Defanging NEPA

Can you buy your way out of judicial review?

The House Natural Resource Committee has released its portion of the draft reconciliation bill that’s working its way through Congress. Among other things, the committee draft includes a provision that aims to make NEPA unenforceable in the courts. The way the provision works is totally wild, and it’s worth some extended attention since it stands a decent shot at becoming law.

I’m sympathetic to the committee’s goals. NEPA is supposed to require federal agencies to think about the environment before undertaking major actions. In practice, it has become an albatross around the government’s neck. The reason has a lot to do with the risk of litigation under a flexible arbitrary-and-capricious standard. Cautious agencies know that uncertainty and delay can kill projects. Financing might fall through because of changes in interest rates or commodity prices. Contracts or grants may expire while the project sits idle. A change in the political environment may undermine support for the project. Budgets may be slashed. And on and on.

Because big projects are complicated and delicate, agencies work hard to hedge against bad outcomes in court. That means they don’t only investigate all the reasonable alternatives. They investigate stupid ones, too, in case a judge later says that the agency really ought to have looked into one of them. Today, the average environmental impact statement is 661 pages long and takes four-and-a-half years to complete. Some take as long as a decade. Countless consultants are paid stiff hourly rates to explore every conceivable alternative, including ones that are obviously infeasible. These “detailed statements” were supposed to help educate the public. They are now so long, turgid, and technical that they’re basically unreadable.

And so a law that was supposed to protect the environment has become one of the chief impediments to the transition to renewable energy. Scratch the surface of any big solar, wind, geothermal, or transmission project that even glances at the federal government and you’re likely to find a NEPA suit. When NEPA was adopted, protecting the environment meant stopping development. Today, we need development to protect the environment.

NEPA is in desperate need of reform. Past changes have tried to impose page limits or deadlines on agencies. That hasn’t worked. Agencies just move pages to the appendix or delay the moment when the shot clock starts to run. To reduce NEPA burdens, you have to fix the litigation threat.

The Bill and Budget Reconciliation

That’s what the new bill language aims to do. It takes an approach that Thomas Hochman at the Foundation for American Innovation calls “pay-to-play.” Someone who wants to build something and needs federal approval—a “project sponsor”—can go to an agency and pay 125% of the costs of compiling an environmental impact statement or an environmental assessment (about $5 million for the former and between $100,000 and $300,000 for the latter, estimates Hochman).

In exchange for the cash, the project sponsor gets two things. First, the bill sets deadlines for environmental review—a year for EISs and six months for EAs. Second, the bill eliminates judicial review of EISs and EAs.

I think this is unprecedented? I know of no other law where someone can pay for the privilege of bypassing judicial review. The language is crafted like this to wedge it into the rules governing reconciliation. By creating a fee, the House Natural Resource Committee can say that the bill will affect the budget. Every year, the government conducts a couple hundred EISs and thousands of EAs, only some of which have project sponsors supporting them. Back-of-the-envelope math suggests that the bill could yield north of a billion dollars in revenue annually.

The analogy here is to the Inflation Reduction Act. There, Congress paired big cuts in Medicare spending on prescription drugs on the preclusion of judicial review of CMS’s implementation of the law. Without preclusion, the cost savings would evaporate as the reforms got tied up in court. That’s why the parliamentarian ruled that the preclusion language could be included in a reconciliation bill: it was not “merely incidental” to the cost-savings that would result from reduced drug spending.

Will the parliamentarian find that analogy convincing? I’m no expert but I can argue it either way. The argument against: The IRA aimed primarily to reduce prescription drug spending. This bill aims primarily at … defanging NEPA. It’s not really about the budget. (The IRA was estimated to save $100 billion over ten years; the NEPA bill is maybe an order of magnitude smaller?) The argument in favor: The bill will bring in revenue. What’s more, it wouldn’t bring in that revenue were it not for the preclusion of judicial review, so preclusion is not “merely incidental” to the bill’s budgetary provisions.

If the bill language is enacted, will it work?

Speed

It probably wouldn’t speed up environmental review. In other pay-to-play schemes—I’m thinking here of the Prescription Drug User Fee Act, where pharma companies pay FDA to accelerate review of their drugs—the money goes into the agency’s coffers. That allows the agency to hire staff to do what needs to be done. Here, the money would be deposited in the federal treasury. Because agencies won’t get any additional resources, they can’t staff up to conduct EISs or EAs more quickly. The 2023 NEPA amendments do allow project sponsors to do their own environmental reviews, subject to supervision by the lead agency—but even supervision takes time.

The bill language also doesn’t address some of NEPA’s biggest hold-ups, including the requirement to conduct notice and comment for EISs. The bill could even slow things down if project sponsors inundate agencies with paid-up demands for environmental reviews. Agencies may have a technical legal obligation to move faster, but it’s notoriously difficult to enforce statutory deadlines in court.

That said, I’m not totally certain how things will play out. If environmental reviews don’t require examination of every conceivable alternative, they may be quicker to conduct. And much depends on how agencies implement the law. Some agencies could take the preclusion of judicial review as a license to rubber-stamp slipshod environmental reviews conducted by project sponsors, without regard to their quality. If that became routine, environmental reviews might not take much time at all.

Preclusion

The preclusion of judicial review is not as tight as it looks at first blush. To an administrative lawyer’s eyes, the law is drafted oddly. It precludes judicial review of environmental impact statements and environmental assessments. But no law allows judicial review of those documents in the abstract. The APA instead authorizes challenges to final agency action—which is to say, the permit approval or loan grant for which the environmental review is conducted.

An agency action may be arbitrary and capricious if the agency has failed to comply with its obligations under NEPA. Environmental reviews are meant to discharge those obligations. Colloquially, then, it’s natural to say that you’re challenging an EIS or an EA. Formally, however, they are not themselves the target of judicial review. The agency action is.

The bill language is best understood, I think, to preclude consideration of any explanatory deficiencies in EISs and EAs that pertain to the “environmental impacts” of an agency action. It’s a limited, domain-specific indentation on hard-look review under the APA, and it ought to prevent a court from flyspecking parts of an agency’s environmental review documents. That should give agencies some confidence that they need not chase down every cockamamie alternative that might mitigate environmental harms.

But how much confidence? Litigation threats emerge from plenty of procedural statutes other than NEPA, including the Endangered Species Act, the National Historic Preservation Act, and more. Those laws are often considered in EISs and EAs, but won’t be covered by the litigation shield. If there were any doubt on the question, the strong presumption in favor of judicial review of agency action means that the preclusion language would be read narrowly.

What happens, too, when an agency’s organic statute independently requires it to consider “environmental impacts” when making particular decisions? The litigation shield might not apply, even if NEPA would require consideration of exactly the same impacts. Or what about an agency’s determination, for example, that a project does not significantly affect the environment and thus does not require a full-dress EIS? Such a determination is probably shielded from judicial scrutiny, but it’s by no means certain. The Supreme Court in Bowen v. Michigan Academy construed a preclusion statute to allow for review of retail-level Medicare decisions, but not wholesale decisions. A court might make a similar move here.

Finally, and most importantly, the underlying agency action for which the environmental review supplies a partial justification can still be challenged under the APA. That matters because the category of environmental harms is not crisp. Many harms can be framed in environmental terms (e.g., light pollution harms local species) and non-environmental terms (e.g., lighting will disturb nearby homeowners). Today, agencies consider many category-straddling factors in their EISs and EAs, without drawing a sharp distinction between them.

If the bill language is adopted, clever litigants will reframe some of their claims in non-environmental terms. Agencies might be successful in resisting that reframing, but they may not be. Faced with uncertainty, agencies may feel they have no choice but to thoroughly canvass alternatives that a court might someday find promising. At least for matters that don’t relate to core NEPA obligations, the arbitrary-and-capricious standard will still create a stiff justificatory burden.

All of which is to say, the bill language wouldn’t be the last word on preclusion. To be VERY clear, the litigation shield is by far the most extensive I’ve seen in any reform proposal to date. I agree with Hochman that “it would represent by far the largest permitting reform ever passed in the US.” I hope it passes. But it would not eliminate the style of judicial review that is at the root of NEPA burdens. There’s still more work to be done.