Permitting Reform in the Debt Ceiling Bill: A First Step, with More to Come

Now that Congress has averted financial default via the bipartisan Fiscal Responsibility Act of 2023, several questions come to mind. For one, what should be made of the bill’s compromise provisions to modernize the federal permitting process? And can Congress build on those changes and pass something more comprehensive by year’s end?

First, it is important to commend both sides, Speaker Kevin McCarthy (R-CA) and President Biden, for recognizing the need to fix what nearly everyone agrees is broken: obtaining permits to build infrastructure of all kinds has become a legally fraught and uncertain endeavor that can take years. Project developers are routinely ping-ponged between conflicting agencies (federal and state), before being caught up in court challenges of indeterminate number and duration. To meet both climate and energy security goals, this needs to change.

The debt ceiling legislation includes an amended version of the BUILDER Act, which was originally part of H.R. 1, the “Lower Energy Cost Act,” the energy and permitting legislation that House Republicans passed in March. The BUILDER Act’s intent is to update the National Environmental Policy Act (NEPA), a five-page statute passed in 1970 that requires federal agencies to issue “detailed statements” for “major federal actions significantly affecting the quality of human environment.” 

That one line, in what was originally conceived as a fairly modest, procedural statute, was expanded by President Carter in 1978 into a far more ambitious regulatory scheme. As interpreted over many decades by different agencies, administrations, and courts, the NEPA process has become, in many respects, an obstacle to efficient permitting. 

So does the debt deal fix the problem? Developers, whether of pipelines, roads, wind farms, or transmission lines, seem to agree that firm deadlines around completing NEPA’s “environmental impact statements” (EISs) would help. While the legislation in the debt ceiling bill sets two-year time-limits for EISs, and one year for more modest “environmental assessments” there is a catch: agencies need only “consult” with permit applicants in the event those deadlines will be missed. What form such consultations will take is unknown, but it creates a significant opportunity for agencies to slow walk the process.

Under the new bill, those same applicants can take the lead agency of the NEPA review to court if a deadline is missed. The court, which has no deadline to act, can then require the agency to complete the review in 90 days after the court makes the decision—however, the court can allow more time if it concludes that more time is needed. 

Some question whether this provision, to the extent it is useful, would be invoked by developers, who might be concerned about the political dynamic it may create; that is, they may be reluctant to sue the very agency that issues the permits they need.

With respect to NEPA, the extent of litigation risk is clearly a problem. It drives agencies to extremes, with EISs taking the form of shelf-length tomes, thousands of pages long, lasting an average of 4.5 years. Utah State University researchers called this phenomenon “litigation-proofing” the EIS (the debt deal includes pages limits on NEPA documents, but they do not apply to appendices or speak to whether the analysis of a potential impact is sufficient). 

While there were some initial discussions around litigation reform, negotiators could not reach an agreement on how to address it. Litigation reform will surely be on the table in the next round of permitting discussions, which Speaker McCarthy and President Biden agreed in principle to pursue later this year. 

Those discussions are already underway, with all eyes on the Senate, where the leaders of the Energy and Natural Resources Committee and Environment and Public Works Committees have all introduced legislation to increase the speed and efficiency of permitting. Republicans will likely push for additional reforms to NEPA, along with the Clean Water Act and other environmental statutes, while Democrats will prioritize policy changes around building interstate transmission lines. 

Is a major deal in the works? Time will tell. Sifting through statutes, court cases, regulations, and conflicting positions from interest groups will contribute to a lively process. To be sure, legislators on both sides are primed and ready for the debate. The question is how that debate gets resolved into the passage of meaningful legislation. 

While not entirely analogous, the politics of this potential deal resemble the 2015 compromise that rescinded the 40-year ban on crude oil exports—a monumental accomplishment that transformed global energy markets. To get it, Republicans agreed to extend tax credits for wind and solar energy projects. The final agreement was added to an end-of-year spending bill. 

The theme of “energy independence” will tie the deal together, though with different strands. Speaker McCarthy needs to persuade members of his conference that a permitting bill will enable the United States to regain what, in their minds, was lost over the last two years: U.S. “energy dominance” in producing fossil fuels. Democrats want policies that expedite connecting renewable energy projects funded by the Inflation Reduction Act to the electric grid. In either case, both sides want what “energy independence” means to them: lower energy costs for consumers; more secure, reliable, and clean supplies of energy; and more resilient infrastructure.

Today’s discussions around permitting reform, and the dynamic that fuels them, have a familiar ring. More fossil fuels, more renewable energy, and more infrastructure could all be achieved as part of a must-pass vehicle at year-end. While not a sure thing, the stars surely seem aligned for another landmark achievement.

Michael Catanzaro is a senior associate (non-resident) with the Energy Security and Climate Change Program at the Center for Strategic and International Studies in Washington, D.C.

Michael Catanzaro
Senior Associate (Non-Resident), Energy Security and Climate Change Program