Biden Is In Between Rock And A Hard Place On Permitting Reform

It’s do-or-die time for energy-permitting reform on Capitol Hill.

The passage of the Inflation Reduction Act (IRA), which includes substantial tax incentives for clean energy projects, has highlighted the need for energy permitting reform, even Democrats are starting to realize that.

The IRA’s $369 billion in tax incentives are meant to turbocharge the buildout of clean energy and hasten the arrival of the energy transition, but the 2022 law will have a limited impact unless those projects are actually built. That’s unlikely under the existing federal permitting process.

The current federal environmental review process is antiquated, causing costly delays in the construction of renewable energy and other critical infrastructure, hindering the transition to a cleaner energy system.

The excessive regulatory hurdles and avenues for endless legal challenges allowed under the federal permitting process have been used by climate activists to stall infrastructure projects, including those crucial to the energy transition.

While the intention may be to protect the environment and reduce carbon emissions, blocking a project often creates the need to find alternative energy supplies elsewhere with potentially higher carbon footprints.

The lengthy permitting process is a concern for clean energy investors, as it poses significant regulatory obstacles and uncertainties. It discourages substantial investments in projects that face such challenges.

Leading renewable industry groups like the American Clean Power Association note that it takes an average of four and a half years to permit a renewable energy project. For interstate transmission lines – which are needed to carry power from remote wind and solar farms to urban demand hubs – the wait is even longer at six and a half years.

As attractive as the IRA’s tax incentives are to clean energy investors, the permitting problem creates a significant hurdle. After all, who wants to invest billions of dollars in projects that face tremendous regulatory obstacles?

The oil and gas industry – as well as other sectors of the economy – has long been a victim of this unnecessarily burdensome process, particularly in recent years, as climate activists have used lawsuits to hold up infrastructure projects like pipelines.

Activists think that if a pipeline isn’t built, then those oil and gas reserves won’t be developed, sparing the world the associated carbon emissions. Never mind that another project somewhere else in the world will replace it, most likely with a higher carbon footprint.

Recognizing the impact of these delays, the Biden administration and its Democrat allies in Congress are becoming more aware of the need for permitting reform.

Reaching a deal on permitting reform in Congress will require compromise from both parties, though. Democrats will need to consider reforms that apply not only to renewable energy projects but also to traditional energy infrastructure.

The White House has remained vocally supportive of permitting reform and recently even threw support behind the Mountain Valley natural gas pipeline, a project of particular interest to Sen. Joe Manchin, the Democrat from West Virginia who chairs the Senate Energy and Natural Resource Committee and the key vote in passing the IRA without Republican support.

Sen. Manchin is the sponsor of one of three permitting reform bills this Congress. Wyoming’s Sen. John Barrasso, the ranking Republican on the Senate Energy and Natural Resources Committee, and West Virginia Republican Sen. Shelley Capito, ranking member of the Senate Environment and Public Works Committee, have introduced the other two bills.

The challenge lies in finding a middle ground that satisfies both environmental concerns and the interests of fossil fuel proponents. Some Democrats are reluctant to embrace an “all of the above” approach to permitting reform, fearing it would undermine U.S. leadership on climate change. Conversely, key Republicans are adamant about ensuring fair treatment for fossil fuels.

As negotiations continue, the extent to which the Biden administration is willing to compromise on oil and gas production and whether the left will align with these compromises remain critical questions.

It’s already looking unlikely that progressives in the Senate will come around on this issue after being forced to accept concessions on fossil fuels in the IRA at Manchin’s insistence.

The Biden administration has shown a willingness to permit additional oil and gas production since the war in Ukraine. How far President Biden is willing to go – and how far he can nudge his coalition – remains an open question.

The current standoff has resulted in an unusual alliance between the renewable energy industry and the oil and gas sector. Both energy sectors recognize the need for easing regulatory roadblocks to infrastructure development. The coming weeks will reveal whether the two sides can bridge their differences and find consensus.

Permitting reform is overdue. Further delay will impede the timely construction of renewable energy projects. To ensure the success of the IRA and achieve the nation’s clean energy goals, Democrats may need to compromise with fossil fuel interests, recognizing the importance of U.S. energy security and the need for a viable and sustainable energy transition.