US House passes bill to speed energy permitting, teeing off Senate negotiations

The Republican-majority US House of Representatives passed a sweeping energy policy and infrastructure permitting bill along party lines March 30, setting the stage for likely changes in the Senate, where the leadership of the majority Democrats has vowed to reject the proposal in its current form.

The House voted 225-204 to pass H.R. 1, or the Lower Energy Costs Act, with all but four Democrats voting against the legislation, and all but one Republican voting in favor.

H.R. 1 would make process changes to the National Environmental Policy Act including placing time limits on environmental reviews for energy projects subject to NEPA permitting, and setting deadlines for legal challenges.

In that regard, the bill overlaps with a measure meant to streamline permitting of energy infrastructure that Senator Joe Manchin, Democrat-West Virginia, tried to advance in the last Congress with support from the White House and Senate Democratic leadership.

But the House bill adds a host of provisions drawing strong objections from Democrats, including rollbacks of measures in the Inflation Reduction Act signed in 2022: it repeals higher oil and gas royalties, eliminates a methane fee program for oil and gas producers, and scraps the IRA bill's incentives for home efficiency upgrades and electrification.

The House bill also takes some more aggressive steps on permitting reform, limiting considerations of climate in permitting reviews and narrowing the range of projects subject to NEPA reviews.

Further, it seeks to limit states' ability to stop gas pipeline projects by stripping their ability to deny water quality certificates, and aims to boost LNG export projects by instructing the Federal Energy Regulatory Commission to find exports consistent with the public interest.

Amendments

Before voting on final passage, the House acted by voice vote to tell FERC to withdraw draft policies for reviewing natural gas projects and considering greenhouse gas emissions. The draft policies have drawn strong pushback from industry, Republican lawmakers and Manchin, but were unlikely to advance in their existing form with the current slate of commissioners. Gas industry groups have urged their withdrawal to reduce uncertainty.

Lawmakers also agreed by voice vote to require future purchases for the Strategic Petroleum Reserve to use an index-based pricing bid system.

According to Phil Flynn, senior market analyst at The PRICE Futures Group, the amendment is "designed so the government doesn't get into a long-term contract for oil at a high price," allowing the buyback price to adjust with the underlying price of the commodity. On the flip side, he said that if prices go up, the government would pay more, but it would reduce the risk that "the government offers sweetheart deals and pays too much."

The Department of Energy last year laid out a plan for repurchasing crude to replenish the SPR when WTI crude oil was at or below $67/b-$72/b. At that time, the DOE also finalized a rule giving it the option to pay a fixed price for crude when a transaction is executed. Previously, regulations let DOE enter contracts for future delivery of oil for the SPR but tied the price to a market index at the time of delivery, exposing producers to volatile crude prices.

S&P Global Commodity Insights does not expect the US to begin refilling the SPR until 2025.

"Politically we don't think anything will happen until after the election in 2024" because buying crude for the SPR at current levels would risk boosting crude and gasoline prices, said S&P Global analyst Rene Santos during a March 30 webinar.

An amendment barring entities subject to Chinese government jurisdiction from acquiring an interest in federal lands or waters leased for oil and gas development also prevailed.

Lawmakers also voted to bar the energy secretary from implementing a proposed new efficiency rule for gas stoves, and any other rule that could limit consumer access to gas stoves.

Bill faces changes in Senate

The proposed rollback of IRA bill programs, as well as provisions in the bill to exempt some energy and minerals projects from Clean Air Act requirements, made the legislation a target of ire from Senate Democrats, and drew a veto threat from President Joe Biden.

"This administration is making unprecedented progress in protecting America's energy security and reducing energy costs for Americans — in their homes and at the pump. H.R. 1 would do just the opposite, replacing pro-consumer policies with a thinly veiled license to pollute," the White House said in its statement of administration policy.

ClearView Energy Partners, in a note March 27, said the "messaging bill," while unlikely to last in its current form, sets up an occasion for a conversation with or within the Senate that could lead to a compromise as part of must-pass legislation.

Senate Democratic Leader Chuck Schumer said H.R. 1 did little to support the buildout of the US electric grid, which industry experts say is key to decarbonizing the power sector.

While he previously pronounced the bill "dead on arrival" in the Senate, both he and the Biden administration have said they want to hash out a bipartisan compromise.

Staff for Manchin said the lawmaker is taking a close look at HR1. Manchin is "hopeful there might be a pathway to permitting legislation that could gain bipartisan support," said Sam Runyon, spokeswoman for the Senate Energy and Natural Resources Committee.

In one sign of early activity in the Senate, Republican senators Shelly Moore Capito of West Virginia and John Barrasso of Wyoming are putting together an energy and permitting bill that will include changes to the environmental review process, according to Peter Hoffman, a spokesman for Capito.

Key provisions of H.R. 1, the Lower Energy Costs Act