The White House is moving forward with a new set of guidelines aimed at streamlining the permitting process for large infrastructure projects. Released last week, an administration memo provides recommendations for state agencies that are reviewing projects subject to the National Environmental Policy Act, otherwise known as NEPA.
Infrastructure plays a crucial role in the commercial real estate industry. The location and quality of roads, bridges and other types of transportation are a key determinant of where real estate investments are made, and of the value of property as a whole.
NAIOP has long been a proponent of increased investment in America’s aging infrastructure network, but the current regulatory framework is far too onerous to deploy the capital needed to do so. As Congress considers infrastructure funding proposals, it must also seek to modernize laws like NEPA that prevent projects from going forward.
The latest move by the White House builds on an August 2017 executive order, the administration’s first attempt at cutting permitting times.
Passed in 1969, NEPA requires federal agencies to assess the potential environmental, social and economic impacts of certain infrastructure projects. A major implication of NEPA is that, when a proposed project is deemed to have a “significant impact,” an environmental impact statement (EIS) must be performed. The Department of Energy reports that the average completion time for an EIS in 2015 was more than four years, at a cost of $4.2 million.
The intent of NEPA was to apply additional scrutiny to “major federal actions,” which can include anything from power plants to interstate highways. A private sector project is subject to NEPA regulations only in the event that it is located on federal land or uses federal funds.
In 2015 the Obama administration sought to improve the NEPA review process by signing the Fixing America’s Surface Transportation (FAST) Act into law. One reason permitting takes so long is that a number of federal and state agencies can share jurisdiction over a given project. For example, an interstate highway might require approval from the Environmental Protection Agency, Army Corps of Engineers, and the Fish and Wildlife Service, each with varying levels of resources, review procedures and timelines. The FAST Act took a number of steps to encourage enhanced coordination among stakeholders, but in practice has had limited success.
The Trump administration’s 2017 executive order was intended to go a step further. To achieve a goal of issuing permits within two years (versus the current average of more than seven years after state and local delays figure in), the executive order requires a single, lead federal agency to oversee the environmental review of the project, in coordination with “cooperating agencies.” Last week’s memo clarifies that the executive order applies to state agencies assigned NEPA responsibilities, and says they are responsible for sticking to the two-year permitting timeline.
As with most policy proposals related to environmental protections, efforts to modify the NEPA permitting process have received both opposition and praise, generally along party lines. But there has been bipartisan agreement that seven years is simply too long of a timetable for approval of infrastructure projects, particularly those with broad societal benefits.
However, some argue that these and other directives contained in the executive order are only recommended actions, and are ones that agencies either have the authority to do or, in some cases, are already doing. These critics point to other factors – such as risk-averse agencies that avoid streamlined permitting options for fear of litigation – as the root cause of delays.
It’s worth noting that NEPA is not the only obstacle in getting major infrastructure projects approved. For example, determining which waters receive federal protection under the Clean Water Act is an often costly and time-consuming endeavor. The same goes for species and habitats covered by the Endangered Species Act, as well as the Clean Air Act, and other federal laws. Adding to the complexity is a web of state and local regulations, and the different interpretations of statutes by various regional agency offices.
The administration’s attempt at streamlining the NEPA permitting process is an important step towards establishing a more efficient and cost-effective regulatory framework. Much of the current debate about infrastructure investment focuses on funding, but ensuring that projects – once capitalized – aren’t needlessly tied up in bureaucratic red tape is just as important. These delays not only hurt the CRE community, but also deprive states and municipalities of increased property values and jobs, as well as the expanded tax base that comes from this economic activity.