Is CEQ Rule the End 'Regulatory Reign of Terror' or the Start of Legal Chaos?

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Written by John Egan for IIR News Intelligence (Sugar Land Texas)

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Summary

The Trump administration finalized a rule January 7 scaling back the requirement that the White House Council on Environmental Quality set uniform standards for federal agencies to conduct environmental analyses under the National Environmental Policy Act (NEPA), continuing its effort to cut regulation and expedite the construction of infrastructure.

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Another Step in Deregulation

The National Environmental Policy Act (NEPA), enacted in 1970, requires that federal actions that might affect the environment, including granting permits for private companies to build power stations, transmission lines, oil and gas production, interstate oil and gas pipelines and mines, must undergo an environmental analysis. For decades, the White House Council on Environmental Quality (CEQ) has functioned as the regulatory traffic cop, setting procedural standards for the NEPA analysis and coordinating input from other federal agencies.

That era may be over, and developers of traditional energy assets are delighted.

The Trump administration on January 7 finalized a rule voiding the requirement that the Council on Environmental Quality (CEQ), a White House agency, issue consistent federal government-wide regulations under the National Environmental Policy Act (NEPA), a bedrock federal law. Since 1977, under a directive from then-President Jimmy Carter, CEQ has set uniform implementation rules for federal agencies to follow in conducting their NEPA analyses of proposed projects. This consistent set of practices did allow agencies some discretion to tailor procedures based on their statutory mandates.

Barring a successful court challenge, a process critics have called a regulatory straightjacket or worse appears to be headed for the junkyard. That would be good news for developers of traditional energy assets that align with the president's preferences, such as oil and gas extraction, oil and gas pipelines, interstate electric transmission lines, mines and power plants (aside from renewable energy).

That consistency, and CEQ's oversight power, were voided by the January 7 final rule, barring a successful court challenge. Over the last year, in steps along the way to finalizing the rule, the CEQ replaced specific rules and practices with "guidance," timelines and flowcharts it provided to agencies. In instructions to those agencies, CEQ said agencies "must revise or establish their NEPA implementing procedures (or establish such procedures if they do not yet have any) to expedite permitting approvals."

That means that construction of proposed industrial projects that have been delayed or cancelled due to an inability to secure permits from the federal government may come back to life. One of the poster children for those clamoring for "permitting reform" would be the Atlantic Coast Pipeline, a $5.9 billion project that was cancelled in 2022 after years of litigation added significantly to its cost. Other, less-publicized projects, such as St. George Grassroot Saunders Titanium-Zirconium Mineral Mine and Process Plant, currently on hold, and the cancelled Chantilly Pumped-Storage Power Plant, could also be restarted.

"NEPA's regulatory reign of terror has ended," CEQ Chair Katherine Scarlett said in a statement January 7 that finalized the rule. "Thanks to President Trump's leadership, CEQ acted early to slash needless layering of bureaucratic burden and restore common sense to the environmental review and permitting process. The Trump CEQ is putting the American people first by cutting red tape that has held back growth of the U.S. economy and refocusing its attention on ensuring the certainty needed in the permitting process to invest in American infrastructure."

The step completes "one of the Trump Administration's most significant deregulatory efforts, affirming the removal of CEQ's NEPA implementing regulations," the agency said in a statement, adding it was "fixing a decades-long permitting failure."

The final rule will be published in the Federal Register in the near future.

The White House said this step aligned with decisions by other branches of government to reform the NEPA process. In addition to the president's Day One executive order "Unleashing American Energy," it said Congressional passage of the BUILDER Act in 2023, and the Supreme Court's 2024 decision in Seven County Infrastructure Coalition v. Eagle County, all spoke to the need to rein in NEPA.

In comments submitted to CEQ last year as it was revising the rule, the Institute for Energy Research, a free-market group, said CEQ's NEPA role "consistently delays valuable projects for merely procedural reasons. The uncertainty of the process means many projects are never proposed. And NEPA hobbles some of our most important industries, including many energy projects--one study found that 50% of pipelines ... face predevelopment litigation on projects requiring an environmental-impact statement."

The CEQ move came as federal permitting reform was making headway on Capitol Hill. In December, the House of Representatives approved the SPEED Act, which is designed to shorten the time allotted for environmental reviews and expedite construction of infrastructure. To date, the U.S. Senate is not considering a companion bill. For more on that, see December 31, 2025, article - SPEED Act Seeks to Streamline Permitting of Energy Assets.

Concerns About Consistency

The White House said more than 100,000 comments on the draft rule were received from organizations and the public.

Several federal agencies reportedly raised concerns about potentially inconsistent NEPA reviews from one agency to the next, which could expose those reviews to court challenge. Those concerns were echoed by some organizations that provided public comment as the rule was being finalized.

One such comment, from an office within the U.S. Small Business Administration (SBA) said it had discussed the CEQ's proposed action with small businesses from multiple sectors of the economy. While the SBA and the small businesses it spoke with generally supported the effort, "there is apprehension about how individual agencies may fill the void left by removing the CEQ's NEPA regulations."

"It is important that when developing their NEPA implementation regulations," that SBA comment continued, "agencies maintain a degree of consistency to avoid a scenario where small businesses must follow an array of different NEPA rules. Confusion for small businesses could arise on projects involving more than one federal agency. In such cases, designation of a lead agency could prevent conflicts between different agency NEPA regulations."

Additionally, the SBA said, "Consistency is important as agencies review different types of projects under their jurisdiction. NEPA is not a statute designed to influence outcomes or express a preference for one type of project over another. Rather it is intended to establish one review process to be used to evaluate all federal actions and/or projects."

Confusion over the NEPA process often leads to litigation, which adds an average of 4.2 years to a project's completion time, SBA said. "To reduce this confusion and help minimize litigation-related delays, (we) recommend the CEQ stress the importance of consistency to agencies in both NEPA regulations and application."

The SBA's comment was echoed in an article in The Regulatory Review, a publication from the University of Pennsylvania Carey Law School.

"The elimination of major aspects of CEQ's uniform framework drew immediate concerns from industry and environmental stakeholders for its effects on regulatory uncertainty, including the efficacy of intergovernmental cooperation," wrote Finn Dobkin, a Ph.D. student at George Washington University.

"The cooperative framework is particularly salient in NEPA's environmental impact statement process," he continued. Until the CEQ's January 7 action, "federal agencies were required to engage in 'interagency cooperation before the environmental impact statement is prepared, rather than submission of adversary comments on a completed document' and to eliminate 'duplication with state and local procedures, by providing for joint preparation' of environmental statements."

"Without this mandate," Dobkin continued, "agencies (would be) free to conduct reviews based on their missions, scientific assumptions and scoping procedures. In this legal environment, a project might meet the requirements of one statute under a specific set of conditions yet fail to satisfy another statute under an entirely different and potentially conflicting set of conditions."

The term "legal chaos" was not used by Dobkin or SBA, but that seems to be the essence of concerns their concerns.

Key Takeaways

• On January 7, the White House Council on Environmental Quality finalized a rule scaling back its role in federal environmental reviews under the National Environmental Policy Act.
• For decades, CEQ has established consistent procedures for federal agencies to follow in conducting NEPA analyses. The January 7 final rule voids that requirement and said the agency's new role will be to provide guidance to other agencies as they conduct their NEPAS reviews.
• CEQ's guidance said agencies' NEPA reviews must lean towards expediting permitting approvals.
• Several individuals and organizations expressed concern that stripping CEQ of its role in setting consistent environmental review standards would lead to confusion, disorder and potentially additional litigation.

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About IIR News Intelligence
IIR News Intelligence is a trusted source of news for the industrial process and energy markets, powered by Industrial Info Resource's Global Market Intelligence (GMI).

About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 250,000 current and future projects worth $30.2 Trillion (USD).