Introduction
In the aftermath of the Inflation Reduction Act’s passage, congressional leaders are preparing to tackle permitting reform. Some activists have called on lawmakers to stay away from any reforms to the National Environmental Policy Act (NEPA) and the broader environmental review process it helms, arguing that the landmark environmental bill is key to preventing climate change.
But those activists are misguided: the NEPA process as it currently exists is slowing down the clean energy transition and is long overdue for reform. NEPA imposes massive costs on the federal government, drags clean energy projects out for years, and generates uncertainty that stops other projects from ever getting off the ground. With targeted reforms, Congress can unlock critical clean energy projects that are currently being stifled.
How NEPA works
NEPA was passed in 1969 as an attempt to infuse environmental considerations in federal decision making. It requires that a “detailed statement” describing significant environmental impacts of “major” federal actions be produced before the action can begin. In practice, a major federal action can be anything from creating a new policy or procedure, to building a new project, to issuing a license or permit.
NEPA is an environmental protection statute, but its benefits to the environment are at best uncertain. Though it was originally intended to force government agencies to place greater weight on environmental considerations, as it exists today NEPA is a procedural statute. NEPA doesn’t require that agencies place any particular weight on environmental concerns, only that they be documented thoroughly. “Success” in terms of the law is measured by comprehensive documentation, not environmental benefits. As one agency official described it, “you can pave paradise with a NEPA document.”
Over time, NEPA has evolved into a tiered system of analysis. At the lowest level, actions that have previously been found not to have significant environmental effects can receive a categorical exclusion (CE), meaning federal agencies don’t need to write a detailed statement regarding them. For instance, the FAA has determined that the acquisition of snow blower equipment can be categorically excluded. Categorical exclusions make up the largest fraction of NEPA analyses.
If an action clearly will have major environmental effects, those effects must be described in an environmental impact statement (EIS), a detailed analysis that often takes years to complete and can reach thousands of pages in length. The construction of a new highway, for instance, typically requires an environmental impact statement. An EIS also requires that the public be notified of the potential impacts of the action, and be given a chance to respond. Because of this, NEPA is sometimes referred to as a “sunshine law” that creates greater government transparency.
If it’s unclear whether the action will have significant effects, an environmental assessment (EA) is performed; it’s similar to an EIS, but generally less involved. The issuing of a launch permit for SpaceX’s Boca Chica facility in Texas, for instance, required an environmental assessment. Assessments that find actions are likely to have no significant impacts issue a Finding of No Significant Impact (FONSI). If an action is close enough to the threshold, project developers may take mitigating measures to bring their net environmental impacts below the threshold of significance and avoid a full EIS — this is known as a “mitigated FONSI”.
NEPA is implemented on an agency-by-agency level. Each federal agency has its own NEPA procedures, its own list of categorical exclusions, and its own staff for managing the process. This decentralized system leads to a great deal of variation in how NEPA is administered. Some agencies perform few NEPA actions, some perform many. Some are able to complete an analysis comparatively quickly, while others take an exceedingly long time. The Corps of Engineers, for instance, produces environmental assessments that are usually fewer than 100 pages, while ones produced by the FAA are often thousands of pages in length.
The lack of centralization has also resulted in poor data on NEPA analyses. While environmental impact statements are tracked (the U.S. currently produces around 100 final EISs per year, a figure which has been trending down over time), less is known about the number of CEs and EAs (though it’s likely in the range of 5,000 to 10,000 EAs and 35,000 to 45,000 CEs per year).
NEPA supporters point to case studies where the process resulted in better outcomes. However, because NEPA often acts as an “umbrella” statute to structure the entire environmental review process, it’s not obvious which benefits are the result of NEPA and which are due to other environmental laws (such as the Clean Air Act or the National Forest Management Act), or simply the result of competent project management. A 2014 GAO report noted that “little information exists on the costs and benefits of completing a NEPA analysis”, and a 2009 USDA report stated that “gauging NEPA’s true impact can be challenging” and that “the literature points to only a few effects of NEPA…on planning processes that are not widely debated” (these included a broader consideration of alternatives, and greater transparency of agency analyses). A study of environmental impact statements for oil and gas land management plans produced by the Bureau of Land Management, for instance, found that the NEPA process resulted in a decrease in land area disturbed, but a slight increase in the number of wells drilled (though this latter effect was not statistically significant).
On the other hand, the costs of NEPA are more apparent. The USDA report notes that the aforementioned benefits of NEPA came “with associated costs of long delays in decision making as analyses are performed and reports are produced, and of high-priced responses to litigation of the agency processes.”
The costs of NEPA can be broken into three categories — money, time, and uncertainty.
Monetary cost
The monetary costs of performing a NEPA analysis are often significant. Even a categorical exclusion, which documents actions that have already been determined to have no significant impacts, can be expensive. The Forest Service, for instance, testified in 2007 that a categorical exclusion will typically cost them $50,000 to complete (for reference, the Forest Service completes more than 1,000 categorical exclusions a year).
Higher tiers of analysis can be significantly more expensive. In the same testimony, the Forest Service noted its costs for completing an environmental assessment and an environmental impact statement were $200,000 and $1,000,000, respectively. And while the costs of CEs and EAs are somewhat capped, the cost of an EIS is unbounded in practice. As of 2016, the average cost for a DOE environmental impact statement was $6 million, and particularly complex EISs might cost in the tens of millions. (The DOE is one of the only agencies that has tracked and made available cost data for their NEPA analyses.)
Time cost
More significant than the money, however, is the cost in time. Even categorical exclusions often require significant time to complete. As of 2018, a Forest Service CE took a median of 105 days to complete. Prior to a rule change that allowed state DOTs to make their own categorical exclusion determinations, the Federal Highway Administration (FHWA) in some cases took a year or more to complete CEs. A bridge in Florida that collapsed in 2004 following Hurricane Ivan took several months to issue the categorical exclusion for its replacement, due to a backlogged Coast Guard. (The lack of available NEPA data means that, for most agencies, the time to complete a CE is unknown.)
Higher tiers of analysis take far longer. The average EIS completion time across all agencies is currently at 4.5 years, with some agencies taking significantly longer. The FHWA, for instance, took on average 8.6 years to complete an EIS as of 2021. These analyses must be completed before construction begins on a project.
In some cases, the time required for a NEPA analysis has prevented the project from happening at all. In 1999, for instance, delays in the NEPA process for the prescribed burning of the Six Rivers National Forest resulted in the wildfire that the prescribed burning was meant to prevent from occuring.
Cost of uncertainty
But the largest impact of NEPA is the uncertainty it injects into the project process. Agencies can be sued under the Administrative Procedure Act for not properly complying with NEPA, and in practice often are — the DOJ noted that NEPA is the most litigated environmental statute. While a NEPA lawsuit can’t completely stop a project, it can slow it down to the point where it’s no longer attractive to pursue, an outcome that is often specifically targeted by opposition groups — as one activist opposing a missile defense project stated, “the hope is that delay [occasioned by NEPA litigation] will lead to cancellation…That’s what we always hope for in these suits.”
Although more than one in 10 court cases brought over NEPA receive a temporary or permanent injunction, the threat of litigation shapes project outcomes even when it never occurs. Federal agencies spend significant time and effort to make their documents “litigation proof”, and often perform analyses that serve no purpose other than as litigation defense. A 2014 study of the Forest Service noted that “team members felt pressure to include what they considered to be otherwise unnecessary information in their NEPA documents.” These incentives cause NEPA analyses to stretch far beyond the “recommended” lengths. The Council on Environmental Quality’s NEPA regulations, for instance, state that most EISs should be fewer than 150 pages, but as of 2018 the average EIS was 661 pages (including appendices). As one study noted, “regulations governing excessive paperwork are unfortunately routinely ignored by federal agencies, their state partners, and project proponents, which unwisely seek to provide every possible answer to any conceivable question that might be asked by anyone during the review cycle.”
Agencies will also deliberately make their project plans less ambitious to avoid NEPA challenges, and both private and public actors will deliberately avoid projects that will trigger a NEPA review. For instance, a GAO study found that 33 state DOTs had avoided taking federal highway funding partly to avoid the NEPA process.
The NEPA process makes it difficult for private entities to plan and invest in infrastructure projects, because the timelines and costs are so uncertain. As one executive from a mining company stated, “In considering a new project, the first thing I am asked is ‘How long will it take, and what will it cost to get it permitted?’ I can answer this question with a high degree of confidence in most jurisdictions around the world, with the exception of the United States… it is very difficult to make business decisions in the U.S. under the current permitting environment on federal lands.” Similar effects have been noted for transmission line construction, renewable energy projects, and geothermal projects.
This uncertainty also means some potential reforms to NEPA may not have their intended effects. Caps on review times, for instance, may increase the likelihood that projects get litigated, if it means agencies don’t take the “hard look” required. BLM environmental impact statements for land management plans that had their drafts prepared more rapidly ultimately had longer total review times, because they typically required significant revisions in response to public comments. Some experts think that Trump’s NEPA reforms (since rolled back) were likely to increase energy project timelines in the short term, as the uncertainty they created would have resulted in new litigation.
Policy changes to facilitate clean energy infrastructure
NEPA acts as a delay on both fossil fuels and clean energy projects. As stated by one environmental lawyer, “NEPA, being procedural and not substantive, is a hefty sword. It stops the projects many groups do like, along with the ones they don’t like.” NEPA reviews slow down oil and gas projects, but also prescribed burning to prevent large wildfires. They stop highway projects, but also offshore wind projects. Projects in the American Recovery and Reinvestment Act of 2009 were subject to more than 192,000 NEPA reviews, including more than 7,000 EAs and more than 800 EISs.
If anything, NEPA likely stifles newer, environmentally-friendly industries more than older incumbents, which have had many years to work the process in their favor. 42% of the Department of Energy’s (DOE) active NEPA projects are related to clean energy, transmission or conservation, while only 15% are related to fossil fuels. Based on available data, offshore wind offers one of the starkest examples: The U.S. has 42 MW of offshore wind production that is operational, 932 MW under construction, and 18,581 MW bogged down in permitting, most of which are waiting on NEPA analyses to be completed. The climate crisis requires a rapid build-out of clean energy infrastructure but current NEPA permitting processes enforce the status quo, benefiting the fossil fuel industry.
As the Senate negotiates the permitting reform deal that President Biden, Majority Leader Schumer, and Speaker Pelosi agreed to in exchange for Senator Manchin’s vote on the Inflation Reduction Act, here are four ideas for how to streamline the permitting process for energy infrastructure:
1) Give clean energy the same regulatory treatment that fossil fuels already receive
Experts say we will need to at least double our electric transmission capacity to accommodate solar and wind energy production as it comes online. FERC has the authority to rapidly site and permit gas pipelines under the Natural Gas Act of 1938, but transmission lines — vital for harnessing clean energy generated from wind and solar farms — go through a cumbersome approval process at local, state, and federal levels. A review of more than 30 transmission projects initiated after the 2005 Energy Policy Act found that new transmission takes more than 10 years on average to complete. The same report concluded that “should current estimates remain unchanged and prove accurate, long distance interstate transmission lines will frequently take 15 years or more to site and construct, which would put the Biden goal of decarbonizing the electricity sector by 2035 out of reach.”
The oil and gas industry has been given categorical exclusions for certain activities which are denied to the geothermal industry. Offshore drilling in the Gulf of Mexico has received many NEPA exemptions. Meanwhile, a geothermal energy project may trigger as many as six NEPA reviews, and take 10 years before the project can start.
To address these issues, Congress should:
- Provide FERC with the authority to permit siting of electrical transmission and generation facilities using the same standard it uses for natural gas siting, the “public convenience and necessity” standard;
- Require the Secretary of Energy to establish a categorical exclusion from NEPA review for upgrades up to a certain level in electricity generation and transmission;
- Put geothermal exploration on an equal footing with fossil fuels by providing geothermal exploration with the same categorical exclusion from NEPA review available for exploration of oil and natural gas;
- Establish sole authority at FERC to site hydrogen gas storage facilities and pipelines and to regulate the interstate transport of hydrogen gas;
- Put hydrogen gas permitting on equal legal footing with natural gas pipeline construction by creating the same “public convenience and necessity” standard and providing FERC the authority to issue certificates
- Establish sole authority at FERC for siting of carbon dioxide pipelines or storage facilities and for the regulation of transport of carbon dioxide
- Put carbon dioxide pipeline or storage permitting on equal legal footing with natural gas pipeline construction by creating the same “public convenience and necessity” standard and providing FERC the authority to issue certificates
2) Establish limits on judicial review in actions arising from NEPA
A key pillar of permitting reform should be reducing procedural and legal uncertainty for clean energy projects to achieve our decarbonization goals. Proponents of reform often point to three possible types of time limits to reduce the uncertainty created by NEPA. First, and perhaps the most commonly proposed reform, is putting a shot clock on the length of a NEPA review. But as discussed earlier, this would at best provide only a marginal benefit and at worst be counterproductive, exposing federal agencies to additional litigation risk for producing an incomplete environmental review. Similarly, a shorter statute of limitations on filing NEPA lawsuits and stricter litigation standing requirements for who can file claims would certainly be improvements on the status quo, but by themselves are unlikely to dramatically change outcomes as most lawsuits are already filed quickly (to avoid mootness arguments) and courts already tend to restrict NEPA challenges to comments raised during public review period on the EIS.
As James W. Coleman argued in a 2019 law review article, the time limit that would likely have a major impact on outcomes is restricting the ability of the courts to issue injunctions against projects that have undergone extensive environmental review under NEPA. This change would provide developers the certainty they need to invest in large-scale build outs of solar, wind, transmission and other clean energy infrastructure. Without a time limit on judicial injunctions, developers have a sword of Damocles perpetually hanging over their head, threatening the entirety of the project.
Congress should:
- Limit the ability of the courts to issue injunctions against projects more than two years after the start date of the environmental review process; and
- Limit standing in claims arising under Federal law pertaining to NEPA environmental review to parties who submitted a comment during environmental review and submitted a comment that was sufficiently detailed to provide notice of the issue on which the party seeks judicial review
3) Establish a program to designate “energy security corridors” which would encourage the development of regional energy hubs
Permitting issues for clean energy infrastructure are not just a federal problem but a state and local one as well. For example, the California Environmental Quality Act is a state-level environmental review law that forced the City of San Francisco to spend more than a million dollars and 2.5 years producing a 1,353 page environmental impact report to add 34 miles of bike lanes to its streets. The combination of local, state, and federal veto points over major infrastructure projects is likely the primary cause of why it costs so much to build in the United States.
As part of its permitting reform efforts, Congress should consider creative programs for incentivizing state and local governments to streamline their own permitting processes. One approach would be to use the incentive of federal cost-sharing on energy projects in certain regions conditional on a streamlined state and local permitting process in that area.
Congress should:
- Require the President to establish a program to designate “energy security corridors” which would encourage the development of regional energy hubs
- Establish the purpose of the program, including to encourage efficient permitting of critical energy infrastructure and the development of regional energy hubs
- Set forth the deadlines and requirements and factors to be considered when designating energy security corridors, and create a categorical exclusion from NEPA review for all activities or actions related to the development of energy infrastructure within those corridors
- Authorizes appropriation of up to $500,000,000 over ten years to carry out the program
4) Collect comprehensive data on environmental reviews and other permitting issues
One challenge with determining the extent of the damage caused by NEPA and other environmental review laws is the lack of comprehensive data on how long reviews take and what the bottlenecks are. The federal government should require every agency to upload data on its outstanding environmental reviews to a centralized dashboard (the Department of Energy is a positive example of what should be done). Better data about what’s going on can be used to guide future reform efforts (as well as catalyze public support for necessary changes).
Conclusion
Congress has a once-in-a-generation opportunity to restructure environmental regulation to maximize clean energy production. It should take the chance to reduce the cost, time, and uncertainty currently baked into the clean energy permitting process. With relatively minor adjustments to NEPA and the broader environmental review process, it can open the door to tremendous innovation.
Special thanks to James W. Coleman for his feedback and help on the judicial review reforms and to Aidan Mackenzie for general research assistance. You can read draft legislative text for our policy recommendations here.
