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On July 9, 2020, the Council on Environmental Quality (CEQ) announced the final rule updating regulations for the National Environmental Policy Act (NEPA), marking the first comprehensive update of the regulations since 1978. This change removes federal loan guarantees from the NEPA process. The change includes federal loan guarantees granted by the USDA’s Farm Service Agency (FSA) utilized by many producers. This final rule goes into effect on September 14, 2020.
What is NEPA?
NEPA requires federal agencies to assess the damage to the environment, directing agencies to assess the environmental impacts of all proposed actions. Agencies must prepare a detailed statement called an Environmental Impact Statement (EIS) when actions would have a significant impact on the environment. An agency completes an Environmental Assessment (EA) to determine if the project will require an EIS.
Before this final rule, FSA and Small Business Administration were required to complete an EA on all actions involving federal loan guarantees. An EA must show the need for the proposed action, such as a proposed poultry house, alternatives to the project, environmental impacts of the proposed action, and other options, and a list of all agencies and persons consulted. The agency must complete this process, determine if an EIS is required, or explain why only an EA is appropriate. A few animal feeding operations (AFOs) have had loan guarantees challenged by groups, including one in Maryland, for FSA not having followed proper procedures.
Final Rule Changes
As mentioned, the final rule from CEQ excludes loans, loan guarantees, and other forms of financial assistance. According to CEQ, an agency, such as FSA, would not exercise sufficient control and responsibilities over the effects of the action, including farm ownership and operating loan guarantees and SBA’s business-loan guarantees. With FSA’s loan guarantees, CEQ highlights that FSA’s role is limited to providing the guarantee to a private lender with no Federal funds spent unless the borrower defaults on the private loan. If a default happens, the funds are paid to the lender, not the borrower. FSA does not control any actual decision-making authority over the lender or the borrower. In previous court decisions, courts have highlighted that when an agency has no control, NEPA is not triggered. For this reason, a NEPA review will now exclude FSA’s loan guarantees.
What Does This Mean?
For a grower looking to expand, building new houses, or looking to get into poultry, this change does not affect any of the state environmental review processes which would ordinarily need to be done. The move will be if a grower’s lender requires a loan guarantee with FSA. FSA would no longer have to do an environmental review before granting that loan guarantee. This change would also take away potential challenges to FSA’s environmental review by groups. This final rule goes into effect on September 14, 2020.