Infrastructure spending as an economic stimulus requires a NEPA fix, too

Infrastructure spending as an economic stimulus requires a NEPA fix, too
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As the novel coronavirus continues to spread, lawmakers are continuing to brainstorm ways to ensure the U.S. economy does not spin into a recession. That’s good.

One idea that has been floated by Senate Appropriations Committee Chairman Richard ShelbyRichard Craig ShelbyHouse pushes back schedule to pass spending bills Top Republican says Trump greenlit budget fix for VA health care GOP senators not tested for coronavirus before lunch with Trump MORE (R-Ala.) is a $1 trillion infrastructure programMany Democrats also support the idea of infrastructure as a stimulus, although there will always be differences of opinion on the level of funding and types of projects supported. 

In fact, a bipartisan group of 20 members of Congress wrote House leadership urging them to pass an infrastructure spending bill. This is also good, as infrastructure spending not only can provide the immediate economic stimulus, but also provides a foundation for further economic development down the road. 

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But if we as a nation are going to look to infrastructure development as a means to stimulate the economy, we must make sure we address a major impediment to infrastructure spending that has nothing to do with this new viral threat – the outdated National Environmental Policy Act (NEPA).

When NEPA was enacted in 1970, it was intended to ensure that federal projects would be evaluated to ensure compliance with existing environmental laws. While NEPA provides important safeguards to ensure federal agencies carefully consider environmental impacts, the process as it stands has become a tangle of bureaucratic red tape for many industries wishing to deliver on new, modernized infrastructure projects. Overly burdensome analytical requirements, broad definitions of reasonable effects or impacts, excessive levels of review and endless opportunities for review and comment have led to significant uncertainty in planning major projects.

According to the Council on Environmental Quality (CEQ), the current average time to complete a NEPA-related environmental review is 4.5 years. Costs can range widely, but in 2003 the Government Accountability Office estimated that environmental impact studies (EIS) alone typically cost as much as $2 million. Costs today will likely be much higher. In fact, in 2016 the Department of Energy estimated that NEPA-related analyses averaged $4.2 million per project

Consider that NEPA reviews can so prolong a project that by the time permits have been approved, the project itself may no longer be of sufficient scope to meet its intended needs. The I-70 East expansion project in Denver is a good example. According to Matt Gerard of the Plenary Group, an investment company, “The permit process for that project took over 13 years and it ended up with a document that was almost 16,000 pages in length.” As Ed Mortimer of the U.S. Chamber of Commerce said of the project, “If it takes 20 years to get a permit, by the time that project is in construction, the capacity it was meant to handle has already exceeded it.”

Furthermore, and of great concern to investors, long NEPA-related permitting times may exceed financial cycles, meaning that by the time permits are granted for needed infrastructure, the funds — be they public or private — may no longer be available. Consider the potential impact on highway projects, where CEQ notes that 60 percent of federal highway projects take more than 6 years to complete all NEPA-related environmental reviews. 

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Major projects like developing the infrastructure so desperately needed in the U.S. rely on reasonable, fixed schedules and financial predictability to attract the capital needed to bring these projects to fruition. 

Infrastructure development will have the additional economic benefit of creating millions of jobs and accelerating economic growth and productivity. If infrastructure development will be part of policymakers’ solution to addressing our current economic woes, we need to be sure those funds can actually be spent. That means modernizing NEPA to streamline the permitting process while still assuring sound, fact-based environmental reviews and enabling increased infrastructure investment. 

Kyle Isakower is Senior Vice President of Regulatory & Energy Policy for the American Council for Capital Formation.