Sen. Joe Manchin, D-W.Va., released a long-awaited permitting reform bill that aims to speed up the construction of electric transmission, natural gas pipelines and other energy infrastructure.

The Senate's Democratic leadership vowed to add the legislation to an upcoming continuing resolution to fund the federal government past the end of September. But potential opposition from Republicans, as well as progressive Democrats, could thwart the permitting proposal.

Democratic leaders agreed to advance permitting legislation to secure Manchin's support for the Inflation Reduction Act, a newly signed law that contains $369 billion in climate and energy spending over a 10-year period. Manchin released the text for the Energy Independence and Security Act of 2022 on Sept. 21.

The 91-page bill would set a two-year target for National Environmental Policy Act, or NEPA, reviews for major energy and natural resource projects that require a full environmental impact statement and reviews from more than one federal agency. The target would drop to one year for projects that require a less thorough environmental assessment, with the issuance of all other permits due within 180 days of finishing the NEPA process.

NEPA, Clean Water Act changes

The bill designates a lead agency to coordinate project reviews and seeks to expand the use of shared interagency environmental review documents. It would also set a 150-day statute of limitations for court challenges and require random assignment of judges to cases consistent with current practice. Courts would have to set and enforce a "reasonable schedule (of no more than 180 days)" for agencies to act on remanded or vacated permits, a bill summary stated.

In addition, the proposal seeks to clarify the scope and time period for states and Native American tribes to conduct water quality reviews under the Clean Water Act. Some states previously faced criticism from industry groups for using Clean Water Act authorities to deny projects or stretch out timetables. The legislation would clarify that states have no more than one year to conduct such reviews, although the period could be made shorter, and states must limit their focus to water quality. In the past, developers have complained about expensive conditions related to conservation goals.

The U.S. president would need to designate at least 25 high-priority energy projects of "strategic national importance for priority federal review." That project list, which would be regularly updated, must consist of a mix of critical mineral, fossil fuel, non-fossil fuel (including storage), electric transmission, carbon capture and hydrogen projects.

Grid expansion reforms

The bill aims to speed up electric grid build-out by overhauling the U.S. Energy Department's existing process for designating national interest electric transmission corridors.

That process was established under the Energy Policy Act of 2005, a statute that required the DOE to make corridor designations after conducting regular transmission congestion studies to identify where new transmission is needed most. However, no corridor designations have been made to date.

Instead of relying on grid studies, the bill would authorize the DOE secretary to make "national interest" designations for individual transmission projects. The DOE secretary would need to consider additional factors such as whether the proposed project would enhance the transmission of firm or variable power generation, maximize the use of existing rights-of-way, and minimize adverse environmental impacts "to the maximum extent practicable."

The bill would also amend the Federal Power Act to make the Federal Energy Regulatory Commission the lead permitting agency for projects receiving national-interest designations. FERC would be required to establish formal proceedings to determine whether proposed projects are in the public interest.

The transmission siting measures will likely be met with stiff opposition from state utility regulators. While the Federal Power Act gives FERC jurisdiction over interstate power transmission, it gives states authority over the siting and construction of power infrastructure.

On cost allocation, a particularly thorny issue, the bill would direct FERC to require rate filings to reflect "the broad range of reliability, economic and other reasonably anticipated benefits" associated with national interest transmission facilities. Costs for those facilities would need to be allocated in a manner commensurate with FERC's existing cost-causation principle.

In response to an earlier draft version of the bill, the National Association of Regulatory Utility Commissioners sent U.S. Senate leaders a Sept. 14 letter arguing that "projects will likely be drastically delayed, become significantly more costly and face cancellation altogether" due to legal uncertainty.

However, Rob Gramlich, president of power-sector consulting firm Grid Strategies, said in a Sept. 21 statement that the measure would allow the many benefits of transmission to be reflected in how costs are recovered "and speeds up approval timelines for siting while preserving the important environmental and public participation protections in NEPA."

Mountain Valley Pipeline

Extending a lifeline to the 304-mile, 2-Bcf/d Mountain Valley Pipeline, dubbed MVP, the bill would give federal agencies 30 days to issue various outstanding authorizations and permits for the natural gas pipeline in Virginia and West Virginia that has been of keen interest to Manchin. Those agency actions, needed for construction and initial operation, would not be subject to judicial review.

And any challenge to the section or related claims involving MVP would go before the U.S. Court of Appeals for the District of Columbia Circuit instead of the 4th Circuit, where the project's permitting has had to deal with multiple legal setbacks. The section extends to FERC and resource agencies such as the U.S. Fish and Wildlife Service.

Headwinds to passage

Manchin's proposal may face a rocky path, despite support from Senate Majority Leader Chuck Schumer, D-N.Y., for attaching permitting legislation to the spending bill.

The bill, whether advanced separately or within a funding resolution, needs at least 60 votes in the evenly divided, 100-member Senate to avoid a filibuster. But both Republicans and some progressive Senate Democrats voiced concerns with an earlier draft of the bill.

Several GOP lawmakers have proposed their own permitting bill that includes aggressive efforts to ease barriers to new projects. And in the run-up to the bill release, some progressive lawmakers and environmental groups argued against changing policy on a fast-moving funding feature, fearing that the legislation would short-circuit the public comment provisions of NEPA that can force more careful reviews.

Manchin in a Sept. 20 news conference cautioned Republican senators against throwing away a rare opportunity to act on permitting, either out of a quest for perfection or "revenge" against the moderate Democrat for helping pass the Inflation Reduction Act.

"How in the world do you go home and explain it? 'Well, the perfect just wasn't perfect enough,'" Manchin said.

Commodity Insights reporter Maya Weber writes for S&P Platts Dimensions Pro. S&P Global Commodity Insights is owned by S&P Global Inc.

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