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Court Challenges, New Regs May Slow Infrastructure Plans

The U.S. Senate's passage of the Infrastructure Investment and Jobs Act represents a potentially exciting opportunity for cities and states that need critical infrastructure upgrades, companies that build infrastructure projects and Americans who seek meaningful employment.

We commend those who negotiated and passed this bill through the Senate, and eagerly await the U.S. House of Representatives' work on the measure. If the bill is successfully signed into law it will be a momentous occasion for our country — and will necessarily turn the national conversation from funding capital-intensive infrastructure projects to authorizing them.

Obtaining federal permits for infrastructure and energy projects has always been a convoluted proposition. But pending litigation and regulatory reviews might further muddy the permitting waters for projects pursued under the Senate-passed infrastructure bill.

In late June, the U.S. District Court for the Western District of Virginia dismissed Wild Virginia's suit against the White House Council on Environmental Quality that aimed to reverse the CEQ's 2020 regulatory reforms to National Environmental Policy Act, or NEPA, by alleging defective notice-and-comment rulemaking. For anyone who follows environmental regulations and their development, the question of a lawsuit against the 2020 NEPA regulations was always "by whom" rather than "if," given the generally contentious nature of NEPA — and the even more contentious nature of the term "cumulative impact."

Generally, NEPA requires the federal government to consider the environmental impacts of its decisions prior to making them. Between 1978 and 2020, environmental impacts considered by federal agencies were divided into direct, indirect and cumulative impacts.

The 1978 NEPA regulations defined cumulative impacts as "the impact on the environment which results from the incremental impact of the action when added to other past, present, and reasonably foreseeable future actions." The 2020 NEPA regulations replaced the direct, indirect and cumulative impact language by directing federal agencies to consider changes to the human environment from a proposed project or federal action if those changes, or environmental impacts, "are reasonably foreseeable and have a reasonably close causal relationship to the proposed action."

The regulations further state that a but-for causal relationship between an environmental impact and a federal authorization does not make a federal agency responsible for reviewing every conceivable impact originating from a proposed project, and that environmental effects or impacts should not be considered "if they are remote in time, geographically remote, or the product of a lengthy causal chain."

The 2020 regulatory update established what amounts to a proximate cause standard for determining whether certain environmental effects or impacts must be considered by federal agencies in an environmental impact statement or assessment. The policy argument that some make against this proximate cause standard, as compared to the cumulative impacts standard, is that it will prohibit federal agencies from considering the effects or impacts that proposed actions may have on climate change — hence the controversy.

The litigants in Wild Virginia advanced 10 claims — including nine procedural claims under the Administrative Procedure Act — in an effort to reverse the 2020 CEQ reforms, alleging legal violations such as a failure by the agency to consider reliance interests. Attempting to establish standing to sue, the litigants claimed procedural, informational and environmental injury.

The litigants asserted procedural injury, on the grounds of their allegation that the CEQ failed to fully consider comments submitted in opposition to the 2020 NEPA regulations, and because commenting in the future will be more difficult; informational injury, because they believe future NEPA reviews will provide less information related to federal actions; and environmental injury, because they believe federal agencies may make uninformed decisions that harm the environment.

While the Wild Virginia suit was progressing, the rumor mill began to speculate as to the likely outcome of the case. Speculation ran the conceivable gamut from dismissal, to injunction, to overturning the 2020 NEPA regulations, and so on. Ultimately, the plaintiffs did not prevail.

In the court's opinion, U.S. District Judge James Jones noted that "NEPA does not provide for pre-implementation judicial review," and that the plaintiffs' claims were unripe because the regulations' implementation deadline is still months away, the plaintiffs lack standing because any harmful outcomes from the reforms are currently attenuated and speculative, and the CEQ is actively reconsidering the reforms at the heart of the lawsuit.

Judge Jones' opinion concluded with the following:

I am left with the firm conviction that the claims asserted in this case by these plaintiffs are not appropriate for judicial resolution at this time. "That the [plaintiffs'] claims are not currently justiciable does not mean that they never will be so." But whether because the claims are unripe or because the plaintiffs lack standing, the case before me is not presently justiciable.

In short: A lawsuit contesting the 2020 regulations is not ripe because the regulations have not yet been implemented at the agency level, and the plaintiffs lack standing because no harm has occurred or is imminent. But Judge Jones dismissed the case without prejudice, so the plaintiffs can refile their lawsuit once the matter is ripe and they have achieved standing.

The plaintiffs took issue with the district court's holding, and filed a notice of appeal with the U.S. Court of Appeals for the Fourth Circuit on Aug. 3. It will be interesting to see if the Fourth Circuit upholds the district court's ripeness and standing determinations, or whether a panel of judges will allow the plaintiffs to get to the merits of their suit.

Prior to the appeal, the question seemed to be whether the plaintiffs would renew their claims when federal agencies' implementing regulations went into effect, or when an individual project's record of decision or finding of no significant impact was issued with its foundation in the 2020 regulations.

Now the question seems to be whether the CEQ will moot the appeal by revising the regulations through the rulemaking process. The U.S. Department of Justice's request to keep the 2020 regulations in place until the CEQ determines its course of action makes this the more likely scenario.

But there are two substantial caveats: (1) This sort of regulatory review and rulemaking process can take several years; and (2) over the past 18 months, the CEQ has seen a complete turnover in its political leadership, senior members of the CEQ's career ranks have left the agency for private sector jobs, and CEQ detailees from other agencies have since returned to those agencies or gone to other agencies.

The time it takes to revise regulations, combined with the time required to get new CEQ staff up to speed, may leave the fate of the 2020 NEPA regulations in the hands of the Fourth Circuit before the CEQ can moot the litigation.

The CEQ's regulatory review, and eventual rulemaking, may also prove complicated, because the agency is expected to both roll back changes to the 2020 regulations and require NEPA documents to assess the environmental impacts of standards that will be new to NEPA's regulatory text. Whether a person agrees or disagrees with the CEQ's efforts and aims is irrelevant to the fact that this sort of effort will take time to get it right, not to mention withstand judicial scrutiny.

The Wild Virginia case, and the forthcoming revisions to the 2020 NEPA regulations, have also introduced uncertainty into federal infrastructure permitting that cannot be understated. Project developers and their consultants are left in a position in which they must develop environmental assessments and impact statements without knowing what the rules will be when their projects are permitted and complete.

And because infrastructure developers operate under the constant threat of litigation — and, by extension, financial risk — project risks are increasingly difficult for developers and their financial backers to assess. This complication is untimely, given that the president and a bipartisan group of senators worked tirelessly to pass an infrastructure bill that would inject $1 trillion dollars, including $550 billion in new spending, into the economy — nearly all of which will require some level of NEPA review.

Over the next several months, and probably years, it is incumbent upon any company that builds, repairs, finances or supports any infrastructure project that requires federal authorizations to take careful note of how the CEQ revises the 2020 NEPA regulations, how the 2020 NEPA regulations fare in the Fourth Circuit and beyond, how the infrastructure bill may or may not impact the environmental review process for infrastructure projects, and how other federal policy shifts will impact the "productive and enjoyable harmony between man and his environment," as NEPA provides — because each of these government actions can have far-reaching impacts on the ability of companies to construct and operate critical infrastructure.

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