Crude Oil & Agency Review: SCOTUS Weighs NEPA Environmental Studies Requirements

By Ryan J. Regula, Charlene Anne Warner, and Cole Craghan

2024 was a year defined by change in the world of administrative law. With the U.S. Supreme Court’s review of the National Environmental Policy Act (NEPA) in Seven County Infrastructure Coalition v. Eagle County, the nation’s highest court has signaled¹ that it is not done reflecting on its role in the administrative state. During oral arguments held on December 10, 2024, the justices weighed the requirements of NEPA, and specifically, what it means for an agency to review the “reasonably foreseeable environmental effects” of a proposed agency action.² While a clear majority did not materialize during the arguments, the Court’s decision will ultimately determine how involved an agency must be in conducting environmental reviews, and in turn, how much judicial oversight must follow.

The Lower Court – Upholding Old Norms

Before reaching the U.S. Supreme Court, the D.C. Circuit Court of Appeals ruled in the case of Eagle County v. Surface Transportation Board, that to fulfill their obligations under NEPA, agencies must thoroughly review environmental consequences of a proposed action and provide a reasoned explanation for their decisions though an Environmental Impact Statement (EIS).³ In doing so, the D.C. Circuit explained that a reviewing agency must prepare a report that takes a “hard look” at the environmental consequences of their actions before making a final determination.⁴

Here, the requisite “hard look” involved reviewing the environmental impacts of an 88-mile railway connecting Utah’s Uinta Basin (a crude oil production site) to the national railway network. In evaluating the Surface Transportation Board’s environmental review, the D.C. Circuit held that the Final EIS ignored certain upstream and downstream effects, such as greenhouse gas emissions and other impacts of moving crude oil nationwide.⁵ While an agency “need not foresee the unforeseeable,” the D.C. Circuit found that an agency cannot avoid drafting an EIS, or including relevant downstream effects, solely because such action would involve a degree of forecasting by the agency.⁶ Therefore, the Court vacated the EIS and sent it back to the Surface Transportation Board for further proceedings.⁷

The Challenge Before SCOTUS – Limiting Agency Involvement

Before the Surface Transportation Board could conduct its renewed review, the Seven County Infrastructure Coalition (another party to the case consisting of local business interests) appealed to the U.S. Supreme Court to argue for a more limited view of the agency’s requirements under NEPA.

At the Supreme Court, the majority of arguments concerning the correct understanding of NEPA ultimately turned on exactly how much of an environmental review is actually required. As Justice Sonia Sotomayor stated: “It’s not a question of did it fail to look at something…[but], was it arbitrary and capricious for it not to consider something more.”⁸ On one side, SCIC argued that NEPA limits review of projects to simple effects, and proximate cause principal; likewise, the railway’s proponents argued that NEPA is designed to “inform” government decision-making, not “paralyze” it.⁹ On the other, Eagle County opposed the EIS conducted, and urged the Supreme Court to stick to “settled” law that requires agencies to conduct an in-depth analysis.¹⁰

As a crucial swing vote in the Supreme Court, Chief Justice John Roberts questioned SCIC’s limited view of NEPA — appearing to doubt the practical implications of reviewing only a narrow portion of a project’s impacts, rather than the total downstream effects.¹¹ In responding to SCIC’s arguments, Chief Justice Roberts alerted the parties to increased risk of judicial review should an agency decide to ignore certain downstream effects. But the Court was skeptical of both parties pushing for opposite ends of a sliding scale, with several questions appearing to search for a balancing standard that limits the scope of an EIS by deferring to the agency on the downstream impacts.

The Final Ruling – A New Method of Curtailing Agency Power?

As the justices wrestle with the arguments over the coming months, outsiders will look to the recent trends of the Supreme Court to inform their predictions. Such retrospective analysis is warranted, as this bench has been especially active in reshaping the administrative state.¹² For instance, during oral arguments, Justice Kavanaugh hinted at a new shift in doctrine that would limit agency involvement by increasing its deference in relation to environmental studies.

To this point, Justice Kavanaugh emphasized the judiciary’s “overly aggressive role” in reviewing agency reports — arguing that, by taking a microscope to every decision made by an agency, there is now an incentive for agencies to conduct an overly exhaustive EIS that transcends the scope of the authorizing statute.¹³ To avoid this result, Justice Kavanaugh advocated that agencies should be allowed significant deference when it comes to deciding how downstream is too far, positing that “the deference of the courts has to be huge with respect to how the agencies think about the scope of what they’re going to consider.”¹⁴

Planning Ahead – What This Means for Businesses

No matter the outcome, Seven County Infrastructure Coalition is likely to have measurable impact on businesses and other regulated entities. Indeed, if Justice Kavanaugh’s words are any indication, that could actually mean less restrictions and more expedited environmental reviews. For instance, eliminating the fear of judicial scrutiny may incentivize an agency to cut out certain downstream reviews that it deems outside the scope of NEPA and expedite the construction of its projects — which, in turn, could eliminate NEPA litigation as a tool for project opponents to slow down developments.

For investors, developers, and agencies subject to NEPA, this decision will be the one to watch in the Supreme Court’s upcoming term. As the court has not been afraid to reshape administrative law, it should be no surprise if it adds another change to its repertoire.