Contributors

This article is the first in a new Womble Bond Dickinson thought leadership series on the potential impacts of ongoing federal legislation and administrative actions on the clean energy sector. The focus of this series will be on how companies can safeguard their interests and maximize opportunities in a fast-changing environment.

Last week, the Supreme Court issued its eagerly awaited National Environmental Policy Act decision in Seven County Infrastructure Coalition v. Eagle County. We were not disappointed. The Court held, 8-0,1 that the U.S. Surface Transportation Board reasonably explained in an environmental impact statement (“EIS”) that the agency did not need to consider the indirect environmental impacts of its decision to approve an 88-mile railroad spur that would connect Uinta Basin oil and gas resources to the national rail network. The Court of Appeals for the D.C. Circuit had set aside the STB’s decision on the basis that the STB did not consider the indirect environmental impacts that would result from upstream oil and gas drilling or from downstream petroleum refining. The Supreme Court reversed.

Apparently hearing our call from last spring that NEPA reforms were necessary to streamline permitting processes, the majority opinion in Seven County acts as a “course correction of sorts,” and an important and substantial step to reign NEPA back in. As the Court describes, “a 1970 legislative acorn has grown over the years into a judicial oak that has hindered infrastructure development under the guise of just a little more process.” In an opinion that will survive decades, the Supreme Court demands a high degree of deference in reviewing agency analyses performed pursuant to NEPA.

The Majority Opinion

The most striking line of the majority opinion2 is that “[t]he bedrock principle of judicial review in NEPA cases can be stated in a word: Deference.” In concluding that courts owe a high degree of deference in the NEPA context, the majority noted that NEPA is a “purely procedural statute that, as relevant here, simply requires an agency to prepare an EIS—in essence, a report.”

The Court marched through each aspect of an agency’s NEPA analysis to which courts owe deference. First, “[t]he agency is better equipped to assess what facts are relevant to the agency’s own decisions,” including whether an EIS is sufficiently detailed. Second, an agency has substantial deference in identifying “significant environmental impacts and feasible alternatives” and the reviewing court must be at its “most deferential” when reviewing such decisions. Third, regarding the scope of an EIS, courts must provide “broad latitude” so that the agency may “draw a ‘manageable line.’”

Notably, the Court distinguished the NEPA deference regime from its recent decision in Loper Bright Enterprises v. Raimondo. When an agency interprets a statute, as in Loper, judicial review of the agency’s interpretation is de novo. In contrast, when the agency exercises discretion granted by a statute or is evaluating issues of fact, the Administrative Procedure Act’s deferential arbitrary-and-capricious review standard applies.

Thus, regarding some of the most litigated NEPA issues where the agency exercises discretion granted by statute (the detail, impacts and alternatives, and scope), the Court instructs that reviewing courts must defer to the agency. In the majority’s words:

When assessing significant environmental effects and feasible alternatives for purposes of NEPA, an agency will invariably make a series of fact-dependent, context-specific, and policy-laden choices about the depth and breadth of its inquiry—and also about the length, content, and level of detail of the resulting EIS. Courts should afford substantial deference and should not micromanage those agency choices so long as they fall within a broad zone of reasonableness.

In addition to the level of deference owed to agency NEPA decisions, the Court also noted that even if an EIS “falls short in some respects,” that is not necessarily reason to vacate the underlying approval.  Thus, the “zone of reasonableness” declared by the Supreme Court is quite broad. Indeed, the Court did not hesitate to clarify that the “adequacy of an EIS is relevant only to the question of whether an agency’s final decision (here, to approve the railroad project) was reasonably explained.”

Central to this particular case was whether the EIS at issue should have evaluated the possible environmental effects from upstream oil drilling and downstream oil refining, projects that were separate from the proposed railway. This question of “reasonably foreseeable impacts” has been a long-debated issue, and one that nearly every presidential administration has opined on. The Supreme Court largely put the issue to bed:

While indirect environmental effects of the project itself may fall within NEPA’s scope even if they might extend outside the geographical territory of the project or materialize later in time, the fact that the project might foreseeably lead to the construction or increased use of a separate project does not mean the agency must consider that separate project’s environmental effects. . . This is particularly true where, as here, those separate projects fall outside the agency’s regulatory authority.

The Court concluded that NEPA requires agencies to focus on the environmental effects of the project at issue. And even then, the agency’s only obligation is to prepare an “adequate report.”

There is one area, however, where the Court suggested that agency determinations may not be subject to the same level of deference: decisions to deny projects based on environmental impacts. In footnote 4, the Court explained that a denied applicant may argue that the agency acted unlawfully in weighing the environmental consequences of a proposed action. In these circumstances, “NEPA does not alter those judicial inquiries.”

The Concurrence

Justices Sotomayor, Kagan, and Jackson concurred in the Court’s reversal, but they would have done so on narrower grounds. Under their view, and the 2004 Supreme Court case Department of Transportation v. Public Citizen, the STB did not need to consider the environmental impacts of upstream oil and gas development or downstream oil refining because the STB is not authorized to consider such impacts under its organic statute. The concurrence explained: “That is the rule of Public Citizen.”

And that leads to the most notable aspect of the concurrence: its framing of the majority opinion as grounding its “analysis largely in matters of policy” and ruling more broadly than necessary to decide the case at hand. The concurrence itself is significant evidence that the majority opinion has significantly shifted the lay of the land in NEPA cases by expressly affording agencies high degrees of deference.

The majority decision will affect all NEPA cases, whereas the concurrence’s reasoning would only have affected decisions where the agency in question is not authorized to consider environmental impacts. Other agencies that approve federal projects, including the U.S. Department of the Interior, the U.S. Forest Service, and the U.S. Nuclear Regulatory Commission, would arguably not be affected under the Public Citizen line of cases because those agencies are directed to consider environmental impacts. Under the majority’s framework, however, all agencies enjoy broad deference in limiting the scope of their analysis or deciding that certain impacts on the environment are not significant.

Practical Takeaways

  • NEPA litigation has long been used as a tool to dictate a particular outcome of an agency decision and to halt project development. And in many cases, appellants have been successful in those efforts. In this landmark decision, the Court fortified those principles that are core to NEPA. “Simply stated, NEPA is a procedural cross-check, not a substantive roadblock.” At the very least, the Court’s opinion can be expected to deter the most frivolous NEPA litigation.
  • The Supreme Court repeatedly underscored that judicial review of agency analyses performed pursuant to NEPA are afforded “substantial deference.” This decision can have an immediate impact for all ongoing judicial challenges raised under NEPA. Even in cases where the merits are fully briefed, the government will likely file supplemental briefs or letters explaining why the decision in Seven County further supports the reasonableness of the agency’s explanation.
  • Over the longer term, Seven County may have substantial salutary follow-on effects that allow for more efficient agency approvals. Indeed, the Court was acutely aware of how stringent judicial review incentivized agencies to bullet-proof their NEPA analyses to avoid judicial reversals: “All of that has led to more agency analysis of separate projects, more consideration of attenuated effects, more exploration of alternatives to proposed agency action, more speculation and consultation and estimation and litigation.”
  • The Supreme Court opinion was not shy in expressing frustration with the “continuing confusion and disagreement in the Courts of Appeals over how to handle NEPA cases.” The Court’s admonishment and clear command to apply deference should dissuade courts from policymaking from the bench—at least in the NEPA context.
  • The Court also took head on an issue tangential to the case at hand, but that has “been too often overlooked”—the length of a NEPA document. The Court went out of its way to warn that “[b]revity should not be mistaken for lack of detail,” clearly encouraging agencies and courts to be more efficient in the paperwork.
  • Although Seven County reviewed an EIS, nothing in the majority opinion’s reasoning or analysis would limit the deferential regime to just the EIS context. Applying Seven County, courts are also likely to apply a high degree of deference to agency decisions that an EIS is unnecessary because the proposed project will not significantly affect the quality of the environment. For this reason, more agencies might decide to pursue environmental assessments rather than EISs.
  • From the perspective of parties challenging agency NEPA analyses, the effort just became more difficult. Given the Supreme Court’s repeated emphasis that judicial review under NEPA is deferential, challengers will likely need to identify glaring holes in the agency’s analysis or facial inconsistencies in how the agency determines scope or which environmental impacts are significant. It is also possible that challengers will shift their focus to other statutory schemes like the National Historic Preservation Act, Endangered Species Act, or the Clean Air Act, which do indeed impose substantive constraints.

The team at Womble Bond Dickinson has extensive experience navigating NEPA compliance in securing project approvals, including administrative changes we discussed earlier this Spring. We can help you navigate these and other changes affecting your project development.

References

1 Justice Gorsuch recused himself from the case. 
2 Justice Kavanaugh wrote the majority opinion, in which Chief Justice Roberts and Justices Thomas, Alito, and Barrett joined.