In the wake of the passage of a historic U.S. climate law, further federal action to curb planet-warming emissions from the U.S. power sector could largely play out at administrative agencies over the second half of U.S. President Joe Biden's term.

. . This article is part of a package of news and research content that will explore how the 2022 midterm elections may impact the U.S. energy and mining industries. Federal, state contests weigh on future energy mix Climate bill top target as GOP readies energy oversight agenda Federal power policy focus shifting to agency action SEC climate risk rule on GOP chopping block Energy policy battles play out in key races for Congress Hydrogen lawmaking gains traction in statehouses State elections could redraw battle lines over gas bans Makeup of next US Congress weighs on permitting reform push .

With much of the heavy legislative lifting complete, observers anticipate a wave of power-sector regulations from agencies such as the U.S. Environmental Protection Agency and Federal Energy Regulatory Commission.

But the fate of the climate law, formally called the Inflation Reduction Act, as well as several other major pieces of energy and climate legislation and future Biden administration nominees, could hinge on the outcome of the November midterm elections, according to policy experts.

Flurry of agency action planned

The U.S. Supreme Court dealt the Biden EPA a blow in its recent West Virginia v. EPA climate ruling by restricting the agency's authority under the Clean Air Act to regulate in a way that would cause a nationwide shift away from coal-fired electricity.

In that ruling, the court's 6-3 conservative majority, for the first time, invoked what is known as the major questions doctrine. It holds that agencies must point to clear congressional authorization when issuing regulations of "vast political or economic significance."

Democrats subsequently used the Inflation Reduction Act to clarify the EPA's greenhouse gas authority. In the section of the law covering air pollution, Democrats said that greenhouse gases, including carbon dioxide and methane, are all air pollutants under the Clean Air Act.

That provision did not directly address the Supreme Court's West Virginia decision but could bolster future legal arguments that Congress clearly intended to give the EPA broad authority to regulate greenhouse gases as air pollutants.

Jay Duffy, an attorney with the Clean Air Task Force who participated in the West Virginia briefing, noted the Supreme Court's ruling also confirmed earlier court decisions finding that greenhouse gases are air pollutants under the Clean Air Act.

"While it is great that Congress confirmed that climate pollution is air pollution and therefore subject to the Clean Air Act, that was not in doubt," Duffy said in a Sept. 21 email. "In West Virginia, the court rejected how EPA regulated greenhouse gases; it did not question its authority to regulate them."

The EPA is expected to issue a new proposed rule to address power-sector greenhouse gas emissions sometime in March 2023.

Around the same time, the EPA plans to issue a final rule addressing harmful smog emissions that drift across state lines. The EPA's proposed rule, issued in April under a section of the Clean Air Act that covers nitrogen oxide emissions, is projected to drive 18 GW in incremental coal plant retirements, according to agency estimates.

"The EPA has retained a lot of authority and actually, in fact, the [Inflation Reduction Act] was a good backstop to its authority to regulate carbon emissions and really tackle pollution in the power sector comprehensively," Holly Burke, communications director for the advocacy group Evergreen Action, said in an interview.

Also in March 2023, the EPA is planning to unveil new proposed emissions standards for passenger vehicles and light-duty trucks for model years 2027 and later. The U.S. transportation sector recently eclipsed the power sector as the nation's largest source of climate pollution. And in May 2023, the EPA is expected to issue a final rule addressing methane emissions, a far more potent greenhouse gas relative to carbon dioxide over a 20-year period, from new and existing oil and gas facilities.

The Federal Energy Regulatory Commission, an independent agency chaired by Democratic Chairman Richard Glick, could also issue multiple regulations in 2023 that help speed clean energy deployment.

In April, FERC issued a long-range transmission planning and cost allocation proposal (RM21-17) that would require regional grid planners to account for projected changes in future generation and consider factors such as expected increases in electricity demand.

FERC in June also proposed a rule aimed at clearing a roughly 1,400-GW clean energy interconnection logjam by requiring grid operators to prioritize generation projects closest to achieving commercial operation. Glick, whose term on the commission expired June 30, has stated that speeding U.S. transmission build-out is one of his top priorities. He has been renominated to serve a second term.

Outlook for climate, permitting legislation

In the past two years, Biden and Democratic lawmakers scored major victories with the passage of the Inflation Reduction Act, or IRA, and the bipartisan infrastructure law of 2021. Democrats' party-line IRA dedicates nearly $370 billion over 10 years to energy and climate measures and represents the largest single investment in climate action in U.S. history, according to party leaders.

The two laws combined are expected to slash U.S. greenhouse gas emissions by around 40% from 2005 levels by 2030. But those cuts are still short of Biden's pledge to slice economywide emissions in half by 2030.

If Democrats keep control of Congress, they hope to close that gap by passing climate and clean energy provisions that were excluded from the IRA. Among other things, the law discarded a proposed investment tax credit for transmission projects and left out incentives for existing hydropower generation. It also excluded a national clean electricity standard championed by many Democrats.

"There's a ton of really good stuff in the IRA, but there's a lot of things that did not make it in," said Brad Townsend, vice president for policy and outreach at the Center for Climate and Energy Solutions. "We sort of cleared the decks on a lot of areas where there was consensus. Like what's left, what's next? I think that's going to be the conversation that folks are having over the next couple of months."

Congress has passed four major pieces of legislation in the last four years that contained climate and energy money — the IRA, the infrastructure law, the CHIPS and Science Act and the Energy Act of 2020. That substantial investment may limit lawmakers' appetite to spend more.

"There's a pretty clear recognition that Congress is probably done for the time being spending money when it comes to energy and climate," said Sasha Mackler, executive director of the Bipartisan Policy Center's Energy Program. "That's a big, big set of priorities from the energy and climate community, and that's a lot of resources now that are coming out the door for these issues."

READ MORE about the impact of the U.S. midterms on our sectors in this Issue in Focus.

Mackler said Congress will likely maintain focus on permitting reform, supply chain concerns for clean energy technologies, potential trade mechanisms like a border carbon adjustment, and sectoral decarbonization policies. Permitting reform is a priority for both parties, with a lengthy and complicated project approval process slowing both clean energy and fossil fuel projects.

"We are sailing into a huge transmission constraint," said U.S. Rep. Sean Casten, D-Ill., a member of the House Select Committee on the Climate Crisis who has sponsored bills to ease the interconnection of renewable resources to the grid. "We're going to need a ton of transmission, and we got a bunch of permitting problems to do that."

But divides both between and among parties on how to streamline permitting could push the issue into the next Congress. If Republicans reclaim majorities in both houses of Congress in the midterm elections, they may seek more aggressive reforms that lower barriers to gas pipelines and other fossil fuel projects more markedly than in Democratic legislation.

They are also expected to support measures to boost domestic oil and gas production amid criticisms of Biden's policies around leasing of federal areas for drilling.

"We're going to stop the war that's been waged on American energy," U.S. Rep. Cathy McMorris Rodgers, R-Wash., ranking member of the House Energy and Commerce Committee, said during a Sept. 15 event hosted by Punchbowl News.

A Republican-majority Congress will also scrutinize spending and implementation of the IRA and bipartisan infrastructure law and could use the appropriations process to slow down Biden's energy and climate agenda. GOP lawmakers are likely to conduct "antagonistic oversight of how these programs are implemented," Mackler said.

Republicans will be constrained by Biden's veto powers, however, with the GOP unlikely to clinch veto-proof majorities in the upcoming election.

Biden nominees at risk

The midterms could also put Biden's nominees for key climate and energy positions at risk.

Yet to be reconfirmed to a new term, FERC's Glick will need the Senate to approve his nomination by year's end to avoid falling off the commission. Although Biden could renominate Glick in 2023, that confirmation process would be trickier if Republicans take control of the upper chamber.

GOP lawmakers and even the Senate energy committee's current Democratic chair, Joe Manchin of West Virginia, have objected to Glick's stance on gas pipeline permitting. Republicans have also criticized Glick's efforts to update market rules in a way they say threatens grid reliability.

Without Glick, FERC would have two Republican and two Democratic commissioners, potentially resulting in 2-2 partisan deadlocks that could hamper commission action. Biden would then need to either select a new chair from the commission's other Democratic members or nominate and confirm a new member to helm FERC.

"The theme on all of this is uncertainty," said Larry Gasteiger, executive director of the transmission trade group WIRES. "The one thing we really don't like is uncertainty because it makes it hard to plan, it makes it hard to make decisions about what to do going forward. So, the sooner all of that's resolved, the better."

A GOP-majority Senate could also hinder Biden's efforts to confirm federal judges that hold major sway over the interpretation of energy and environmental laws.

The Supreme Court's recent ruling on the EPA's regulatory powers underlines "the importance the federal courts play in climate policy," Craig Auster, vice president of political affairs for the League of Conservation Voters, said in an interview.

"Just as much as climate policies being passed, we need good federal judges being confirmed to uphold the laws," Auster said.

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

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