Transmission lines on the approach to the Herman Creek trailhead, Cascade Locks, Oregon, July 2023
1970 was a heady time for environmental issues and policy in the United States – the first Earth Day, the passage of the Clean Air Act and Clean Water Act, establishment of the Environmental Protection Agency, and a national-level energy policy, the National Environmental Policy Act, which went into law on January 1, 1970. A 2011 Congressional Research Service report provides a summary of the law:
Signed into law by President Nixon on January 1, 1970, NEPA was the first of several major environmental laws passed in the 1970s. It declared a national policy to protect the environment. To implement its policy, NEPA requires federal agencies to provide a detailed statement of environmental impacts, subsequently referred to as an environmental impact statement (EIS), for every recommendation or report on proposals for legislation and other major federal action significantly affecting the quality of the human environment.
NEPA is a procedural regulation requiring federal agencies to take environmental impact into consideration in their regulatory decision-making, and to inform the public in this process. The CRS report (again, published in 2011) points to different assessments of the net benefit of NEPA:
Environmental groups often refer to NEPA as the “Magna Carta” of environmental law. They view it as an essential tool to help agencies plan and manage federal actions in a responsible way by requiring policymakers and project sponsors to consider the environmental implications of their actions before decisions are made. Environmental groups also view the NEPA process as an important mechanism in providing the public with an opportunity to be involved in agency planning efforts. Critics charge that the law creates a complicated array of regulations and logistical delays that stall agency action.
As is the case in most policy issues, there’s a nugget of truth in both of those claims. An environmental regulation layered on top of other federal environmental regulations, NEPA has had controversies over interpretation and scope, which have been litigated for all of the ensuing 53 years; the word “significant” does a lot of heavy lifting in determining whether a project triggers NEPA. Table 2 from the CRS report provides some examples, again from 2011, of projects/transactions involving federal agencies that require NEPA compliance.
Even if a project is not being sited on federal land, it may still require federal permitting and approval to proceed (a requirement that is not evaluated or reevaluated often enough, if at all). If a project is deemed to have likely significant environmental impact, the NEPA requirement to produce an environmental impact statement (EIS) has several steps, including performing the environmental impact analysis and providing the EIS for a public comment period. Without discounting the well-intended substantive objective of incorporating environmental impacts into regulatory policy, the NEPA process has long been one criticized for its delays arising from two causes: the time and effort involved in the EIS process, and the almost-inevitable litigation and judicial review arising from NEPA-compliant projects (CRS 2011, p. 25-26).
In 1997, CEQ published a study to determine NEPA’s effectiveness and methods to improve its implementation. Study participants included individuals and organizations that were knowledgeable about NEPA and could be characterized as both supporters and critics of NEPA. Generally, participants felt that NEPA’s enduring legacy was that it provided a framework for collaboration between federal agencies and those who will bear the environmental, social, and economic impacts of agency decisions. However, they also felt that NEPA often takes too long and costs too much, agencies make decisions before hearing from the public, documents are too long and technical for many people to use, and training for agency officials is inadequate at times.
Attempts to streamline the NEPA process, provide categorical exclusions, etc. have had little effect on the long lead times that NEPA-compliant projects face. Is this an appropriate way to incorporate environmental impact into public policy, or given the technological and administrative changes of the past 50 years, what are some ways to improve the process of environmental regulation? I don't have a good answer to that question as I am not technically an environmental economist, but it's a bureaucratic problem that I think about a lot because of the waste and distortion it introduces into our efforts to align economic and environmental value (and values) and incentives.
A new paper (Bennon, Michael and Wilson, Devon, NEPA Litigation Over Large Energy and Transport Infrastructure Projects (October 2, 2023). Environmental Law Reporter, Available at SSRN: https://ssrn.com/abstract=4498938) attempts to quantify the delays embedded in the NEPA process as it interacts with other layers of regulation.
NEPA’s environmental impacts are similarly difficult to quantify and attribute. However, it intuitively follows that requiring an agency to study the environmental impacts of a project will induce the agency to make less environmentally impactful decisions on the margins. In a similar manner, we know that the costs of a lawsuit or an environmental study are not limited to the fees of the lawyers and environmental consultants needed to adjudicate them.
Even granted this natural limitation, there remains a considerable gap in the existing literature on the impacts of the NEPA process and environmental litigation on infrastructure development in the United States. To address this gap, we examined an existing data set of 355 large federal infrastructure projects in the transportation and energy sectors that completed an EIS between 2010 and 2018. We supplemented the data set with information on environmental litigation associated with those projects, as well as other important project information, such as current project status, subsector, permit duration, and in some cases permit length (in pages). (p. 10838)
Due to data limitations and the complicated, layered nature of NEPA with other regulations, Bennon and Wilson provide a correlation-based analysis and make no causal claims. Their analysis indicates that NEPA-associated delays vary considerably by project type, with projects such as public transportation with federal subsidies having the longest NEPA compliance periods (9.6 years) but lower litigation rates. Solar power projects have higher litigation rates but lower time periods (2.4 years) (p. 10851). Transmission line permitting takes on average 4 years. Another important point they make is the difficulty of determining ex ante how likely environmental litigation is once the project has started.
Why do I keep repeating that this CRS report was published for Congress in 2011? Because 2011 represents a discontinuity in the types of projects subject to NEPA compliance, particularly in energy-related technologies. In 1970 the environmental gestalt and the energy technologies were more of the canonical opposition to human construction of things like pipelines, power plants (especially nuclear), transmission lines, and oil storage tanks. NEPA was intended as a way to require project developers and the federal agencies permitting their projects to quantify and incorporate environmental impact in their project plans, and to make those data public in advance of construction. The general presumption was that human construction and environmental quality were in opposition, that human activity reduced environmental quality. As Bennon and Wilson note about the 1970s judicial review period,
While many environmental stakeholders were disappointed that courts were not enforcing NEPA’s substantive mandates, the comment-and-litigation process being delineated by the courts presented an opportunity to further environmental objectives by blocking or delaying projects or, perhaps more importantly, as a useful tool to gain leverage over the agencies trying to permit projects. (p. 10842)
They also document the effect of NEPA compliance on project costs:
In the energy sector, power generation projects in more mature sectors have shown similar real cost growth post-1970, such as coal generation and hydroelectric projects. Much more recently, studies have attempted to compare project costs and refine estimates for U.S. electricity transmission projects. For the development of nuclear power projects, unique in both their scale and degree of local opposition, cost escalation has been far greater in the United States relative to projects in Europe.
There is very strong evidence of Baumol’s cost disease in the U.S. construction sector, indicating that unit costs will likely continue to outpace inflation in the future. (p. 9)
2011 represents a discontinuity, not in NEPA regulation or litigation, but in the types of human construction and technologies involved in such infrastructure projects. 2010 is the rough date when wind turbine and blade technologies improved wind efficiency enough to make them cost-competitive with older generation technologies, and since then (around 2015ish) solar PV’s efficiency has also improved dramatically. Combine that with state-level renewable portfolio standard regulations and you see a shift since 2011 towards federal permitting requests for low-carbon electricity projects rather than the projects envisioned in 1970 by the NEPA authors. Thus the growing criticism that permitting delays arising from a regulation intended to improve environmental quality are actually hampering environmental quality by increasing delays and costs of low-carbon energy projects. Again, Bennon and Wilson:
One of the obvious conclusions of our study is the varying rates of litigation between the sectors, and particularly for some sectors considered to be important to the energy transition and climate change mitigation. Within the energy sector, solar, wind, and transmission line projects exhibit high rates of litigation, even though these sectors are widely considered to be critical components of the energy transition away from fossil fuels. (p. 10856)
From a federal policy perspective, different positions exist on NEPA and its reform. Last week, Aidan Mackenzie, Arnab Datta, and Alec Stapp of the Institute for Progress wrote proposing a Grand Bargain for Permitting Reform, in which they characterized well the various positions:
Democrats want to accelerate the deployment of clean energy by making it easier to site and build interregional transmission lines. Republicans are concerned that this increased federal siting authority will supersede states’ rights, and that cost-allocation measures will force red states to pay for blue state renewable energy mandates. Instead they prioritize reforming NEPA, the law that enshrines environmental review, particularly by limiting legal challenges against NEPA permits, a key driver of delays. While some Democrats support reforming NEPA to speed clean energy projects, others worry that changes might weaken a tool for blocking fossil fuel projects or reduce community engagement.
The Fiscal Responsibility Act that President Biden signed in June 2023 included modest NEPA reforms, such as limiting review timelines and EIS document page count limits. Mackenzie, Datta, and Stapp have a more bold “framework for a grand bargain”, a political bargain that trades transmission permitting reform for NEPA reform:
Transmission reforms should both shorten siting and permitting timelines for large interregional transmission lines, and accommodate the rights and needs of different states. Proposals for setting interregional transfer requirements offer a compelling framework for compromise by having FERC set transfer capacity targets, while letting state governments and utilities determine which projects or upgrades are best suited to meet those standards.
Reforms to the judicial review of NEPA permits should limit bad-faith obstruction while maintaining a period for good-faith legal challenges. Limiting injunctive relief can limit legal obstruction without undermining community engagement.
They provide more detail in their essay, which I recommend strongly along with the Bennon and Wilson article. These issues are difficult, and I appreciate their attempt to reinvigorate the idea of politics as bipartisan exchange, an idea that sadly has been jettisoned in the past decade plus in Congress. Their suggestions for time limits on injunctive relief and on statues of limitations preserve the environmental protection intent of NEPA while not eliminating the venues for disagreement and community participation. Regarding transmission investment, they suggest a regional transmission investment and interconnection requirement as a percentage of regional generation capacity while letting regional governments (with resident input) determine where to site the required lines.
I don’t have a single sentence, mic-drop opinion about these issues because they are so complicated and they force us to wrestle with deep questions about the proper role of government, where to draw the line between essential individual liberty and important collective action, and how to achieve large, complicated outcomes that are in many ways open-ended and not teleological. I do welcome their invitation to more collaborative discussion and bargains on these issues. In a future newsletter I will dig more into these deep questions, bringing in work ranging from Tocqueville to Coase.