irreversible and irretrievable commitments of federal resources that would be involved in the proposed agency action should it be implemented
• clarification on when environmental documents may not be required and incorporation of NEPA's sliding-scale approach
• utilization of a single coordinated document for all agencies, with page limits and deadlines, which the NEPA Guidance asserts are "critically important to expedite permitting approvals and prioritize efficiencies"
• develop clear procedures for project sponsor preparation of environmental documents
• remove environmental justice issues from the NEPA process, which is consistent with the Trump Administration's rescission of other EOs that required environmental justice consideration

While emphasizing consistency and predictability, CEQ encourages agencies to:

• prepare a schedule for completion with major decision points at the "earliest reasonable time"
• include a threshold stage of identifying actions that do not require NEPA
• clarify typical classes of activities that require CEs, EAs and EISs
• establish procedures to guide how the agency will conduct reevaluations or supplemental NEPA processes
• clarify how the agency will identify lead, cooperating and participating agencies
• protocols for engaging with state, Tribal, territorial and local agencies and for public involvement and addressing public comments
• identify appropriate uses of programmatic NEPA documents
• provide procedures for concluding or terminating the NEPA process
• include processes for emergency actions and how to handle classified proposals

Ultimately, CEQ urges agencies to complete this process within 12 months, specifying that subcomponents of departments may adopt their own individual procedures, and instructs agencies to consult with CEQ before submitting their proposed and final regulations to the U.S. Office of Management and Budget (OMB) for a significance determination. To the extent public comment is required, CEQ recommends providing 30 to 60 days for public comment on the proposed regulations. Agencies also have to provide CEQ a proposed schedule for updating their regulations within 30 days of the NEPA memorandum.

The Path Forward: What Does It All Mean?

These latest actions by CEQ are an attempt to provide clarity in the wake of significant uncertainty and ambiguity around NEPA as a whole. Federal agencies are directed to "continue to follow their existing practices and procedures for implementing NEPA consistent with the text of NEPA, EO 14154, and this [NEPA Guidance]." In many ways, the memorandum stresses keeping the status quo by continuing to review federal actions under the existing regulatory framework.

However, the reliance on the existing regulations causes its own problems in light of the regulatory history. As mentioned above, many agencies' NEPA regulations incorporate by reference CEQ regulations (in whole or in part), which CEQ itself states may have been promulgated ultra vires and are now rescinded. Additionally, the NEPA memorandum indicates that agencies can choose to voluntarily rely on whatever version of the NEPA regulations they choose, with preference shown to the 2020 Amendments. Even without the questions regarding the validity of those regulations, the voluntary reliance on some version of the regulations by each agency may lead to further divide between agencies on how NEPA is implemented. As agencies update their own NEPA regulations, it is possible that there may be further divergence of NEPA implementation across the federal government. CEQ has also made clear that agencies cannot delay any NEPA review due to these uncertainties. But for agencies with limited resources in particular, this may present challenges.

As for past projects reviewed under NEPA that have been challenged, CEQ emphasizes that agencies should continue to rely on the version of the CEQ regulations that were in place at the time of those prior decisions when defending them. In other words, CEQ does not intend for this revocation to apply retroactively. Nonetheless, the exact timing of which version of CEQ regulations was valid is not perfectly clear, which adds an additional layer of burden on any existing NEPA challenge. Ultimately, much of NEPA's fate may be in the hands of the Supreme Court while the public awaits a decision on the Seven County case.

How We Can Help

Holland & Knight's Environmental Team has been closely evaluating the rapidly evolving NEPA landscape and has extensive experience with successfully navigating the regulatory and commercial challenges associated with NEPA review. Please contact the authors if you have any questions.

Notes

¹ 42 U.S.C. §§ 4321 et seq.

² 42 U.S.C. § 4343.

³ 40 C.F.R. Parts 1500-1508.

⁴ The Forty Most Asked Questions Concerning CEQ's National Environmental Policy Act Regulations, 46 Fed. Reg. 18026 (Mar. 23, 1981).

⁵ 51 Fed. Reg. 15618 (Apr. 25. 1986); textual errors corrected 51 Fed. Reg. 16846 (May 7, 1986).

⁶ Update to the Regulations Implementing the Procedural Provisions of the National Environmental Policy Act, 85 Fed. Reg 43304 (Jul. 16, 2020).

⁷ National Environmental Policy Act Implementing Regulations Revisions, 87 Fed. Reg. 23453 (Apr. 20, 2022).

⁸ Pub. L. No. 118-5 (Jun. 3, 2023).

⁹ CEQ, NEPA Implementing Regulations Revisions Phase 2, 89 Fed. Reg. 35442-35577 (May 1, 2024).

¹⁰ This reflects the fact that the agency-specific NEPA regulations rely heavily on CEQ Part 1500 -08 regulations and often adopt them by reference.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.