The State of Play in Permitting Reform

Recent weeks have seen a flurry of activity on the permitting reform in Washington. Legislative proposals have been advanced by Republicans and Democrats in both the House and Senate. Last week, the Biden administration added to the debate with the release of its own permitting priorities statement. All of this comes amid considerable political drama centered on negotiations over the debt ceiling which have been linked to permitting reform debate. Whether these issues will remain linked is unknown.

It is remarkable that there is such bipartisan interest in pursuing permitting reform, but the term has now become a stand-in for a wide range of ideas and policies. A close examination of the permitting reform proposals reveals both overlapping interests and considerable divergences.

Q1: What are Biden’s priorities?

A1: A lot is packaged in the administration’s proposal. However, the lead item is “Accelerate Deployment of Critical Electric Transmission,” which indicates a focus on new and expanded Federal Energy Regulatory Commission (FERC) and Department of Energy (DOE) authorities that would make it easier to develop renewables and low-carbon energy. This includes the ability to site interstate transmission and establish cost allocation procedures (i.e., which ratepayers in which state will foot the bill for a given project), new FERC rules to speed up generation interconnection queues, establish new minimum interregional transfer requirements, and allow the DOE to use loan authorities granted by the Infrastructure Investment and Jobs Act (IIJA) for transmission projects outside of formally designated zones.

Politically the Biden administration is signaling an interest in compromise and negotiation. Accompanying the release of these priorities, John Podesta, senior adviser to the president for clean energy innovation and implementation, endorsed Senator Joe Manchin’s (D-WV) permitting reform legislation as a starting point for negotiation, saying that “though the president doesn’t like everything in the bill, compromise is necessary.”

Q2: What can executive action do?

A2: The administration is taking executive action where it can. Federal permitting takes place within federal agencies under the control of the president and much can be done to improve existing processes already sanctioned by law. A major critique of the existing process is interagency coordination. To this end, the first of the administration’s actions is a MOU between key permitting agencies (e.g., DOE, Environmental Protection Agency, Department of the Interior, Bureau of Land Management, and others). Podesta’s remarks suggest that the DOE will direct and lead the permitting process across agencies, set two-year permit review timelines, and allow a petition to the president if timelines are missed or authorization is denied. This a move to strengthen and expand the one lead agency concept, in which a single federal agency manages and shepherds a project through the permitting process.

Meanwhile, the DOE is taking steps to reform its existing authority under the 2005 Energy Policy Act to designate National Interest Electric Transmission Corridors (NIETCs). Projects built within a NIETC may proceed through a FERC-directed siting and permitting process which, if necessary, can overrule state objections and delays. Furthermore, a project within a NIETC may access federal financing support as granted to the DOE by the IIJA and Inflation Reduction Act (IRA). However, since a 2011 Supreme Court ruling struck down a DOE corridor designation as overly broad the authority has laid dormant. Last week, the DOE released a Notice of Intent which seeks to reform the process to operate on a route-specific, applicant driven process. This would allow project developers to design projects and submit a proposal to DOE for designation as a NIETC. This creates a promising new pathway for transmission projects to be permitted which bypasses time consuming state-by-state permitting pathways.

Q3: If this authority already exists and is being reformed by executive action, what is required of legislation?

A3: Projects submitted to DOE’s NIETC process will still require an environmental review under the National Environmental Policy Act (NEPA). Reform of the NEPA process to shorten timelines, expand categorical exclusions (essentially automatic approvals), and reduce duplicative studies through programmatic reviews requires legislative action. The Biden administration has signaled this as a key priority, Manchin’s legislative proposal has a strong emphasis on it, and the Republican proposals in both the House and Senate likewise focus on amending NEPA itself as a means of instituting greater efficiency in NEPA reviews. This is an area of possible bipartisan compromise.

Legislation is also required to clarify and expand FERC authorities to meet the Biden administration’s goals. Such authorities are key for expanding the number electric transmission projects in the development pipeline. Priorities and interconnection queues, establishing cost allocation for transmission projects, and mandating interregional transfer requirements will require congressional action.

Q4: Where do the parties disagree?

A4: The Biden administration and many Democrats are laser focused on high voltage transmission but are encountering resistance from Republicans. Expanded authority for FERC which overrides state authority over permitting and electric rate setting is controversial and is a nonstarter for many Republicans. It also generates significant political opposition from state public utility commissions (PUCs), whose oversight authorities are eroded. Therefore, aspects of the Biden administration’s priorities which seek reform on “cost allocation” have the potential to be a major sticking point. This directly relates to ratepayers footing the bill for a transmission buildout which runs counter to Republican focus on lowering energy costs (H.R. 1 is titled “The Lower Energy Costs Act”) and, as they characterize it, their general distaste for having their red-state constituents pay for blue-state renewable energy and transmission projects.

Meanwhile a Republican proposal in the Senate features a ban on using the “social cost of greenhouse gases" in regulation and rulemaking, if doing so increases energy costs or, according to the bill summary, “prolongs the time to promulgate regulations, guidance, or take agency actions.” In his remarks on the issue last week, John Podesta explicitly called out provisions such as these as “climate denial” and declared them a nonstarter in negotiations.

Finally, Democrats face internal disagreement over NEPA reform. Some, such as Senator Jeff Merkley (D-OR), question the necessity of NEPA reform in the first place, arguing that other issues are the major source of the delay. Another concern is that NEPA reform will limit local input and risks forcing additional infrastructure onto historically marginalized communities. A Democratic proposal in the House from Representatives Sean Casten (D-IL) and Mike Levin (D-CA), would add new environmental justice provisions to NEPA. In any case, both sides will have to compromise on key issues to achieve meaningful NEPA reform.

Q5: What happens next?

A5: Historically the transmission grid has expanded by roughly 1 percent a year; a 2023 DOE study finds that the U.S. transmission system will need to grow 57 percent by 2035 to accommodate the changes to the power sector induced by the IRA and IIJA. Research such as this has placed massive pressure on the Biden administration to get something done on permitting reform to accelerate the energy transition and ensure grid stability.

Meanwhile, new EPA rules raise the stakes on permitting reform by requiring carbon capture and sequestration (CCS) for existing coal-fired power plants. While NEPA compromise seems possible, permitting reform focused solely on NEPA reform is incomplete and insufficient—building interstate electric transmission lines, interstate CO2 and hydrogen pipelines, and underground CO2 storage capacity, among other things, will require modernization of a number of major statutes, along with litigation reform. For Democrats, FERC, cost allocation, and DOE siting authorities must be included in any package. The question is what they are willing to give up to get Republicans to accept these priorities in a final bill.

Cy McGeady is an associate fellow with the Energy Security and Climate Change Program at the Center for Strategic and International Studies in Washington, D.C.