Supreme Court Focuses NEPA Review: Implications for US Infrastructure

In a unanimous decision in Seven County Infrastructure Coalition v. Eagle County (No. 23-975), the US Supreme Court significantly narrowed the scope of environmental reviews required under the National Environmental Policy Act (NEPA). This ruling represents a major boost for infrastructure development and investment in the United States, as it clarifies what federal agencies must consider in environmental impact analysis, thereby reducing regulatory uncertainty and the risk of litigation-driven delays.

Key Takeaways

• Faster, Focused Reviews: NEPA reviews are now limited to the relevant effects of the proposed project. Agencies are not required to assess the effects of separate upstream or downstream projects or effects beyond the scope of their jurisdiction.
• Reduced Legal Risk and Delay: Courts are directed to grant agencies “substantial deference” on scope and methodology of NEPA reviews. This limits the grounds for legal challenges that may delay, or vacate permits from, a project.
• Boost for Infrastructure Development and Investment: The decision supports faster, more predictable timelines for infrastructure permitting, reducing legal and regulatory risk for developers and investors across all sectors, including transportation, energy, and digital infrastructure.

Background

In 2021, the US Surface Transportation Board (the “Board”) approved a railway connecting Uinta Basin in Utah to a national freight network, facilitating the transport of crude oil to Gulf Coast refineries. Pursuant to NEPA, the Board prepared an environmental impact statement (“EIS”) that analyzed the environmental effects of the project. The EIS noted, but did not analyze, the effects of increased oil drilling or refining that the railway might induce. The Board reasoned these activities were beyond its regulatory authority and too attenuated to assess meaningfully.

After the Board approved the railway, a Colorado county and several environmental groups petitioned the DC Circuit for review, claiming that the Board violated NEPA. The DC Circuit vacated the order approving the railway, holding that the Board violated NEPA by failing to more extensively analyze upstream and downstream effects. The Supreme Court granted review to resolve the extent of NEPA requirements.

The Decision

The Supreme Court unanimously reversed the DC Circuit, narrowing the required scope of NEPA and setting two guideposts for environmental reviews:

• Focus on the project at hand. The Court held agencies need only consider environmental effects of the proposed project, not the effect of “future or geographically separate projects” that may follow or of effects beyond the jurisdiction of the reviewing agency.
• Judicial deference to agencies. Courts must defer to agency decisions regarding the scope of environmental reviews and the methodologies used. The Supreme Court cautioned against lower courts “micromanaging” agency decisions and reiterated that NEPA is a “procedural crosscheck and not a substantive roadblock” to agency decision-making.

The decision included an example illustrating the new regime: “A new airport may someday lead to a new stretch of highway; a new pipeline to a new power plant; a new housing development to a new subway stop,” but NEPA does not require the agency reviewing the initial project to study the environmental effects of those speculative future projects.

Practical Implications

The immediate impact of this decision is a reduction in regulatory uncertainty and delay for infrastructure projects across all sectors. Stakeholders in infrastructure development, from private investors and project developers to public-sector agencies and sponsors, can expect several concrete benefits.

Faster environmental reviews, less litigation risk

NEPA analyses can now be more targeted. Agencies will no longer be compelled to produce exhaustive EIS documents covering every conceivable indirect effect. This should accelerate NEPA review timelines, which today take an average of four and a half years. The Global Infrastructure Investor Association (GIAA), which represents major private investors, hailed the ruling as “a pivotal moment in speeding up the much-needed modernization of infrastructure in America.”

A more limited NEPA scope also limits the grounds for legal challenges to proposed projects. Challenges relying on separate upstream or downstream effects or effects beyond the scope of the jurisdiction of the reviewing agency are now less likely to succeed.

Greater predictability for project planning and financing

For investors, regulatory risks, including the risk of delays due to challenges in the environmental review processes, is a deterrent to investment in US projects. Those delays also inflate costs, with rising materials and labor costs and strained budgets being the result of a protracted review process.

By clarifying and narrowing the requirements of NEPA, this decision effectively removes a layer of ambiguity that project opponents might use to halt a project. Fewer NEPA challenges means fewer injunctions and less chance of permits being vacated. Private capital is thus more likely to engage in projects as this legal and regulatory uncertainty is lifted and projects become more financeable. Public sector clients can also plan with increased confidence that once federal approval is obtained, it is less likely to be later undone. This predictability allows for better risk management, potentially lowering financing costs, and more projects reaching completion on schedule.

Cross-sector impact

The decision affects all types of infrastructure subject to NEPA, including transportation (e.g., rail, highways, bridges, ports, airports), energy (e.g., pipelines, LNG terminals, transmission, renewables), and broadband and other digital infrastructure.

Refocus on relevant environmental impact

Though the decision means NEPA review does not require assessment of indirect environmental impacts, reviewing agencies must still thoroughly evaluate the direct and reasonably proximate impacts of project, take public input, and consider alternatives and mitigation measures. This focused approach may allow agencies to direct resources to studying the impacts they can mitigate or regulate with greater efficiency.

Still, critics caution that narrowing the required scope of NEPA reviews may reduce visibility into broader environmental consequences. Environmental advocates argue that upstream and downstream effects, such as induced fossil fuel production or long-term cumulative emissions, are central to understanding the broader impact of a project. By focusing more narrowly on direct effects, they warn that agencies may overlook significant externalities, particularly in climate-sensitive sectors like energy and transportation. The Court acknowledged these concerns but emphasized that NEPA was not designed to compel such expansive analyses.

Next Steps

The Seven County decision delivers a significant win for developing and investments in US infrastructure, removing a longstanding source of delay and uncertainty. For private investors, developers, and public agencies alike, this is a welcome development, promising to unlock projects and drive infrastructure growth, while ensuring environmental impacts are considered within a reasonable, workable framework.

Stakeholders should factor this ruling into their permitting and litigation risk strategy and consider revisiting stalled projects that may benefit from the new regime. Stakeholders should also monitor federal agency updates to their NEPA guidance and processes to incorporate the clarified scope, and for Congress to potentially codify aspects of this ruling in pending permitting legislating.