The Trump administration proposed earlier this month a reform of the implementing regulations of the National Environmental Policy Act (NEPA), a law enacted 50 years ago. The implementing regulations last were updated in 1978, a fact that might have induced many supporters (“environmentalists”) of the “bedrock environmental law” to consider, however briefly, whether such a modernization might yield some improvements in policy generally and environmental outcomes particularly. After all, the analytic significance of the adjective “bedrock” is wholly unclear, and a characterization of the Trump regulatory proposal as a weakening of environmental protections is deeply misguided if the reform can be predicted to improve environmental outcomes, to which we return below.

No such thoughtfulness is reported in the various press reports; the Pavlovian reactions from the environmental left have been both predictable and tedious. I betray no secret when I point out that interest groups seek to shape the legal and regulatory environment to advance their own interests; and that subsequently they evolve in ways shaped by that environment to strengthen the achievement of their institutional and policy objectives. These realities apply in spades to the left-wing environmental lobby, addicted to the litigation, attorney fees, and favorable seat-at-the-table privileges engendered by NEPA narrowly (under the Administrative Procedures Act) and the environmental protection laws more generally.

Accordingly, from the viewpoint of those groups, the specifics of the Trump regulatory reform proposal are irrelevant. The very nature of their institutional interests guarantees their vociferous opposition to a regulatory reform intended to impose shorter time limits for NEPA environmental reviews and a sharpened focus on the actual environmental impacts of the projects under consideration. Any such reform would yield a narrowed scope for the environmental lobby to impose costs and massive delays on both the private sector and the government and thus a reduced incentive for companies and public officials to acquiesce to the demands of the environmentalists — that is, to buy them off both directly and indirectly. That such reforms unambiguously would improve environmental outcomes is of little interest to the environmental left.

At 47 pages, this proposed rule is short, as federal regulatory proposals go, largely because in its essentials it pursues four objectives. It seeks to limit NEPA reviews to projects with significant federal involvement in terms of funding or other sources of control. This means that projects largely state and local in nature no longer would be subjected to NEPA regulatory and legal requirements. It seeks to limit NEPA reviews to two years instead of the average 4.5 years under the current regulatory regime, an average that obscures the far-lengthier delays inflicted on many projects. Because the median, at 3.6 years, is lower than the average, the data suggest a large number of lengthier delays; the recent experience is that a quarter of the delays are over six years and for highway projects are seven years. The proposed rule seeks to increase the private sector’s participation in the environmental review process. And it seeks to eliminate the current requirement to examine the “cumulative impacts”— read greenhouse gas (GHG) emissions and anthropogenic climate change — of proposed projects.

From the standpoint of the environmental left, those four objectives are anathema. Limiting the federal NEPA review process to projects with significant federal involvement necessarily would reduce the ability of those groups to use litigation threats to further their own interests. And states and localities, with stronger incentives than federal decision makers in faraway Washington to balance environmental goals with such other objectives as infrastructure improvement, might prove less enamored with environmentalist arguments not strengthened with litigation threats under NEPA. The longer the review process, the greater the degree to which it is driven by endless minutia, as companies and government officials attempt to insulate the process against litigation challenges. And the longer the process, the greater the employment opportunities for environmentalist attorneys, with the ultimate objective of large fees to be awarded by the courts.

Participation by the private sector in the environmental review process is a nonstarter for the environmental left, for reasons both narrow and broad. Narrowly, the companies proposing a given project are likely to know some things about it and thus are in a position to refute many of the eternal assertions of adverse and irreversible environmental impacts and other factual matters more effectively than would be the case for agency officials, whatever the level of their general expertise. More generally, such participation by the companies is an abomination at an ideological level: Because the private sector is driven by a profit motive, its views and arguments are impure; it thus lacks the moral standing requisite for participation in the marketplace of ideas, regardless of the degree to which its arguments actually are correct or cannot be refuted.

That both the environmentalists and, indeed, the bureaucracy have their own interests both impure and inconsistent with environmental protection is an eternal truth that seems to have escaped notice from many journalists and other observers. Moreover, the private sector in its ability to marshal resources by definition is characterized by an important degree of independence from government; such laws as NEPA reduce that independence, an outcome that serves the ideological goal of increasing the power of government to direct resource allocation.

With respect to the “cumulative impacts” of many proposed projects on climate phenomena: Any proposed project will result in GHG emissions. Supporters of the “cumulative impacts” approach cannot argue that a given project matters in terms of climate phenomena; for example, GHG emissions from the crude oil to be transported by the Keystone XL pipeline would yield a temperature increase in 2100 of 1/10,000th of a degree C. And so the argument instead is that those emissions would add to the global total, and under an extreme set of assumptions they can be “shown” in various climate models to exacerbate the notional future adverse effects of anthropogenic climate change — that is, the climate “crisis.” Such forecasts of “cumulative” effects can be used to argue against any project, literally; eliminating this “cumulative impacts” analytic requirement would damage the environmentalist litigation system.

Note that the “cumulative impacts” argument ignores the trivial effects by 2100 even of truly massive reductions in GHG emissions. The entire Obama climate action plan: 0.015 degrees C. And if we include the (utterly meaningless) 2015 pseudo-agreement with China: 0.025 degrees C. The entire Paris agreement, if it is to be taken seriously (it is not): 0.17 degrees C. Zero net US GHG emissions by 2050: 0.17 degrees C. A reduction to zero in GHG emissions by the entire Organisation for Economic Co-operation and Development: 0.35 degrees C. Those are the calculations using the Environmental Protection Agency climate model under an assumption (equilibrium climate sensitivity of 4.5 degrees C) that exaggerates the effects of reduced GHG emissions. There is little dispute about them, which is why proponents of “carbon” policies never offer actual estimates of the climate effects of their proposals.

Consider an “aggressive” global policy to reduce GHG emissions, one wholly implausible as a matter of economic and political reality but useful nonetheless for analytic purposes. Assume zero net US emissions by 2030 and a 20 percent cut in Chinese emissions, a 30 percent cut in emissions by the rest of the industrialized world, and a 20 percent cut by the rest of the developing world, all from 2005 levels by 2030. The resulting reduction in global temperatures by 2100: 0.53 degrees C. The point is that notwithstanding the “cumulative impacts” rhetoric offered by opponents of NEPA reform, the future climate impact of obstructing even all projects requiring NEPA reviews under the current rules would be too small to measure.

Apart from the specifics of the Trump administration’s proposed reform of the NEPA implementation regulations, NEPA itself needs legislative reform by Congress, as under current rules it has institutionalized three perverse conditions — a status quo bias, the “completeness” requirement, and the cost-shifting problem — each of which is inconsistent with sound benefit-cost analysis of proposed projects and environmental concerns.

The Status Quo Bias

NEPA reviews concentrate only on the potential adverse effects of the proposed project under consideration, even if that project, whatever its attendant asserted problems, would yield a clear and significant reduction in the likelihood of environmental damage, or reductions in the costs of achieving lower levels of risks. Consider a proposed pipeline that would transport petroleum products currently moved by railroad or trucks. Table 1 summarizes this comparison of adverse incidents for the US during 2005 through 2009.

The vastly greater safety of pipelines over trucking and rail transport of petroleum products is manifest; but NEPA’s reviews of proposed pipeline projects shunt this larger context aside, focusing only on the environmental effects of the proposed pipeline itself. This myopia is inconsistent with the larger goals of improved safety and reduced environmental risks but is a direct consequence of the implementation of NEPA as written. This is particularly the case as technological improvements and other such advances enhance the environmental performance of new infrastructure projects relative to existing ones. A reform of this law by Congress would yield environmental improvement and reduced costs for capital investment.

The “Completeness” Requirement 

Under Scenic Hudson Preservation Conference v. Federal Power Commission, the 2nd US Circuit Court of Appeals held that the project under consideration could be approved only if “the record on which it bases its determination is complete.” The need for a “complete” record is an obvious route toward endless litigation and delay, in that there is no limiting principle that would exclude consideration of any given potential environmental impact, regardless of how trivial or speculative. Such delay is inconsistent with the need for any modern economy to improve and replace infrastructure as it depreciates or becomes obsolete, whether economically or physically. And, again, it is inconsistent with the increased aggregate wealth needed for a growing population to maintain and improve environmental quality. 

For any project there is a hierarchy of potential effects, from the large and significant, to the small and insignificant, to the trivial. This list of potential effects, almost literally, is endless. Any reasonable review of a major proposed capital investment, intended to provide services and pose some environmental risks for many years under conditions of uncertainty, cannot do much better in terms of environmental protection than to focus on major impacts while insisting on lower-risk designs, ongoing inspections, and other procedures intended to avoid and mitigate risks and adverse events as they emerge. 

Ex ante examination of any and all risks — “completeness” — is preposterous in an economy in which capital investments must be made to avoid impoverishment and, indeed, environmental degradation. A reform of NEPA in this context would require that Congress define the nature and magnitude of significant risks and environmental impacts, with less rather than more interpretive flexibility for the administrative agencies, under the reasonable assumption that the vast array of less-significant, small, and trivial risks is too lengthy to examine in detail and that the very large number of such factors will tend to cancel out as a whole, particularly when such less-important impacts are viewed across a lengthy list of proposed and potential projects.

The Cost-Shifting Problem 

Not all environmental impacts are worth avoiding. That is, the benefits of a given project may outweigh any adverse environmental impacts, however defined, a truism that is the beginning of sensible benefit-cost analysis in this context. For decision makers systematically to achieve that end, they must be confronted with both the political benefits and the costs of their decisions. Because the NEPA regulatory approach does not require compensation for asset owners — unlike the case under a takings approach — the law in effect allows Congress to demand a maximalist protection of environmental values without bearing any of the costs of doing so, in this case in terms of some sort of required budget outlay. NEPA demands in section 101(a) that regulators

use all practicable means and measures, including financial and technical assistance, in a manner calculated to foster and promote the general welfare, to create and maintain conditions under which man and nature can exist in productive harmony, and fulfill the social, economic, and other requirements of present and future generations of Americans.

Note the absence of any cost considerations or benefit-cost balancing parameters. This means that regulators are empowered — indeed, that they have a duty — to regulate projects in such a way that marginal costs are guaranteed to exceed marginal benefits, because government is instructed in effect to “protect the environment” without consideration of the explicit or implicit costs of doing so. As an aside, this system provides perverse incentives for private parties as well, because they bear all the costs of environmental protection, while most of the favorable effects accrue to the benefit of others. Hence, the “shoot, shovel, and shut up” phenomenon.

An economy in need of constant capital investment in the face of a growing population, economic shifts, technological advances, depreciation of existing capital, and growing demands for environmental improvement should strive to balance such needs with the imperative of environmental concerns. The NEPA as currently written and enforced is inconsistent with that basic benefit-cost goal, a condition that should induce Congress to reform this law to eliminate the three central problems discussed above. In the interim, the Trump regulatory reform proposal represents a major step in the right direction.