The language of "significant harm" closely mirrors a legislative fix to the provision that has been pushed by Vermont Sen. Patrick Leahy, who chairs the Judiciary Committee. The new policy has been praised by both the Project on Government Oversight and OMB Watch.  But it effectively side steps the most controversial part of legislation proposed by Leahy, and backed by other civil libertarians: A formal review by courts of any administration's judgement. As Sen. Russ Feingold, a co-sponsor of the legislation, puts it in a press release:

While I am pleased that the Obama administration recognizes that the Bush approach was a mistake, its new policy is disappointing because it still amounts to an approach of ‘just trust us.'  Independent court review of the government's use of the state secrets privilege is essential.

The American Civil Liberties Union makes a similar point, via staff attorney Ben Wizner:

On paper, this is a step forward. In court however, the Obama administration continues to defend a broader view of state secrets put forward by the Bush administration and to demand that federal courts throw out lawsuits filed by victims of torture and illegal surveillance. In recent years, we have seen the executive branch engage in grave human rights violations, declare those activities 'state secrets,' and thus avoid any judicial oversight or accountability. It is critical that the courts play a meaningful role in deciding whether victims of human rights abuse will have an opportunity to seek justice. Real reform of the state secrets privilege must affirm the power of the courts to reject false claims of 'national security.'"