The Good, The Bad, The Ugly: Federal Permitting Reform

Sen. Joe Manchin’s (D-WV) long-awaited permitting bill, the Energy Independence and Security Act of 2022, was dropped on Wednesday evening, and similar to the anticipation expected, is a mixed bag for the energy industry.

Reminder: debate about permitting reform has accelerated in recent weeks following passing of the Inflation Reduction Act (IRA) when Sen. Joe Manchin reached a side deal with Democratic leadership and President Joe Biden to overhaul the U.S. permitting process in exchange for his vote on the IRA legislation. Now, Senate Majority Leader Chuck Schumer (D-NY) has agreed to tie Manchin’s permitting bill to a budget resolution that must pass by the end of the month to keep the government funded and running.

Let’s take a closer look at some of the good, the bad, and the ugly within the proposed act:

The Good: Accelerated environmental reviews, movement on major energy projects, completion of the Mountain Valley Pipeline

Sen. Manchin’s legislation would limit the timelines for environmental reviews that are part of the approval process to two years for major projects and one year for those that are not designated major. The legislation also puts a statute of limitations barring legal challenges to agency permitting decisions that are not filed within 150 days – timelines that are desperately needed to limit the ability of climate protestors to continuously stall on projects they seek to obstruct.

It also outlines transparency and reporting requirements that will show the public information about proposed projects and the schedules that agencies must adhere to, while designating a lead agency to coordinate reviews to streamline processes.

The legislation further requires the President to keep a list of 25 energy projects of strategic national importance that take into account critical impacts on U.S. policy including, among others; reducing energy prices, improving electric reliability, improving domestic supply chains while limiting America’s reliance on hostile foreign supply chains, increasing trade with allies, creating jobs and reducing greenhouse gas emissions – shared goals the industry can rally behind.

The bill also orders additional construction of electric transmission lines to ensure “an abundant supply of electricity” that will help to reduce costs and stabilize the grid. This is a measure that would benefit the entire energy industry.

In addition, the completion of the Mountain Valley Pipeline in West Virginia, is included in the bill, directing federal agencies “to issue all approval and permits” in just 30 days:

“Congress finds that the timely completion of the construction of the Mountain Valley Pipeline is necessary to ensure an adequate and reliable supply of natural gas to consumers at reasonable prices; to facilitate an orderly transition of the energy industry to cleaner fuels and to reduce carbon emissions; and is in the national interest.”

The Mountain Valley Pipeline alone is expected to provide up to two million dekatherms per day of additional energy capacity to markets in the Mid- and South Atlantic regions of the United States, capitalizing on the vast supply of natural gas from Marcellus and Utica shale production to improve regional energy security.

The bill also limits state environmental reviews under the Clean Water Act to matters directly relating to water quality, eliminating a provision many states have used to challenge projects based on greenhouse gas emissions.

These measures have the potential to dramatically accelerate the permitting approval process, increase domestic production of oil and gas through new infrastructure, and force continuous action on major projects of strategic importance for the industry.

The Bad: Some fossil fuel projects required, but government still picking winners and losers

While the projects of strategic national importance are a good start, the bill still outlines which of these projects are “allowed” to be fossil fuel-based, and which are not. Of those 25 projects, five must be related to fossil fuels or biofuels while the rest are spread across critical minerals, clean energy projects, electricity generation, grid-enhancing projects, carbon capture, and hydrogen.

This designation of specific energy sectors opens the door for abuse to occur where projects deemed more “environmentally friendly” are prioritized in greater numbers than those in the oil and gas industry – an industry that is currently powering America’s electricity needs where renewables alone fall short.

For example, Sen. Shelley Moore Capito (R-WV) went further than Manchin’s bill in her own legislative provision, preventing the singling out of an industry and increasing projects on federal lands:

From The Hill:

“Capito’s bill goes further, with provisions that prevent the federal government from restricting fracking and allowing states to take over authority from the federal government for energy production on public lands.”

In addition, while the Manchin bill seeks to limit state authority to block energy projects, it again doesn’t go as far as the Capito bill. More from The Hill:

“Both the Capito and Manchin proposals also both seek to limit state authority to block energy projects that run through their waters, giving them just a year to do so and limiting the reasons states can use to justify their decisions. Yet Capito’s legislation would also codify a Trump-era rule that limited which waters are subject to federal protections, something Manchin’s bill does not do.”

The Ugly: No reform to the National Environmental Policy Act and no “teeth” to review process

Perhaps most notably, the bill does not amend key underlying statutes such as the National Environmental Policy Act, a provision environmental activists have consistently used and abused.

Reform to NEPA has been desperately needed for years to streamline approval processes for new oil and gas infrastructure that often face extensive government red tape and review lag times that extend multiple years. These delays regularly allow time for climate activists to pressure states to shut down new infrastructure through endless and frivolous litigation. The irony is, permitting reform is also necessary to speed up construction of renewable energy projects.

Additionally, while deadlines are placed on environmental reviews and judicial actions throughout the legislative text, and subsequent remedial action is outlined if those deadlines are not met, there is no real “teeth” to the measures. What happens if a deadline is not met? Activists just get another 30-60 days to stall until the next action…and the big “whammy” if action gets all the way to the top of the remedial process? From the legislation text:

“REFERRAL TO THE PRESIDENT. If issue resolution is not achieved by 30 days after the date of the meeting convened by the Council on Environmental Quality under clause (i)(II), the head of the lead agency shall refer the matter directly to the President.”

The text also repeatedly mentions a “good cause” clause, emphasizing that projects can be lengthened and shorted if there is good purpose – something that seems ripe for abuse.

Bottom Line: While there are some good provisions in the long-anticipated bill that will help to increase critical infrastructure for the oil and gas industry and streamline convoluted environmental review processes, there are also several provisions that leave the industry wanting for more. It’s just more of the same in wading through an ocean of mixed messages when it comes to the current energy policy landscape.

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