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Federal Roadblocks

by Robert VerBruggen

A saner regulatory regime would help us update our transportation infrastructure

As part of his stimulus plan — which in total adds up to nearly $1 trillion — President Obama has proposed investing $85 billion in the nation’s infrastructure.

Many have asked: Why not spend more in this area? U.S. infrastructure is under severe stress, with highways congested and roads and bridges in need of repair, and Obama’s planned investments will hardly make a dent in the problem. The U.S. will need to spend $225 billion annually for a half century to “upgrade our existing transportation network . . . [and build] more advanced facilities,” according to the government’s National Surface Transportation Policy and Revenue Study Commission.

One likely reason for Obama’s modest goal: regulation. The theory behind the stimulus is that immediately pumping money into the economy can pull the country out of a recession — and by the time many projects jump their various regulatory hurdles, it will be too late. To the degree these hurdles are necessary, the delays they cause are acceptable. But many of the regulations burdening construction projects give no apparent benefit.

The biggest culprit is the National Environmental Policy Act (NEPA), enacted in 1970. The act seems sensible enough: It doesn’t even prohibit anything. It just states that for all federally funded projects, builders must explain how the construction could harm the environment, whether there are less harmful alternatives, and what the builders plan to do to mitigate the harm. They must also allow the public to comment.

Thousands of times each year, this process takes the form of an “Environmental Assessment” document, and hundreds of times, the more detailed “Environmental Impact Statement” is needed. EAs add about 1.4 percent to a project’s construction costs, and EISs add about 2.3 percent, according to a study by the National Cooperative Highway Research Program. When a project falls under a “categorical exclusion” — that is, it’s a common type of project known to have no serious environmental impact, so no review is necessary — obtaining the exclusion adds only about 1.1 percent.

NEPA isn’t always such a mild nuisance, however. In 1989’s Robertson v. Methow Valley Citizens Council, the Supreme Court confirmed that the law is “procedural” rather than “substantive,” mandating only that those executing federal projects document potential environmental harm. But this leaves a window open for abuse, and gives builders a big reason to worry — if an activist group can point to some flaw, real or imagined, in a builder’s NEPA process, it can file a lawsuit and tie up construction.

In 2005, A. Kathleen Craft of Nevada’s Frehner Construction testified about such lawsuits before the House Committee on Resources (on behalf of the American Road and Transportation Builders Association, or ARTBA, a construction-industry interest group). At the time, the committee was considering various changes to NEPA.

Craft’s company had obtained a final Environmental Impact Statement and begun widening U.S. 95 (outside Las Vegas) in 1999, but in 2004, a Sierra Club lawsuit halted the process. The Sierra Club alleged that car exhaust from the highway would hurt those living nearby. Craft suggested a time limit for complaints, and a requirement that complaints deal only with issues raised during the public-comment period. A subsequent law has put a 180-day deadline in place for activists to challenge approvals, but they still aren’t required to limit their suits to issues that actually came up during the NEPA-required debate time. They’re free to keep silent about their grievances until after the final impact statement, and then complain that the statement doesn’t address their problems.

To be fair, the committee’s report concluded that fewer than 1 percent of NEPA decisions produced lawsuits, and that in 93 percent of those lawsuits, judges didn’t issue injunctions. But the mere threat of a lawsuit is enough to scare potential builders into bulletproofing their plans. In 2000, the average Environmental Impact Statement was 742 pages long — too long for most citizens to read, defeating the purpose of public comment, and not a good use of anyone’s time.

And of course, NEPA itself is only part of the story. Projects that receive federal funding must first go through a state planning process. Then, during the NEPA process, the builders must explain how they plan to follow other regulations. “If you touch a body of water, which is pretty broadly defined, you have to get a Clean Water Act permit. If you have endangered species, you have to deal with that. If you’re disrupting a historic property, there’s a whole other regime for that,” says Tyler Duvall, who was acting undersecretary for policy in the Department of Transportation in the Bush administration. “NEPA is kind of an umbrella for all of those.”

The Endangered Species Act in particular can be a problem. Sometimes it halts construction that might harm specific types of wildlife, but more often it’s the ESA process that presents an unnecessary burden. Until Bush changed the policy last month, federal agencies couldn’t review projects themselves, but had to turn to the federal wildlife agencies, even when there was clearly no threat to any endangered species — a requirement Obama hopes to restore.

Not to mention that private environmental groups like to sue under the ESA. In December of 2008, the Center for Biological Diversity teamed up with Greenpeace and the Defenders of Wildlife to contest Bush’s aforementioned change to agency-review procedures. Earlier, it had filed suit against the Department of the Interior concerning 55 species in 28 states, spread over 8.7 million acres whose protection had been removed.

Also, states have their own environmental laws. California often leads in this regard, and currently, strict emissions regulations there have made it difficult for the construction industry to use equipment and heavy machinery. In addition, local governments need to approve projects.

Funding creates still more delays, as every money source can bring with it regulatory baggage. “Federal investment is about 45 percent of transportation investment nationwide,” says Jeffrey L. Solsby, director of public affairs for ARTBA, the construction industry group. “The rest comes from state and local sources, and many governments fund projects on a multi-year basis.”

Thanks to NEPA and other federal regulations, many states forgo federal funding on some projects to avoid delays and other costs, according to a December 2008 report by the Government Accountability Office. In addition to complying with NEPA, projects that receive federal money must pay workers the “prevailing wage” under the Davis-Bacon Act, hire minority contractors under the Disadvantaged Business Enterprise program, and buy only American steel under the Buy America program. By the GAO’s count, 39 state departments of transportation have used only non-federal money on projects that were eligible for federal programs, and 33 of them had done so because of NEPA.

For transportation projects that receive federal funding, it takes a long time to wade through all this red tape. Environmental Assessments and Environmental Impact Statements do a lot of the damage: Between 2003 and 2008, the median EA completion time fluctuated between about 20 and 30 months; the median EIS time between 50 and 70. Even if the Federal Highway Administration hit its stated targets, the median EA would take a year, the median EIS three. There is absolutely no way to stimulate the economy with new projects requiring these assessments.

All told, major highway projects take an average of 13 years, start to finish, according to the Federal Highway Administration. This doesn’t have to be the case: After the I-35W bridge in Minnesota collapsed, it took about a year to rebuild, thanks to a categorical exclusion from NEPA requirements (which itself was rushed through, taking only three weeks instead of the normal three to six months). Of course, it takes time to investigate and approve new projects, as opposed to rebuilding, so not all projects can or should qualify for such exclusions. But the current delay for Environmental Assessments and Environmental Impact Statements is “simply too long,” as the National Surface Transportation Policy and Revenue Study Commission has stated.

President Obama, not to mention state and local governments, could build a lot more a lot faster under a saner regulatory regime. Once he spends his trillion dollars, he might think about establishing one.

 

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