On February 19, 2026, the Federal Energy Regulatory Commission (FERC) issued a notice of proposed rulemaking that would expand an existing National Environmental Policy Act (NEPA) categorical exclusion to cover certain terminations and revocations of hydropower licenses and exemptions. The proposal would allow FERC to rely on a categorical exclusion, rather than preparing an Environmental Assessment (EA) or Environmental Impact Statement (EIS), for license and exemption terminations or revocations that involve only minor or no ground-disturbing activity and minor or no changes in reservoir conditions and downstream flows.

Under NEPA, federal agencies must evaluate the environmental impacts of “major Federal actions” and, where significant effects are reasonably foreseeable, prepare a detailed EIS. For actions with uncertain or potentially lesser impacts, agencies typically prepare a shorter EA, unless the action is exempt from NEPA or falls within a categorical exclusion—a category of actions an agency has determined “normally does not significantly affect the quality of the human environment.” Agencies may establish or revise categorical exclusions based on experience and data from past environmental reviews and must still screen for “extraordinary circumstances” that could make a normally excluded action significant.

The subject of FERC’s proposed rule relates specifically to how NEPA applies to the termination or revocation of a hydropower license or exemption. Under Part I of the Federal Power Act, a FERC-issued license can conclude in several ways: through a voluntary surrender initiated by the licensee; through termination for failure to commence construction within the time prescribed; through “implied surrender,” when a licensee effectively abandons the project by inaction or unauthorized transfer; or through revocation, when FERC withdraws the license after a knowing and unremedied violation of a compliance order. Currently, FERC’s NEPA regulations explicitly address only one of these pathways—voluntary surrenders—by generally requiring an EA for a proposed voluntary surrender when project works exist or ground-disturbing activity has occurred, and by providing a categorical exclusion for a voluntary surrender when no works exist or no ground disturbance has occurred. FERC’s new proposal is aimed at expanding the circumstances in which NEPA can be satisfied through the use of categorical exclusions for Commission-initiated terminations and revocations.

The proposed rule would revise 18 C.F.R. § 380.4(a)(13) to add a new categorical exclusion for “terminations or revocations of water power licenses and exemptions that will result in minor or no ground disturbing activity and minor or no changes in reservoir conditions and downstream flows.” In support of the proposed categorical exclusion, FERC notes that termination for failure to commence construction produces no environmental effects. FERC also explains that its historical experience with implied surrender terminations and revocations shows that these actions typically leave project facilities in place, do not alter flows or reservoir levels in more than a minor way, and have not produced significant environmental effects. In the relatively few cases where additional work such as dam stabilization or removal was required, FERC explains that its prior EAs still found no significant impact, and any outlier involving more than minor changes would fall outside the scope of the new categorical exclusion. FERC states that its proposed rulemaking aims to clarify its NEPA compliance path for low-impact license terminations and revocations, while improving the efficiency of its hydropower oversight and use of Commission resources.

In support of the proposed rulemaking, FERC Chairman Laura Swett noted that “by cutting unnecessary red tape, [FERC is] accelerating the decision-making processes and allowing applicants to get the answers they need quickly and efficiently, all while ensuring we meet our statutory obligations under NEPA.”

Comments on the proposed rulemaking are due on March 26, 2026. A copy of the proposed rulemaking, issued under Docket No. RM26-7-000, is available here.